Cryptocurrency Market Monthly Recap - December 2022

ANIVERSE

Published in

ANIVERSE

14 min readDec 9, 2022

1. Major Assets: Latest news

2. Asset Performance: Summary

3. Market Updates

4. Chronicle of the collapse of FTX

5. Expectations for 2023

1. Major Assets: Latest news

1) Major Assets

2) News Headlines

• Bitcoin hit a new two-year low, once again failing the $20,000 level.

• Market capitalization plunged below $900 billion amid FTX collapse.

• Users have shown significant interest in decentralized exchanges and non-custodial wallets.

• Ethereum futures trading volume outpaced bitcoin for the second time in history.

• The total volume of Ethereum held on centralized exchanges decreased by 15%.

• November saw the fourth largest capitulation of bitcoin investors.

• The crisis of miners has worsened significantly — they turn off the equipment and sell off the stocks of cryptocurrency.

• The total volume of bitcoin mining in November fell by 20%.

• The share of the Foundry USA pool in the hashrate of the first cryptocurrency exceeded 26%.

• TVL of DeFi applications decreased by 22%. Solana dropped by 70%.

3) Macroeconomic Background

Spread between 10-year and 1–3-year government bonds as part of the Bloomberg Global Aggregate Bond index.

Fed Chairman Jerome Powell noted the advisability of slowing down the pace of monetary tightening at a meeting in December. In his opinion, there are chances of a “soft landing” of the economy without a serious recession.
The annual growth of consumer prices in the US in October slowed down from 8.2% to 7.7%, the pivotal one — from 6.6% to 6.3%. This turned out to be better than expected by 7% and 6.5%, respectively.
According to the futures market , at the upcoming meeting on December 14, the Fed with a probability of 79.4% will raise the key rate by 50 basis points. p. (A month ago, the options for 0.5% and 0.75% were almost equally likely). According to the swap market, by mid-2023, the ratio will peak at 4.94% (now it is 3.75–4%).
For the first time since data collection began in 2000, the components of the Bloomberg Global Government Bond Index formed an inversion of the yield curve. This signal is a harbinger of the transition of the world economy to recession.
The collapse of FTX triggered a wave of deleveraging and bankruptcies , which resulted in the loss of the price relationship between digital assets and the stock market. The latter, against the background of prerequisites for a slowdown in the tightening of monetary policy, almost won back the fall of August-September (according to the S&P 500 index).

4) Market Index by Upbit (3M)

UBMI (Upbit Market Index)

UBAI (Upbit Altcoin Index)

As can be seen from the UBAI indicator, the altcoin market index fell from 4200 to 2900 within a week after the FTX bankruptcy as the BTC market worsened.

According to the digital asset market index data provided by the Upbit Exchange, November 21st was the worst time in the last three months. It maintained 5,000 UBMI for the last 2 months, but started to decline in November and has maintained 4,000 UBMI continuously. It can also be inferred that it is related to the start of the FTX fall.

As bad as the market is, the situation has also affected the Fear & Greed Index. At the end of October, the “Fear and Greed Index” went out of the “extreme fear” range, but already in early November, the indicator returned to this zone again. The average value of the indicator was 25.9 (24.4 a month earlier).

This is how the Crypto Fear and Greed Index is measured:

0–24 = Extreme Fear
25–49 = Fear
50–74 = Greed
75–100 = Extreme Greed

FTX and Alameda Research troubles have eroded investor confidence in the digital asset industry. Additional pressure on market players is exerted by the unstable macroeconomic and geopolitical situation, as well as the tightening of the Fed’s policy.

2. Asset Performance: Summary

The last month was a big test for the whole cryptocurrency world and in particular for Bitcoin. FTX’s fall brought the market down but BTC reacted well in some respects.

In November, digital gold recorded the largest exits from exchanges since its inception, 91,557 BTC exited the platforms.

1) Returns / Monthly Sharpe rate

The collapse of FTX in November wiped out billions of dollars worth of digital assets, reversing the effectiveness of digital and traditional assets. Concomitant concerns about market contagion led to significant negative results this month. BTC returned -16.3%, its worst monthly performance since June 2022. At the same time, the S&P 500 and NASDAQ positive earnings after lower-than-expected CPI values. The market now expects a 50 basis point rate hike at the next FOMC meeting on December 13th.

