1. Industry overview
I. Overall Market Trends
Last week, there was a significant decline in the market, with the highest dropping from around $25,200. On Tuesday, large BTC spot and perpetual contract holders placed large sell orders worth $104 million in the price range of $25,075 to $25,500. These large BTC holders bet on the $25,200 and $25,500 price levels, totaling 408 BTC. Generally, large orders represent the trend of main capital and can largely determine the short-term market trend. The pressure from the sell-off above was immediately evident, directly causing a 2.5% drop in the 15-minute level, and later falling below the uptrend line since February 17th. At that time, I judged that the expected rebound would not be too high and there would be a downside in the future. Later, aided by US economic data and hawkish statements from the Federal Reserve, the market inertia fell, reaching a low of around $22,720. The three major US stock indexes fell continuously, and the overall cryptocurrency market kept rising and falling with the US stock market. As macroeconomic data suggested that the Federal Reserve would continue to raise interest rates, the cryptocurrency market and the US stock market saw profit-taking this week. Bitcoin (BTC) fell more than 4%, the S&P 500 fell 2.7%, and had its worst week this year.
The focus is now on whether the support near $21,900 will hold or not, which will move up with time. This is critical, if it stabilizes here, BTC will rebound again and test resistance near $23,600 and $25,200; if it falls below this level, it will test support near $21,350 and $20,225. Buy near support and sell near resistance, implement a buy low and sell high strategy.
The minutes of Wednesday's Federal Reserve meeting showed that most officials favored a modest 25 basis point rate hike, but did not provide further measures to boost the US dollar. Nonetheless, the dollar is still expected to continue performing well. With support from recent increases in US short-term interest rates, the dollar should continue to trade on a stronger footing in the short term. However, the Fed did not provide new catalysts to trigger further upward movement. The dollar's strength is a negative factor for global markets, not only in the cryptocurrency market, but also in the stock, commodity, and futures markets.
The sharp rise in interest rates on US dollar deposit products is closely related to the Fed's ongoing rate hikes. At the beginning of this month, the Fed raised the federal funds rate range from 4.25% to 4.5% to 4.5% to 4.75%. Since entering this round of rate hikes in March 2022, the Fed has raised rates eight times for a total of 450 basis points. Recently, the US two-year Treasury yield has hovered above 4%, and asset yields tied to the US dollar have remained high. As for USDT prices, setting an annual moving average based on the exchange rate and buying when it is below the average price is likely to be profitable in the future. Over the past year, the average exchange rate has been 6.77, so entering at a price below this level is appropriate. This can serve as a reference for our deposit and withdrawal decisions. Last week, Brad's hawkish comments that the Fed would not stop raising interest rates also led to an increase in USDT prices.
The price of Ethereum (ETH) rose 18% from February 13th to February 16th and has since fluctuated in a range of $1740 to $1630 until February 22nd. Despite recent price increases, Ethereum derivatives indicators remain neutral, given the more stringent regulatory environment for investors and the potential impact of the Shanghai upgrade. Later, it followed BTC's downward trend and fell to around $1557, then rebounded slightly more strongly than BTC.
Last week, the US dollar continued to strengthen significantly, and all markets fell. BTC made multiple attempts to break through the $25,000 mark but was unable to do so effectively. Currently, the biggest correction has been 10%, with support around $22,850, which is considered normal. From a technical perspective, the US dollar index is approaching the 106 resistance level, while the S&P 500, Nasdaq, and Dow Jones all hit important support levels. There is a high probability of a rebound in all markets next week, but if they accelerate downward, it will mean the end of the rebound trend that began at the beginning of the year.
In terms of news last week, after the release of the non-farm payrolls and CPI data, newly released economic data continued to indicate an overheating economy. The market finally gave up its resistance to the Fed and began pricing in higher terminal interest rates and a longer period of high-interest rate environment, with expectations that there is a 30% chance of another 50 basis point hike in March. It is expected that market funds will not be very abundant throughout the year, making it difficult to push for a booming bull market trend. However, the world is slowly recovering from the pandemic, and humans have also discovered the next growth point in productivity (AI). The probability of the markets hitting new lows again is small, and it is likely to maintain a range-bound or slightly upward trend throughout the year.
