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Turbulent crypto week: four major factors lighting red candles

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In this week’s crypto highlights, we explore the factors that arguably caused a turbulent time in crypto, and other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Market spotlight: Minus $200 billion in the total crypto market cap

Looking at crypto prices this week, it seems that someone spilled ketchup. Most digital assets were dressed in red, leading to a $200 billion drop in the total market cap.&

Here’s what arguably caused the downward-sloping parade.&

U.S. macroeconomic news

On June 7, the U.S. Labor Department reported stronger-than-expected U.S. jobs numbers that cast doubt over interest rate cuts. The latter is considered a key prerequisite for a liquidity influx into risk assets and crypto. After this news, Bitcoin took a nosedive from its two-month high to $69,000.

Multiple central banks have already begun rate cuts in 2024, including the EU and Canada, but the U.S. Federal Reserve remains a holdout. During the June 12 meeting, the Federal Open Market Committee (FOMC) kept rates steady, but hinted that a single rate cut could happen this year.

Meanwhile, the U.S. consumer price index (CPI) stayed flat in May, beating economist forecasts. Bitcoin briefly soared above $70,000 on this news, but couldn’t hold onto that level.

Liquidations

Last week, we highlighted that cascade liquidations could occur if Bitcoin’s price turned down, as open interest in futures markets has been at all-time highs. As such, liquidations typically act as an aggravating factor, which may accelerate the price momentum in a certain direction. Many long liquidations may move the asset price lower, and vice versa.

According to Coinglass, crypto markets saw substantial long liquidations over the last seven days, with $360 million on June 7, and over $200 million on June 11, coinciding with the largest price drops. Despite a reduction, Bitcoin futures open interest remains above $34 billion, suggesting potential for further liquidations. 

Bitcoin ETF strategies

U.S. spot Bitcoin exchange-traded funds (ETFs) experienced the longest streak of inflows in their history (19 days), accumulating $4 billion worth of BTC. In addition, these products recently acquired eight times more BTC than the amount newly mined, marking their largest buying week since mid-March.

Sounds like a Bitcoin bull’s dream, right? Not so fast. There were several reports that certain traders might be shorting Bitcoin futures on the Chicago Mercantile Exchange (CME), while taking long positions in ETFs. For instance, Bitcoin’s open interest on the CME has grown in tandem with the cumulative ETF inflows.

This strategy is known as cash and carry arbitrage, and it aims to profit from the premium in the futures market relative to the spot market. This could also mean that ETF inflows are not entirely bullish, limiting Bitcoin’s price performance.

Local crypto catalysts

The above catalysts were dedicated to Bitcoin, but what about other digital assets? They are likely to be affected by Bitcoin’s performance, as many altcoins are closely correlated with the largest cryptocurrency. 

However, there are still some separate indicators that arguably pushed down certain digital assets:

  • Spot Ether ETF issuers are still waiting for the U.S. Securities and Exchange Commission (SEC) to comment on their S-1 filings. The expected feedback, anticipated by June 7, has been delayed, potentially pushing down ETH prices.
  • GameStop’s recent slide arguably caused a temporary selloff in the memecoin sector.
  • AI tokens, including RNDR, FET, and AGIX, saw double-digit weekly drops, amid Apple’s conference that some AI enthusiasts found disappointing.
  • CRV lost 40% in a week due to liquidation risks tied to loans associated with Curve’s founder, Michael Egorov. And yes, this isn’t the first time this has happened.

Noteworthy market events

Robinhood set to acquire Bitstamp for $200 million

Trading platform Robinhood announced its plans to acquire Bitstamp in a potential $200 million deal, to better position its crypto business for expansion outside the U.S. If all goes according to plan, including regulatory nods and winks, the deal could be wrapped by the first half of 2025.

Founded in 2011, Bitstamp is considered the oldest operating crypto exchange, and one of the largest in Europe in terms of trading volume. It comes with 50+ licenses and registrations globally, and could allow Robinhood to waltz into the institutional crypto space without breaking a sweat. In addition, Bitstamp offers over 85 assets on its spot trading platform, along with staking and lending services, which could significantly bolster Robinhood’s crypto offerings.

Robinhood’s desire to expand in the realm of Bitcoin and its restless siblings seems natural, as crypto trading accounted for 20% of the company’s total revenue, and saw a 224% increase in volume, according to its Q1 2024 earnings report. The kicker is that this $200 million deal is arguably the largest acquisition in the crypto industry to date, but the number is just a fraction of Bitstamp’s 2018 valuation, when the platform was reportedly worth $500 million.

Paxos introduced a yield-bearing stablecoin

Paxos unveiled Lift Dollar (USDL), a yield-bearing stablecoin that promises “risk-free” returns aligned with U.S. Treasury bonds. USDL is issued on the Ethereum network, and pays yield programmatically, on a daily basis, to token holders.

According to Paxos CEO Charles Cascarilla, Lift Dollar is structured similarly to other Paxos stablecoins: PayPal USD (PYUSD) and Pax Dollar (USDP). This means they are pegged to U.S. dollars, and backed by cash and short-term U.S. government securities. USDL is regulated by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM).

As a testing ground, Paxos first launched the USDL stablecoin in Argentina, empowering users to earn about 5% annual yield, close to the current effective federal funds rate.&

Cardano is about to enter its Voltaire phase

The Cardano network is gearing up to enter the final phase of its roadmap — Voltaire. Cardano founder Charles Hoskinson highlighted that this upgrade will transform the network into a fully decentralized blockchain ecosystem. This is because the reins of blockchain will pass from the development company, IOHK, to the community by introducing governance, voting, and treasury management functionality.

The upcoming Chang fork, rumored to be scheduled for this month, will set the stage for the “Age of Voltaire,” which sounds a bit like the Age of Enlightenment but with more blockchain and fewer wigs. Hoskinson assured the community that the network is “Chang fork ready,” and is just waiting for 70% of the system’s stake pool operators (SPOs) to upgrade their nodes.

The Chang fork will reportedly introduce essential tools and infrastructure to support this new phase. It will provide network participants, including ADA holders, with governance authority, granting powers to propose and vote on Cardano improvements using the staking and delegation process.

Fried.tech announced migration to its own blockchain

Web3 social network Friend.tech announced its collaboration with a crypto infrastructure service provider, Conduit, to develop its native blockchain. The new blockchain will feature FriendTech’s native token as a “fully transferable gas token.” While the protocol didn’t specify a timeline for this move, the team mentioned that it will keep everyone in the loop “over the coming months,” as development of the blockchain progresses. 

Last month, Friend.tech co-founder Racer hinted at a possible departure from the Ethereum layer 2 (L2) network Base, where the protocol is currently hosted. According to Racer, Friend.tech’s relationship with Base has been rocky, with the social network feeling alienated from the ecosystem.

One sentence news

  • Kraken reportedly aims to raise $100 million before potentially going public next year.
  • Telegram announced the launch of Stars, a new in-app token for purchasing digital goods and services.
  • Base surpassed Optimism in terms of total value locked (TVL), becoming the second-largest Ethereum layer 2 (L2) network.
  • ZKsync developers unveiled a major airdrop of 3.675 billion ZK tokens to early users and contributors of its Ethereum L2 network.
  • Loopring experienced a $5 million security breach of its two-factor authentication service, “Guardian,” for its smart wallet application.
  • Lido partnered with Symbiotic and Mellow Finance to introduce restaking vaults.

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.


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