2022/04/12

Cryptocurrencies generally fall on fears of U.S. monetary tightening

Last week's actions

Significant sales intertwined with U.S. monetary tightening

LUNA (Luna/Terra) fell the most, DOGE (Dogecoin) temporarily rose but fell back

Over-the-counter lending market rushes to borrow altcoins

Implied volatility remains low, but there is also buying above long-term products

Crypto assets are highly correlated with risky assets such as stocks and have fallen with the U.S. monetary tightening factor. Risk assets have continued to fall since Fed Governor Brainard mentioned late Tuesday that the balance sheet could be compressed from May.

Bitcoin and Ethereum are down 8-9% at the start of the week, while mid-cap altcoins (SOL (Solana), DOT (Polkadot), MATIC (Polygon), AVAX (Avalanche), ADA (Cardano)) are down 15% about 20%. DOGE jumped as much as 25% at one point after reports that Elon Musk had become Twitter's largest shareholder, but later declined. DOGE dipped slightly yesterday following news that Elon Musk will not be on Twitter's board, but the reaction so far appears to be limited.

Looking at the currency trading trend, the trend to buy Bitcoin is stronger than the trend to buy Ethereum. SOL (Sorana), AVAX (Avalanche), DOT (Polkadot), LNK (Chain Link), XLM (Stellar Lumen), EOS (Ios), UNI (Uniswap), MATIC (Polygon) are major sellers, ADA buying dominates In (Cardano), LUNA (Luna / Terra), XTZ (Tezos) and BNB (Binance Coin). From the perspective of customer categories, funds and overseas exchanges are buyers, and sellers are high-frequency trading/market makers. By region, Asia is the most prominent buyer.

Demand for stablecoin lending in the OTC lending market remains subdued, but demand for altcoin lending is on the rise. However, the overnight funding rate for swap indefinite contracts (equivalent to leverage fees for crypto asset CFDs) is significantly negative, while the borrowing rate for altcoins in the OTC lending market is actually relatively cheap. The dollar funding rate observed from the futures market has also declined, with three-month funding rates on major exchanges falling in the range of about 2% to 3-4%.

Future Outlook
News headlines continued to be flooded with negative headlines, including the possibility of far-right Marine Le Pen becoming president of France, the blockade in Shanghai, and unrest in Ukraine, further fueling risk sentiment. I think we should be careful about spoilage. In addition, there are high-profile events such as today's US CPI and Thursday's ECB, and we want to keep an eye on these trends.

(Provided by IB Liquidity Market. This report was created by IB Liquidity Market based on data from B2C2, the world's largest crypto asset market maker.)
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