A summarizing review of what has been happening at the crypto markets of the past week. A look at trending sectors, liquidity, volatility, spreads and more. The weekly report in cooperation with market data provider Kaiko.
The last 7 days in cryptocurrency markets:
- Price Movements: After Coinbase announced they would list Tether, a premium emerged and has persisted for days.
- Volume Dynamics: Ethereum trade volume is growing relative to Bitcoin, a sign that traders increasingly consider the asset a viable investment.
- Order Book Liquidity: Binance.US is low liquidity compared to Binance Global and its biggest U.S. competitor, Coinbase.
- Volatility and Correlations: After two months of declines, 20D volatility began to increase again following a week of wild price swings.
Coinbase lists USDT and a premium emerges
Tether (USDT) is the largest stablecoin and denominates the most currency pairs out of any other crypto or fiat asset. USDT is systemically important in cryptocurrency markets and plays a crucial role in Bitcoin price discovery, yet some regulatory compliant exchanges have been holding out on listing the controversial stablecoin which has been the subject of intense scrutiny for years. Thus, Coinbase's announcement that they will list six USDT trading pairs serves as vindication and could usher in a new era in cryptocurrency markets that sees volume shift away from fiat currencies. Ironically, the announcement caused Tether de-peg from its 1-to-1 USD price and a premium has persisted since April 23rd.
Ethereum's popularity is growing
Ethereum is significantly outperforming Bitcoin and is currently up 217% YTD compared with Bitcoin's 67%. Bitcoin has always been the highest volume crypto asset, but over the past year Ethereum has gained an increasing proportion of market share. Ethereum volume now accounts for 36% of total volume (aggregated across all exchanges which offer both a BTC-USD and ETH-USD trading pair), its highest level yet. The shift has occurred as ETH undergoes a record-setting bull run and usage of the Ethereum blockchain network surges. Institutional investors increasingly consider ETH as an investible asset, evidenced by the growing number of regulated exchange-traded products and derivatives.
Coinbase (COIN) ends the week in the red
Coinbase has now completed its first full week of trading on Nasdaq and first full week of trading as a tokenized stock on FTX, closing at just under $300. While Coinbase is well below its market open of $410, it has held above its reference price of $250 in what many still consider to be a successful public debut. COIN on Nasdaq only trades for 8 hours a day while COIN on FTX trades 24/7, and we can observe that these two markets occasionally diverge from one another.
However, tokenized markets will likely become more efficient the more that people trade and supply liquidity. Tokenized equities entitle holders to corporate actions such as dividends and provide more flexibility, such as the option to purchase fractionalized shares at any time of day, trade through an API, and supply liquidity to order books. Exchanges like FTX could be paving the way for a re-shape of traditional equities markets, enabling a new class of investor easy access to U.S. stocks.
Volatility on the rise
News of Biden's proposed tax on capital gains tanked both equities and crypto markets on Friday. The past week's volatility has caused 20D volatility to begin to spike following more than two months of declines after reaching one of its highest levels ever in early February. 180 day volatility reached its highest level since September reflecting a long-term increase in volatility across crypto markets.