Returns / Monthly Sharpe rate

In November, all four cryptoassets had negative risk-adjusted returns and a significant increase in volatility. Over the last three months, SOL and ADA lagged far behind BTC and ETH with returns of -56.7% and -30.8%.

Volatility

Volatility skyrocketed in November as a result of the collapse of FTX, following what was one of the least volatile months for crypto in its recent history. SOL recorded the highest volatility out of all investigated assets at 241%, while BTC’s 30-day volatility more than doubled from 32.2% in October to 84.8% in November. Total market capitalisation across these four assets has fallen to the lowest level since 2020, to $495bn.

Source: Crypto Compare

2) Bitcoin Network Hash Rate

Last month, the average Bitcoin hashrate fell about 20% to 210mn TH/s. After hitting an all time high of 317mn last month, hashrate has now fallen as low as 200mn TH/s on November 26th — the lowest since September.

According to Insight, the reason for the drop in hash rate is that miners continue to suffer.

Rising energy prices and poor price action reduce revenue.Bitcoin Network Hash Rate is at a current level of 231.29M, down from 268.18M yesterday and up from 190.97M one year ago. This is a change of -13.75% from yesterday and 21.11% from one year ago.

3) Eth & BTC Price

BTC and ETH fell significantly, recording lows at $15,480 and $1,074 on the 21st and 23rd, respectively. This was a yearly low for BTC and ETH showed relative resilience, holding above the June 2022 lows.

ETH outperformed BTC in the Q2 of 2022, a 22.4% return compared to BTC’s -10.8% return.

Source: Crypto Compare

Average daily transactions in the Ethereum network saw a 5.30% decline in November to 1.04mn average daily transactions. Average daily transaction fees also fell to $2.86.

Ethereum Average Transaction Fee is at a current level of 0.5039, down from 0.513 yesterday and down from 4.618 one year ago. This is a change of -1.77% from yesterday and -89.09% from one year ago.

4) Market sentiment, correlations and volatility

Despite the crash of FTX, the statistical relationship between bitcoin and the US stock market changed little in November. The smoothed 90-day average was 0.49 for the S&P 500 and 0.46 for the Dow Jones (0.54 and 0.47 in October, respectively).

Such dynamics indicate that macroeconomic factors still have a significant impact on digital assets.

The correlation of bitcoin with gold continues to grow (0.21 vs. 0.19 in October). For comparison: in November 2021, the indicator was 0.02.

The average value of the index of historical intraday volatility of bitcoin (BVOL24H) was 2.9% (1.9% in October). At its peak, the indicator reached the June figure (9.3%). The extremum fell on November 8 — it was then that most of the community learned about the problems of Sam Bankman-Freed’s companies.

Source: Blockchain Center

5) ETH Staking

The total amount of ETH staking

At the end of November, the volume of Ethereum in staking exceeded 15.44 million coins. Over the month, the indicator increased by 5.2%, which is higher than the inflow of assets in October (4.25%).

The number of unique Ethereum addresses that have staked 32 ETH or more has reached 482,561. These wallets have the ability to confirm transactions and receive cryptocurrency rewards for their work.

6) Trading Volume on the Leading Spot Exchanges

In November, trading volume on the leading spot platforms rose by 22% despite the collapse of FTX structures. The cumulative figure reached $689 billion, of which $495 billion (70%) came from Binance. The exchange was the main beneficiary of the collapse of FTX International. In addition, the platform still canceled commissions for trading pairs with bitcoin.

At the same time, Coinbase and Kraken ($61 billion and $23 billion, respectively) improved their positions, as the American branch of FTX US also closed, and local users cannot work with unregulated platforms.

7) Market capitalization of Stablecoins

In November, the capitalization of Tether (USDT) decreased by almost $4 billion, from $69.1 billion to $65.3 billion. The offer of USD Coin (USDC) from Center remained unchanged.

Gemini has more than doubled the issuance of its own stablecoin, GUSD. As of the beginning of November, the capitalization of the asset was $360 million. By the middle of the month, the figure rose to $860 million, and by the end of the month it decreased to $610 million. 3 billion / $22.3 billion, respectively.

DeFi protocols MakerDAO and Synthetic, on the contrary, have reduced the emission of their own stablecoins. Capitalization of DAI decreased from $6.2 billion to $5.6 billion, and sUSD from $67 million to $45 million.