In terms of data, the number of Bitcoin UTXOs (Unspent Transaction Outputs) increased at a rate of 117,000 per month last week, reaching its highest level since December 2022, and the total number of UTXOs also reached a historical high of 137 million. In addition, Bitcoin Taproot usage reached an all-time high, with 8.121% of spent outputs using Taproot last week. However, the Taproot script usage rate dropped by 65% after the market peak, to 2.872%.
The number of Bitcoin whales has fallen to its lowest level since 2019. According to Glassnode data from February 19, there were 2,027 wallet addresses holding more than 1,000 Bitcoins or more, compared to the last low point on August 5, 2019, when there were also 2,023 addresses. In addition, data also showed that the number of Bitcoin whales peaked in February 2021 at around 2,500 and has been steadily declining ever since, with only a rebound occurring between February and March 2022. The current number of "super whales" holding more than 10,000 Bitcoins is 117, with little change in the percentage.
Generally speaking, transferring to exchanges, especially platforms that mainly deal in spot trading, is a potential selling behavior, and essentially negative news. However, Coinbase also has wallet storage properties, and many institutions, such as Grayscale, store BTC in Coinbase wallets.
On the news front, I previously shared my opinion on Twitter's plan to add Twitter Coins. Leveraging Twitter's huge traffic, this move may bring in fresh blood to the crypto market, playing a significant role in attracting incremental capital and impacting the crypto market positively. Currently, Twitter is like Elon Musk's private property, and many of the decisions and operations are his personal ideas, such as adding token functionality to the crypto market, which is also Musk's personal preference. Moreover, Musk is very friendly to the crypto market, as evidenced by his personal comments and Tesla's supportive payment initiatives, which are all good news.
In terms of policy regulation, Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), stated in an interview with the New York Times that almost all types of crypto transactions except for Bitcoin fall under the SEC's jurisdiction as securities transactions. These tokens are securities because there is an intermediary group, and the public expects profits based on the performance of this group. Behind these cryptocurrencies are various complex and legally opaque mechanisms, but at the most basic level, they are working to promote their tokens and attract investors. Bitcoin, on the other hand, is fundamentally different from other crypto projects due to its unique history and creation story.
European Central Bank executive board member Isabel Schnabel said that interest rates need to be further increased, and it is expected that the ECB will significantly raise interest rates in March, with more significant rate hikes possible after March.
The Ethereum Foundation has announced the projects it received in Q4 2022 and their allocation information. The total reward funds distributed in Q4 were approximately $4.37 million, and the categories of donations included community and education, consensus layer, cryptography and zero-knowledge proofs, developer experience and tools, general research, execution layer, indirect funding, Layer2, user experience, etc. The receiving projects include DendrETH, EthereumPools, Lighthouse, Secure-Signer, P2PZK-Chat, Uncloak, among others.
Last week, many platforms rushed to register in Hong Kong, mainly due to policy support and to increase the platform's credibility. Below, we will discuss in detail the Hong Kong concept and related tokens.
In the past week, there has been a significant increase in the value of various types of "Shanzhai" (copycat) coins, such as RIF, DODO, STX, and SSV. The Matthew Effect is in play, where the strong become stronger, and this week, it is recommended to focus on buying opportunities for coins with large gains. It is expected that these coins will rise again. Additionally, considering the rotational effect of the coins, it is expected that mainstream coins with small gains from the previous week may experience a rebound this week. It is recommended to invest a small amount and treat it as a short-term speculative trade. It is important to take profits timely because weak coins tend to lack sustainability. It is still a priority to focus on strong-trending coins.
Over the past week, YFI tokens have skyrocketed by 39%, and trading volume has increased by nearly five times, as developers have announced the soon-to-be-launched product that allows users to obtain a basket of liquidity-backed derivatives by holding a single token.
In terms of the past 7-day gains, CFX (Conflux) has led the way with a growth rate of over 400%, followed by COCOS (Coscos-BCX) and KEY (SelfKey), which have increased by over 200%, and ACH (Alchemy Pay), which has increased by over 140%. FIL (Filecoin) has increased by over 70%.
