JUN 23, 2023

Weekly Market Update - Friday, June 23, 2023

Welcome to our Weekly Market Update.^* Explore weekly crypto price movements, read a quick digest of notable market news, and dive into a crypto topic — today we explore basics of liquidity pools.

Frame 1

| ⬆️ 18.10% | $30,087

| ⬆️ 12.60% | $1,872

| ⬆️ 66.90% | $0.000001476

| ⬆️ 36.70% | $142.83

| ⬆️ 24.70% | $0.2345

Crypto prices as of Friday, June 23, 2023, at 10:05am ET. Percentages reflect trends over the past seven days. C. All prices in USD.

BTCBuzz bar new

0623 Dial

data as of 5:00pm ET on June 22, 2023.

The BitcoinBuzz Indicator is slightly down from last week, but remains in the Buzzing Shift range. While we saw a significant increase in BTCUSD price momentum WoW, that was offset by BTC selling pressure later in the week largely driven by that interact with the Gemini Exchange. Crypto news sentiment and BTCUSD breadth also crept up this week.

To learn more about the BitcoinBuzz Indicator, . Check back every Friday for an updated score!

Frame 2

Takeaways

Bitcoin Prices Rise: Bitcoin prices soared past $30K USD this week on news that BlackRock, Invesco, and other large traditional financial institutions applied to launch Bitcoin ETFs.
New Bitcoin ETF Applications Promise More Transparency: Some of the new bitcoin ETF applications include what are known as surveillance-sharing agreements, which aim to address concerns the SEC has had in the past with similar applications. These agreements would provide more visibility into the underlying bitcoin markets.
Rush of Activity in GBTC: There was heightened trading activity across bitcoin products spurred by the ETF filings, with the Grayscale Bitcoin Trust showing momentum.
UK Interest Rate Hike: The Bank of England continued increasing its key interest rate as the United Kingdom struggles with stubborn inflation.
First DAO Funded Film Features NFT Characters: The Rise of Blus: A Nouns Movie, what is thought to be the first DAO-funded film, was released this week, bringing NFT characters to the screen.

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Bitcoin Breaks $30K USD Leading Crypto Rally as TradFi Firms File for Bitcoin ETFs

surpassed $30K USD on Wednesday, hitting its highest level since April and gaining more than 18% this week. The rally was fueled by bitcoin exchange-traded fund (ETF) filings with the U.S. Securities and Exchange Commission (SEC) over the past week from traditional financial institutions including , and . The approval of a BTC ETF would allow retail traders to purchase shares representing the value of BTC on major U.S. exchanges, like the Nasdaq.

The crypto rally was led by BTC, with rising to over 51%, its highest level since April 2021. and other altcoins rallied in sympathy, with ETH surpassing $1,900 USD. in October and November 2021 when the first , BITO, sponsored by ProShares, was approved by the SEC.

Bitcoin ETF Applicants Focus on Spot BTC Surveillance-Sharing Programs

The inclusion of a in BlackRock’s ETF application is among the nuances differentiating it from previously rejected applications. This type of agreement would attempt to address with approving bitcoin ETFs. The surveillance sharing agreement is by the Nasdaq, the venue where the BlackRock ETF would be listed.

Bitcoin ETFs have been rejected by the SEC for years, filed by VanEck. The SEC has pointed to the potential for manipulation and shortcomings in surveillance of BTC markets as reasons for rejecting various applications. Instead, the SEC has preferred to approve futures-based ETFs, as the agency can monitor trading activity for futures listed on the .

A shared surveillance agreement would require the exchanges listing an ETF, like the Nasdaq or CBOE, to have (a crypto exchange, or exchanges) where the underlying asset is traded. The shared could include trading and clearing activity, as well as the identity of traders. Shortly after BlackRock’s filing, a followed suit and included a sharing surveillance agreement in revised filings.