In the conditions of market volatility, stablecoins have become more actively used for transactions. The amount of value transferred in November reached $25 billion/day. USDC and Tether account for about $20 billion. At the same time, in the context of trading volumes on centralized exchanges, the share of USDC is significantly inferior to its competitors and is less than 1%. The FTX crisis has had a positive impact on Binance, including the share of BUSD in the total. Since the beginning of 2021, it has grown from 5% to 36%, while Tether has decreased from 92% to 64%.

3. Market Updates

1) NFT & GameFi

Trading volume on the OpenSea NFT marketplace, $ billion.

The trading volume of NFT tokens continues to fall steadily — in November, the leading marketplace OpenSea recorded a turnover of 190,769 ETH or $253 million.

Last month, OpenSea competed with the newly launched Blur platform, which for several days outperformed the segment leader in terms of volume. However, by the end of the month, the market structure returned to its previous form.At the end of October, Blur airdropped prize packs containing BLUR tokens among those who traded NFTs in the last 6 months. At the same time, the launch of the site with full functionality is scheduled for January 2023. The announced second airdrop will be intended to reward post-release activity.

Despite the stagnation, several well-known companies have announced new projects in the segment:

At the end of the month, the decentralized exchange Uniswap announced the launch of an NFT aggregator.
The MetaMask team, in partnership with NFTBank , has launched a price oracle that will display quotes for non-fungible tokens from over 5,000 collections inside a Web3 wallet.
Meta Corporation has announced the ability to create its own collections of non-fungible tokens on Instagram. Initially, the option will be available on the Polygon blockchain.
Cryptocurrency exchange Kraken has announced the launch of a beta version of its own NFT marketplace.
NFT marketplace Magic Eden added support for the Polygon blockchain, and OpenSea announced the integration of BNB Chain.

2) Large Venture Investments

$150 M — London-based LeadBlock Partners into an investment fund focused on companies in the digital asset industry

$150 M — Web3 games publisher Fenix Games to fund the acquisition, financial support and distribution of blockchain games

$72 M — Keyrock market maker as part of a Series B funding round. Ripple was the lead investor

$70 M — Startup Ramp during the Series B round. It was led by Mubadala Capital and Korelya Capital

$40 M — Developer of the blockchain game Skyweaver as part of the Series A investment round led by Brevan Howard Digital and Morgan Creek Digital

$25 M — Fleek web3 developer platform team during the Series A investment round

3) Regulatory Updates

The European Parliament has postponed the vote on the MiCA bill.
The development of bitcoin taxation in Ukraine was entrusted to the advisory council at the National Securities and Stock Market Commission.
Switzerland will introduce verification for cryptocurrency transactions .
El Salvador will study the regulation of the issuance of digital assets.
The IMF called on African countries to tighten regulation of cryptocurrencies.
The Brazilian Parliament approved the regulation of cryptocurrencies.
The Majilis approve new crypto regulation bill in Kazakhstan
Uzbekistan approved the procedure for the issuance and circulation of digital assets.

4. Chronicle of the collapse of FTX

022.11.06

Binance CEO Changpeng Zhao announced his desire to get rid of FTX Token (FTT), which, together with BUSD for a total of ~$2.1 billion, was the result of the company’s exit from its portfolio investment in FTX. Alameda Research CEO Caroline Ellison announced her willingness to buy FTT at a price of $22 per unit.

2022.11.08

The FTT rate has dropped significantly . Investors are hastily getting rid of the utility token and other assets associated with FTX and Alameda (Solana, Serum). Bitcoin quotes failed the $20,000 level.

In the evening of the same day, FTX CEO Sam Bankman-Fried assured that users’ assets were in order, despite complaints about the impossibility of withdrawing funds. Later it turned out that $6 billion was withdrawn from the platform in 72 hours. Binance CEO Changpeng Zhao announced that FTX had turned to the company for help and the parties were considering a takeover. The price of bitcoin fell to $17,000.

2022.11.09

Analysts at Coin Metrics called the possible cause of the FTX crisis — the exchange provided Alameda Research with $4.19 billion in FTT for use. In the evening, Binance refused to buy the exchange, noting significant discrepancies in the balance. The FTT fell below $2.5. Tron founder Justin Sun said that he is working with FTX to develop a rescue plan for the company.

