What happened last week

The past week in the crypto market was marked by a mix of movements and anticipation of upcoming events, such as the Jackson Hole Symposium, where Fed Chair Powell will hold his speech (at around 4pm CEST). Bitcoin remained steady around the $26’000 level, while Ethereum traded in the $1580-$1700. The broader market, as it was the case in the past summer months, remains in a state of “wait and see”, where news-driven price action is expected. In combination with low trading volumes in the crypto market, sudden volatility spikes can be more accentuated.

In the US stock market, the tech sector made headlines as Nvidia, a chip manufacturing firm, adjusted its quarterly forecast upwards. This positive news led to an increase in Nvidia's share price, with the company also announcing a share buy-back program. This favorable performance of tech stocks had a positive impact on the broader market sentiment.

Two significant events are in the investors' attention: the BRICS 2023 Summit and the Jackson Hole Symposium. The BRICS Summit with the discussion of the admission of new members, partnerships, and de-dollarization. China's aspirations for BRICS to rival the G7 added weight to the discussions. Starting in 2024, the BRICS group is planning to include Argentina, Saudi Arabia, Egypt, Ethiopia, Iran as well as the U.A.E. Investors await the Jackson Hole Symposium, where Powell's speech today at 4PM CET is expected to provide indications of the Federal Reserve's next moves. With Treasury yields remaining high, there was speculation about the Fed's response to positive economic data and its potential for continued tightening.

China's central bank cutting its one-year loan prime rate by less than expected contributed to Asia's downturn with the HSI dropping by -2% over he past few days. The market's sensitivity to macroeconomic factors was evident, as yields remained at 15-year highs, pressuring equities, and potentially contributing to the S&P 500's potential for its steepest monthly decline of 2023.

Crypto Investment Products

The extended period of uncertainty surrounding the approval of a US BTC spot ETF has resulted in capital outflows from investment products, as reported by Coinshares. The firm’s digital asset fund flows weekly report showed that outflows totalled $55 million for the week ending August 18. With the panic last week leading to a 10% decline in total assets under management, settling at $32.3bn at the end of last week. The outflows were not just focussed on Bitcoin, a wide array of altcoins seeing outflows, including Ethereum, Polygon, Litecoin and Polkadot. This trend underscores the far-reaching consequences of regulatory uncertainty on the broader crypto market.

Crypto Market Sentiment

The Crypto Fear vs. Greed index, reflecting investors' sentiment in the crypto sector, dropped to a value of 37, entering the fear zone from a prolonged neutral position throughout the summer. This decline marked the lowest level since the SVB collapse. The Fear & Greed Index is a widely known investors’ sentiment gauge that includes factors such as market volatility, trend searches, BTC dominance, as well as market volumes. Given that the trading volumes as well as the volatility was below-average in the past months, the Index as such was impacted in turn.

Liquidation of $3bn FTX Holdings

FTX, the cryptocurrency exchange that faced bankruptcy last November, has engaged the expertise of Galaxy Digital to oversee the liquidation and hedging of its substantial crypto holdings, totaling $3 billion. Instead of distributing these holdings to creditors in crypto, the bankruptcy team, under the leadership of John. J. Ray aims to convert them into fiat currency. Galaxy Digital's responsibilities will encompass implementing trading strategies to mitigate potential negative impacts on asset prices within the market. Furthermore, Galaxy Digital will actively participate in staking specific assets and employing hedge instruments to facilitate the management of these assets. It's worth noting that according to North Rock Digital, the majority of the $3 billion in crypto holdings are locked in SOL, and these holdings will remain inaccessible until 2025-2028. Consequently, FTX is only projected to liquidate around $500 million worth of majors (BTC, ETH, APT, DOGE, MATIC) over a span of five weeks if the court order is approved.