Good morning. Here’s what’s happening:
Prices: What turmoil? Bitcoin holds its perch above $28K. Other major cryptos mostly fall in weekend trading.
Insights: Decentralized-focused tokens soared during the quarter. Their gains came as U.S. regulators zeroed in on centralized exchanges.
Bitcoin Investors Continue Their Watchful Waiting
Will April bring showers or more sunshine for bitcoin?
The weekend offered few clues as the largest cryptocurrency by market capitalization kicked off the new month holding at late March levels as investors weighed recent events – bank failures, inflation and crypto-focused regulatory actions – that could push prices higher or drag them down.
BTC was recently trading at $28,045, down 1.3% over the past 24 hours. It rose roughly 21% in March, despite a turbulent last two weeks in which markets teetered at times but always seemed to snap back above the $28,000 threshold.
"Bitcoin has remained resilient over the last week or so, resulting in a general improvement in market sentiment," Joe DiPasquale, CEO of crypto asset manager BitBull Capital, wrote in an email to CoinDesk.
DiPasquale noted that bitcoin was trading above its 200-day moving average, "historically a strong indicator of bullish price action."
But he also reflected uncertainty about BTC's path forward, calling "the $32K to $36K range ... an area of interest on the upside while $18K to $20K ... a strong range on the downside."
Ether was also slightly up from the previous day to change hands at $1,788, down 1.6% but well within its range of the past two weeks. Ethereum developers now await the Shanghai upgrade, which is scheduled to occur April 12 and will mark Ethereum’s full transition to a proof-of-stake (PoS) network, enabling staked ETH withdrawals. Other cryptos in the top 25 by market value were largely in the red.
ARB, the token of layer 2 blockchain Arbitrum, recently fell 7.4% to trade at $1.19. The decline came amid an uproar in the Arbitrum community over how the Arbitrum Foundation – a centralized company charged with promoting Arbitrum's claimed decentralized ecosystem – held a "ratification" vote over decisions it had already implemented, including sending nearly $1 billion in tokens to itself. On Sunday, the foundation said would break up its controversial governance package into a series of separate votes, bending to community pressure.
Popular meme coins DOGE and SHIB were recently off 5.5% and 4.8%, respectively. The CoinDesk Market Index, a measure of crypto markets overall performance was recently down 1.2%.
Equity markets closed an eventful, largely upbeat first quarter on a high with the tech-focused Nasdaq climbing 1.7% and the S&P 500 and the Dow Jones Industrial Average (DJIA) rising 1.2% and 1.4%, respectively.
This week, investors will have a fresh set of employment and productivity data to gauge whether the U.S. economy is continuing to contract as recent signs have suggested or powering forward. The U.S. Census Bureau will release February durable goods orders on Tuesday, with expectations for a 1% month-over-month decline, and on Friday the U.S. Labor Department will announce March's nonfarm payrolls, with expectations for a 225,000-job spike, and the monthly unemployment rate, which is expected to remain at its current 3.6%. A hot jobs market has figured prominently in central bankers' contemplations about the ongoing strength of the economy, which historically leads to higher inflation readings.
In an interview with CoinDesk TV, Marc Chandler, Bannockburn Global Forex managing director and chief market strategist, said that "the financial stress that we saw earlier this month is receding."
"This is allowing the market to focus on two things, which was before the banking stress," he said, adding a note of caution. "One is that the labor market remains fairly robust. And inflation is too high for the Federal Reserve."
A Banner Quarter for Decentralized-Focused Tokens
A growing fear that centralized crypto infrastructure will be the target of U.S. regulators has driven tokens that provide decentralized alternatives to be some of the best performers this past quarter.
CoinMarketCap data shows that tokens for protocols LidoDAO (LDO), dYdX (DYDX), and GMX (GMX) were some of the best performers over the last 90 days.
LDO surged in February when the Securities and Exchange Commission (SEC) ordered Kraken to shut down its staking service and continued to rally when Coinbase’s CEO Brian Armstrong said a blanket staking ban was coming alongside a securities classification – a scarlet letter for any sort of crypto with U.S. exposure.
As for DYDX and GMX, the demise of FTX gave the market a renewed interest in decentralized derivatives exchanges.
“FTX and [sister company] Alameda, as far as we know, were incredibly centralized, controlled by a single person. These things metastasize because of human error,” Dan Gunsberg, creator of Solana-based derivatives exchange Hxro, said to CoinDesk in December.
Like staking, there’s also significant regulatory interest in derivatives. Binance was recently sued by the U.S. Commodity Futures Trading Commission (CFTC) and its derivatives trading desk was front-and-center in the suit. Traders are looking for decentralized alternatives, which they feel are beyond the big-guns of American regulators and outside the crypto war conflict zone.
But decentralized derivative exchanges also have their problems too. As CoinDesk recently reported, many are struggling with liquidity and a lack of available open interest means that they cannot sustain big orders. While not all decentralized derivative exchanges suffer from this problem, it does cast some doubt on how well the idea scales.
While decentralization was a theme for the quarter’s best performers, the actual token that took first place was Conflux (CFX), up a whopping 1,622%, according to CoinMarketCap data.
It’s not entirely clear what’s driving such an outsized gain. Sure, Conflux’s Blockchain SIM card has attracted some interest from investors, but right now its all theoretical and still in a trial phase. On-chain data shows that the number of transactions on the CFX chain are lower than what they were a year ago.
But, this is crypto. And sometimes there’s not discernable data behind a token that pumps.
9:00 a.m. HKT/SGT(1:00 UTC) Australia TD Securities Inflation (YoY/March)
3:55 p.m. HKT/SGT(7:55 UTC) Germany S&P Global/BME Manufacturing PMI (March)
10:00 p.m. HKT/SGT(14:00 UTC) United States ISM Manufacturing PMI (March)
Bitcoin (BTC) was hovering around $28,000 as the PCE price index increased 0.3 percent in February. Bannockburn Global Forex chief market strategist Marc Chandler shared his crypto markets analysis. Plus, DappRadar head of research and analytics Pedro Herrera discussed decentralized finance's performance and the rise of interest in Arbitrum in the first quarter.
Arbitrum’s First Governance Proposal Turns Messy With $1B ARB Tokens at Stake: The Arbitrum Foundation would get to side-step community governance when issuing “special grants.”
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U.S. Government Sold $216M of Seized Silk Road Bitcoin This Month: The government will sell the remaining 41,490 BTC in four tranches this year.