2022.11.10

Bitcoin tested the $16,000 level, while Ethereum dropped below $1,100. A joint decision with Justin Sun was a limited withdrawal of funds in TRX, JST, BTT and other assets of the Tron ecosystem.

2022.11.11

11th of November. FTX branches around the world have begun to close . The hole in the balance sheet of the exchange was estimated at $4–8 billion, while Bankman-Fried was looking for $10 billion. The company filed for bankruptcy. At the same time, unknown people withdrew more than $400 million from FTX.

Expert’s Perspective

In the virtual asset industry, there is a lamentation that trust has collapsed again after the Terra-Luna incident. Bankman Fried is even accused of secretly using $10 billion of customer funds deposited at FTX to cover Alameda’s losses. Alameda suffered a huge loss due to the Terra-Luna crash, and it illegally loaned customer assets to cover it.

Looking at the FTX bankruptcy filing filed by John Ray III, the successor of Bankman Fried, to the court, it includes expressions such as ‘failure to control the company’, ‘absence of reliable financial information’, ‘compromised system’, and ‘lack of experience and lack of experience’. Concentration of control in the hands of very few unsophisticated individuals.” Michael Casey, Chief Content Officer of , who first reported the incident, criticized, “In a secret space made up of insiders, they wielded power in a destructive way uncontrolled by anyone.”

There are also criticisms that the virtual asset market is following the evils of traditional finance, such as opaque governance and lack of internal monitoring. As a result, it is expected that policy authorities’ regulatory movements for the virtual asset market will also accelerate. “Spot exchanges are not currently regulated by any federal agency,” said Rostin Bennum, chair of the Commodity Futures Trading Commission (CFTC). If FTX were under our supervision, it would not have collapsed,” he asked the Congress to give him the authority to directly regulate the exchange.

Source: CoinDesk Korea

5. Expectations for 2023

The main question about crypto is How Long Will the Crypto Winter Last?

2022 may have been absolutely terrible for cryptocurrency.

Stocks are on a losing streak this year, with the S&P 500 expected to close the year down 17%. The picture is even bleaker for Bitcoin and other leading cryptocurrencies.

In January 2022, Ethereum (ETH) was worth over $3,800 and Bitcoin (BTC) was almost $48,000, and the Fed’s war on inflation is the main reason for both leading coins to drop so dramatically.

The last 12 months have been strewn with crypto meltdowns, bankruptcies and chaos, so the losses should not be surprising to anyone. Now the question is whether all this market chaos will continue in 2023, and how long the crypto winter might last.

Bitcoin

With crypto’s reputation badly dented by the crises and scandals of 2022 and wider markets hurting, another leg downward to the $10,000 mark may not be so far-fetched for BTC in 2023.

JPMorgan Chase & Co. analysts agree that the bottom is not in yet. The bank sees Bitcoin’s floor at around $13,000, with “a cascade of margin calls” across the market following recent events. Strategists also use Bitcoin’s production cost to forecast how far prices could fall. “At the moment, this production cost stands at $15,000, but it is likely to revisit the $13,000 low seen over the summer months,” the JPMorgan team stated in a note.

Ethereum

Kemmerer believes the crypto could rise as high as $2,500 in the next six months. While this is an aggressive bull case, the fact remains that the same developments driving Bitcoin’s price are impacting ETH. The macroeconomic climate must cooperate for upside gains to return.

Other Cryptocurrencies

Until Bitcoin and Ethereum recover, altcoins will continue their downward trend. And much like bear cycles of days gone by, many will cease to exist entirely.

Crypto exchange Binance delisted several stablecoins in September, including USD Coin (USDC), the fifth biggest cryptocurrency at a market cap of $43 billion. Circle, creator of USDC, announced shortly after that they would launch a euro-backed stablecoin on Solana (SOL) in the first half of 2023.

“Stablecoins are really in a tough spot because there’s little question that the advent of CBDCs is going to eat away at their market,” says Richard Gardner, CEO of fintech company Modulus Global.

The market for stablecoins is as difficult to forecast as the price forecasts of Bitcoin. Ethereum, or any other cryptocurrency. Risk in the crypto sector remains elevated.

Source: Forbes news, Zebpay , Staking Rewards Journal