Notable Trading Activity in GBTC After ETF Filings

With traders on the increased likelihood of an approved bitcoin ETF, the discount to net asset value (NAV) , from as low as ~48% in December 2022. the difference between the price of GBTC and the price of spot BTC.

, meaning no redemptions are currently permitted. Grayscale has previously said once the SEC approves one, which would then allow for the opening of redemptions.

Bank of England Continues to Raise Interest Rates Amid Stubborn Inflation

The Bank of England by 50 basis points to 5% in a surprise decision on Thursday. This is the highest key interest rate level . The magnitude of the move outpaces the actions of its G7 peers as the United Kingdom struggles to curb inflation that has year-over-year in recent months. The UK's May consumer price index (CPI) showed .

The fell to 1.27 vs. the U.S. dollar (USD) despite the rate increase as the economic concerns outweighed the higher interest rate. The declined 0.76% on Thursday.

First DAO-funded Animated Film Released

A pilot for the was released this week, in what appears to be the first DAO-funded animated film. The project and includes animators who have worked at the likes of Netflix, Pixar, and Marvel.

The film was funded through a by NounsDAO. It features characters based on 8-bit NFT characters known as Nouns. , the film “centers around the lively floating cloud city of Blus, wherein a daring 13-year-old Noun uncovers a malevolent scheme by the city’s aristocrats.” The title character bands “together with a motley crew of unlikely allies (other Nouns) to thwart the threat and protect those they hold dear.”

-From the Gemini Trading Desk

CryptoNews (1)

Crypto Liquidity Pools

Crypto play an essential role in the ecosystem. They are a mechanism by which users can pool their assets in a decentralized exchange’s (DEX) to provide asset liquidity for traders to trade crypto more easily. At a high level, liquidity pools provide , speed, and convenience when trading on DeFi platforms.

Prior to the rise of , crypto market liquidity was a challenge for DEXs across the Ethereum ecosystem. Early on, DEXs were a new technology that usually sported a complicated interface and a relatively low volume of buyers and sellers, making it challenging to find sufficient liquidity on a regular basis.

AMMs were developed to fix this problem of limited liquidity through the creation of liquidity pools, which offer liquidity providers an incentive to provide supply. Traders can then trade directly with these pools through the use of .

What is the purpose of a liquidity pool?

Liquidity pools aim to solve the problem of illiquid markets by incentivizing users to provide crypto liquidity on a specific platform. Known as liquidity providers, these users are incentivized with a share of platform trading fees.

Trading on liquidity pool protocols like does not require the matching of buyers and sellers. Instead, users can exchange their tokens and assets with a liquidity pool, trading tokens provided by liquidity providers.

Seasoned traders in traditional or crypto markets are well aware of the potential downsides of entering a market with thin liquidity. Whether it’s a low cap crypto or penny stock, slippage is often a concern. is the difference between the expected price of a trade and the price at which the trade is actually executed. Slippage is most common during periods of higher , and can also occur when there isn't enough volume at the selected price to maintain the expected for a large trade.

How do liquidity pools work?

Crypto liquidity pools are designed in a way to incentivize liquidity providers to stake their assets in the pool. Most liquidity providers from the exchanges on which they pool tokens. When a user supplies a pool with liquidity, the provider is often rewarded with . LP tokens can be valuable assets in their own right, and can typically be used throughout the DeFi ecosystem.

Usually, a crypto liquidity provider receives LP tokens in proportion to the amount of liquidity they have supplied to the pool. When a pool facilitates a trade, a fractional fee is proportionally distributed among the LP token holders.

Liquidity pools maintain fair market values for the tokens they hold by employing AMM algorithms, which maintain the price of tokens relative to one another within any particular pool. Liquidity pools in different protocols may use algorithms that vary slightly. Uniswap liquidity pools, for example, use a to maintain price ratios. This algorithm helps ensure that a pool consistently provides crypto market liquidity by managing the cost and ratio of the corresponding tokens as the demand increases.

See you next week. Onward and Upward!

Team Gemini

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