After analyzing the K-line chart of CFX, it was found that when MA120 was above, entering the market when MA7 crosses MA30 has a maximum single return of 113.63% and a total return of 79.87%, with a total winning rate of 40%. Replaying the chart is an efficient tool for verifying the feasibility of trading strategies.
CFX is actually a domestic public chain, and the team is almost entirely composed of Chinese individuals. It was developed by Shanghai Shitu, and there is a close relationship with the Shanghai government. Recently, CFX has gained popularity because of its cooperation with China Telecom to launch blockchain-supported SIM cards in Hong Kong. This is their latest landing application, which aims to increase web3 and metaverse adoption among more users. The stock market has also been hyping this up, including stocks such as China Telecom.
Last week, there was news that Hong Kong's financial secretary hinted at the possibility of opening up encrypted trading to all citizens in June. This news coincided with the launch of a SIM card collaboration between CFX and China Telecom in Hong Kong. As a result, Aicoin and Feixiaohao quickly launched a Hong Kong section on their platforms, with CFX being treated as the leader. This led to an influx of funds and a surge in prices.
The classification of sectors and concepts in the cryptocurrency market is not very strict, and many coins can belong to multiple categories. The Hong Kong sector is a concept that was artificially created in this case.
Aicoin and Feixiaohao have listed many coins under this concept, with CFX, KEY, ACH, FIL, and COCOS being the main focus of attention.
Some coins can be considered true representatives of the Hong Kong concept because they are headquartered in Hong Kong, hold Hong Kong licenses, or are listed on the Hong Kong Stock Exchange.
Most of the participants in this round of speculation, including the media, project teams, platforms, and related institutions, are Chinese. Therefore, the hype around the Hong Kong concept is believed to be artificially created. Of course, there are positive policy factors in Hong Kong that have emerged at the right time, and the Hong Kong concept is riding on the positive momentum. However, the logic behind the leading coins in this concept is not clear, and caution should be taken to avoid Ponzi schemes.
According to the list of major holders' increased positions, MATIC, AIOZ, SYN, and DAI are among the top positions, excluding stable coins, indicating that the main players are accumulating and increasing their positions. As a retail investor, it may be profitable to follow the trend of the main players and buy before the rise and take profits before the main chips are sold.
Regarding changes in holding addresses, BCH/SYN/GFT/ROSE/CFX have experienced significant fluctuations, which are long-term coins on the list. It is challenging to attract new users during the bear market, but it may also indicate behavior by project parties to inflate data, so caution is necessary.
According to L2BEAT data, the total amount of Ethereum Layer2 lockups has risen to 6.33 billion US dollars, with a 7-day growth rate of 2.16%. The top five lockups are ArbitrumOne (US$3.39 billion, 7-day growth rate of 4.21%), Optimism (US$1.95 billion, 7-day growth rate of 1.69%), dYdX (US$374 million, 7-day decline rate of 0.88%), MetisAndromeda (US$141 million, 7-day decline rate of 8.77%), and ImmutableX (US$125 million, 7-day decline rate of 0.15%).
SUSHI is not a well-established coin but emerged after the rise of the DeFi concept and decentralized trading platforms. The market value is not high because of many competing products, such as UNI, CRV, 1inch, and DYDX, which can cause capital diversion.
The total supply of BLUR is 3 billion, with a circulating supply of nearly 388 million (including 360 million airdropped a few days ago). The remaining amount is still in a locked state and will be slowly released in the future, which is a common pattern for many coins. Specifically, 49% (1.47 billion) will be gradually distributed to core contributors/investors and advisors over the next four years. The remaining 1.17 billion (39%) can be distributed to the community through contributor subsidies, community initiatives, and incentive plans. Of the 39%, 10% (117 million) has been confirmed for the next incentive distribution. According to the plan, the 1.17 billion will be distributed 40% in the first year, 30% in the second year, 20% in the third year, and 10% in the fourth year.
Many coins produced through mining increase their circulation over time, such as Bitcoin, with a limit of 21 million coins, of which just over 19 million have been mined, and it will take more than a hundred years to mine the rest. Moreover, many have been permanently lost or are in hibernation, so few are in the secondary market.
