First Mover Asia: Singapore’s Distaste for Retail Crypto Spooks Institutional Money
Three Arrows Capital's decision last week to move its headquarters to Dubai reflects growing concerns about the city-state's increasing regulatory scrutiny of crypto; bitcoin returns to where it started the weekend.
Good morning. Here’s what’s happening:
Prices: Bitcoin returned to where it started the weekend.
Insights: Singapore's growing crypto regulatory scrutiny has raised concerns among institutional investors.
Technician's take: BTC's trading range could persist into the following week.
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Bitcoin (BTC): $38,594 +2.2%
Ether (ETH): $2,844 +3.9%
Bitcoin returns to late Friday levels
Bitcoin investors continued their recent dour mood this weekend amid macroeconomic uncertainty and a widely expected, half-point interest rate hike by the U.S. central bank this week.
The largest cryptocurrency by market cap was recently trading at about $38,400, up 2.2% for the past 24 hours, but approximately where it started the weekend. Bitcoin finished April down 17%, its worst month yet in a ragged 2022 for cryptos.
Ether, the second-largest crypto by market cap, followed a similar weekend pattern and was trading at roughly $2,840, up about 3.9% over the previous day but little changed from late Friday. Most other major cryptos were recently rising. Terra's luna token and SOL climbed over 5% and 7%, respectively at one point. Popular meme coin DOGE jumped nearly 6%. Trading was light as is often the case on weekends.
"At the moment, there are no major bullish catalysts on the horizon and BTC is likely to grind in this range or break down lower before more aggressive accumulation can begin," Joe DiPasquale, CEO of fund manager BitBull Capital, wrote to CoinDesk. "The lack of bullish catalysts is still evident and U.S. equities have shown weakness as well as the U.S. dollar index rose. All these factors continue to weigh down BTC."
DiPasquale noted that the Federal Reserve's likely decision to try to tame inflation through a more hawkish rate increase "could result in price volatility." The Fed is also expected to explain how it will reduce its portfolio of mortgage and Treasury securities, which ballooned to $9 trillion during the pandemic.
Crypto declines in recent days have largely dovetailed with major stock indexes as investors veer away from riskier assets. The tech-heavy Nasdaq plunged 4% on Friday. The S&P 500 and Dow Jones Industrial Average were off 3.6% and 2.7%, respectively. Gold was up slightly. The Nasdaq 100, an index of mostly tech, biotech and health-care companies, plummeted 13% in April.
Economic growth has slowed worldwide, a result of Russia's unprovoked invasion of Ukraine. On Friday, the European Union reported that the economies of 19 countries that use the euro grew by just 0.2% during the first quarter. The news followed the announcement that the U.S. economy had grown by a sluggish 0.4% over the same period. Rising energy prices and supply chain delays exacerbated by the Russian offensive have hampered businesses worldwide.
With bitcoin failing to hold the $42,000 level last week, DiPasquale was measured in his expectations for the coming days. "We have continued to see $38K levels acting as support but continued testing of this range may result in a breakdown toward $35K-$32K," he wrote, adding: "Bulls will want to see the bleeding stop and serious buyers stepping in before they can be confident of a trend reversal."
S&P 500: 4,131 -3.6%
DJIA: 32,977 -2.7%
Nasdaq: 12,334 -4.1%
Gold: $1,896 +.08%
Singapore's less crypto friendly environment
Three Arrows Capital is the latest crypto firm that’s decided to call Singapore quits and move to Dubai.
“The energy in Dubai’s digital asset industry is electric right now,” fund co-founder Su Zhu told CoinDesk during the Crypto Bahamas conference. “We have decided to move our Three Arrows headquarters to Dubai, and I’m looking forward to meeting more technology startups.”
“For a while, Singapore was making pro-crypto decisions, but now something’s changed course,” added Kyle Davies, the fund’s other co-founder.