The address that has been dormant for 2 years transferred 66 million ANKR to Binance, which is about 2.8 million US dollars. According to Lookonchain monitoring data, more than an hour ago, a whale address (beginning with "0x4271") that had been dormant for nearly two years transferred 66 million ANKR (approximately $2.8 million) to Binance. It is reported that the ANKR at this address was received from Binance in July 2019 and September 2020, when the price was $0.0065. The transfer of this volume of coins to the exchange can be regarded as a potential selling pressure, which is negative for ANKR. Friends with relevant positions should pay attention to avoiding the potential risk of a callback. Because the holding cost of this giant whale that has been dormant for two years is only $0.0065, I checked and found that the current price is $0.0421, which is about 6.5 times the income, and it is the fifth largest holding of ankr.
Here I have screened the currencies with the highest market capitalization of the Internet of Things concept, you can refer to them. The leading currency is still the iota I mentioned this morning, as well as hnt and qtum. The level of market capitalization represents the recognition of the market, and the general value of low market capitalization is lower. Unless it is those few hundred times coins in the bull market.
II. Concept ups and downs
The specific performance of the concept section is as above, divided by the ratio of rise and fall, GAMEFI, coinbase, and NFT and other sections are leading the rise.
In terms of specific performance, EPIC and DUCK have an increase of more than 80%, which belong to the concept of anonymous coins and Dogecoin. LAVA has an increase of nearly 60%, which belongs to the concept of Huobi ecological chain. BTO has an increase of about 20%+, which belongs to the concept of AI artificial intelligence. Currency, pay attention to the rotating hype market of the sector to which the above-mentioned relatively large-growth currency belongs.
III. Overview of macro analysis
In terms of A-shares, due to the comprehensive influence of internal and external factors, the A-share market rose first and then fell last week. It has generally continued the shock and consolidation characteristics since February. %; small-cap performance slightly outperformed the broader market, the Shanghai and Shenzhen 300 rose slightly by 0.7%, and the China Securities 1000 Index rose by 1.1%. In terms of transactions, the average daily turnover last week dropped from nearly one trillion yuan to around 840 billion yuan. The net outflow of northbound funds last week was about 4.1 billion yuan, the first weekly net outflow since November 2022. At the industry level, some highly cyclical industries that had been stagnant in the previous period performed better, with coal and steel leading the rise; sectors related to the real estate chain such as home appliances and home furnishing also performed well with the support of data.
In terms of Hong Kong stocks, due to factors such as the possibility of the Fed raising interest rates for a longer period of time and a higher end point and rising geopolitical uncertainties, market sentiment was further suppressed last week, and the overseas Chinese stock market fell sharply again. The performance of the growth sector lagged behind. The Hang Seng Technology Index fell 5.8% last week, and the Hang Seng China Enterprises Index and the Hang Seng Index fell by 4.1% and 3.4% respectively. In terms of sectors, consumer discretionary and media and entertainment sectors lagged behind, while energy and materials sectors were among the top gainers.
In terms of U.S. stocks, last Friday, the PCE price index, the inflation indicator favored by the Federal Reserve, did not slow down year-on-year in January, and unexpectedly hit the highest growth rate in five months. The cumulative decline in the rising week was 3.33%; the S&P 500 index fell 1.05%, and it fell 2.67% last week; the Dow fell 1.02%, and it fell 2.99% last week. Among them, the Nasdaq and S&P 500 had their largest weekly decline since the second week of December last year; the Dow had its largest weekly decline since late September last year. Last Friday, the three major U.S. stock indexes all fell by more than 1%, and popular Chinese concept stocks generally fell. As of the close, the Dow fell 1.02%, the Nasdaq fell 1.69%, and the S&P fell 1.05%. The yield on the 10-year U.S. Treasury bond rose 1.7% to close at 3.949%, which is -87 basis points over the yield on the two-year Treasury bond. The panic index VIX rose 2.51%, Brent crude oil closed up 0.73%, spot gold has continued to rise since November 22, and closed down 0.62% yesterday to $1810.99 per ounce. The U.S. dollar index continued to fall from highs and closed at 105.26.