To be sure, on paper Singapore hasn’t advanced any new rules that would affect a fund like Three Arrows Capital. The government has been clear that its policy position is to create a “conducive environment for such activities to flourish in Singapore.”
But that is for institutional capital. The Monetary Authority of Singapore has also been clear that it doesn’t approve of retail investors getting deeply involved in crypto.
“We have taken a tough line on unfettered access to retail public because retail investors should not be dabbling in cryptocurrencies. Many global regulators share similar concerns about retail exposure to cryptocurrencies,” Ravi Menon, the agency’s managing director, said in a recent interview, adding that it has granted retail crypto licenses but they come with strict terms and conditions.
Funds like Three Arrows Capital don’t deal directly with retail crypto, as they aren’t open to non-institutional or non-accredited investment.
So why the long face?
It might have something to do with DeFiance Capital, one of Three Arrows’ peers in the city.
In March, DeFiance Capital was placed on an Investor Alert List by MAS. DeFiance Capital isn’t sure why that happened, and MAS won’t give CoinDesk a clear answer.
Putting a fund on an investor alert list, which has negative connotations, and not explaining the reasoning, isn’t a good look.
It also might be the beginning of problems in doing business in Singapore.
Visas for foreign staff are increasingly difficult to attain, and the logical narrative of the city being a massive beneficiary of Hong Kong’s capital and talent flight isn’t necessarily shaping up with those in traditional finance also looking at Dubai as the next hub instead of Singapore.
At the same time, Dubai is making the relocation process as easy as possible with visas sponsored by the Dubai International Financial Centre (DIFC) special economic zone processed in less than a week. Plus, the DIFC has a parallel legal system
Bitcoin is testing support at around its 100-week moving average, although upside momentum has slowed over the past month. The cryptocurrency could remain in a wide trading range until a decisive breakout or breakdown occurs.
BTC is on track for an 18% decline this month and is down about 40% from its all-time high of nearly $69,000 reached in November.
Most technical indicators are neutral on the daily and weekly chart and bearish on the monthly chart. That could increase the risk of a breakdown in price, especially if support at $37,500 fails to hold.
A series of higher price lows since Jan. 24 has supported buying activity on dips. Still, resistance at $46,710 has capped rallies over the past three months.
For now, BTC is on watch for a countertrend reversal signal next week, per the DeMARK indicators, which typically precedes a brief upswing in price.
8:30 a.m. HKT/SGT(12:30 UTC): Jibun (Japan) Bank manufacturing PMI (April)
9:30 a.m. HKT/SGT(1:30 a.m. UTC): Australia and New Zealand Banking Group job advertisements (April)
1 p.m. HKT/SGT(5 a.m. UTC): Japan consumer confidence index (April)
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Said and heard
"There’s a fascinating discussion to be had about whether what Hwang did was full-blown fraud, but I won’t bother trying to outdo Matt Levine on that front. Instead, I want to focus on the financial mechanics of what Archegos was up to, and why it’s extremely important for cryptocurrency holders or traders to understand." (CoinDesk columnist David Z. Morris) ... "Yet, that surface-level assessment misses some striking new adoption trends that aren’t easily apparent to mainstream commentators. Minorities and various other marginalized groups are turning to crypto as a tool and developing unique, new innovative uses for it – often at a faster pace than communities that have traditionally had more privileged access to resources. This experience demands a careful approach to fostering diversity. We must not throw the baby out with the bathwater." (CoinDesk Chief Content Officer Michael Casey) ... "The broad selloff has erased trillions of dollars in market value from the tech-heavy gauge, with investors souring on shares of everything from software and semiconductor companies to social-media giants." (The Wall Street Journal) ... "The closings and demands for constant checks and vigilance, especially in Shanghai, have ignited public frustration, exhausted local officials and medical workers, and sapped economic momentum." (The New York Times)
CORRECTED (May 2, 06:21 UTC): Corrects name of Three Arrow co-founder in the third graph of the "Insights" sub-header.
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