U.S. PCE data for January beat expectations, with strong income growth and accelerating inflation, which could heighten financial market concerns that the Federal Reserve may continue to raise interest rates through the summer. Data on Friday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.8% last month. Data for December was revised up to show spending falling 0.1 percent instead of the previously reported 0.2 percent decline. Spending was likely driven by an 8.7% cost-of-living adjustment, the biggest increase since 1981. Strong consumer spending, combined with a resilient labor market, suggest the economy is far from recession. Moody's believes that the US economy will experience slow growth, growth will be close to stagnation, but there will never be a recession.
Traders are fully pricing in rate hikes at the Fed's next three meetings, with terminal rate expectations rising to 5.45%. The U.S. 2-year Treasury yield rose to 4.8%, the highest since 2007. Germany's 2- to 10-year bond yield curve inverted by 50 basis points, the deepest inversion since 1992. Interest rate hike expectations are heating up, with the market predicting for the first time in December that the European Central Bank will not cut interest rates in 2023, and traders are fully pricing in the possibility that the Bank of England will raise interest rates by 50BP in May. Japan's 10-year government bond was not traded throughout the day, the first time since December last year.
The administration of U.S. President Joe Biden will increase tariffs on 100 Russian metals, minerals and chemical products worth about $2.8 billion. U.S. Secretary of State Antony Blinken said the U.S. announced $10 billion in budget support for the Ukrainian government, as well as additional energy aid measures.
According to Fed Mester: The new inflation data confirms the Fed's case for more rate hikes in the future; the Fed needs to keep raising rates, raising the funds rate above 5% for a period of time until the inflation trend declines. Collins of the Federal Reserve said: To deal with excessive inflation, the Federal Reserve needs to raise interest rates further, and it is possible to keep interest rates unchanged for a long time in the future. The 2025 FOMC vote committee and St. Louis Fed Chairman Bullard said: The market expects inflation to be under control in the next few quarters or years.
Recently, many friends may have paid attention to the premium and rise of the USDT price. On the one hand, it is caused by demand, and on the other hand, it is caused by changes in the real exchange rate. In the past few trading days, the renminbi has weakened rapidly, and the dollar is currently hovering around the 7 mark against the renminbi. "Bearing the dollar" was the unanimous consensus on Wall Street at the beginning of the year, but the frenzied sentiment came to an abrupt end in February—the dollar began to "peak twice". The U.S. dollar index rebounded from 101 to 105, while the yuan against the U.S. dollar fell from 6.7 to around 7 again. A number of factors are driving the dollar's upside in the near future - a buoyant U.S. job market, persistently high inflation, and renewed interest rate hike expectations. Given that China's monetary policy is still in the dovish camp around the world, and the renminbi, which has soared from around 7.4 to 6.7, also needs a technical correction, the recent weakness of the renminbi is not surprising.
After a series of US economic data (non-agricultural employment report, retail sales, consumer CPI and producer PPI) released, the market expects the upper end of the target range of the federal funds rate to increase by about 40BP, reaching 5.25%. The forecast also changed from June to July. With inflation likely to become more stubborn, the Fed's terminal interest rate level may continue to rise. U.S. stocks, which had rebounded sharply earlier, fell into consolidation, and the U.S. dollar index rebounded from a low of around 101 in January to around 105. Last year's high on the dollar index was around 115.
Looking back at January, the money market was still in the frenzy of cutting interest rates - at that time, the market was pricing in an expected rate cut of 160BP between June 2023 and June 2024. At present, the market has retracted the rate cut expectation of nearly 70BP. In addition to changes in money market pricing, we have also seen an increase in market-implied inflation expectations and U.S. interest rate volatility. The market is having to turn to the greater possibility that the Fed will keep rates higher for 'longer time'. Is this reversal just driven by momentary trading sentiment, or is it a more permanent change? This will determine the subsequent trend of the dollar. From the perspective of inflation and employment, the two key indicators of the Fed's decision on interest rates continue to far exceed expectations.
Just in the past Friday, the core PCE price index in the United States rose by 4.7% year-on-year in January, compared with the expected 4.3% and the previous value of 4.4%. The decline in inflation will not be smooth sailing. The most stubborn part is "super core inflation", that is, core service items (excluding inflation of housing, medical care and other indicators). The tight labor market keeps wages high. After the release of non-agricultural data that exceeded expectations by 3 times in January, Nomura raised its 2023 US core PCE forecast from 1.7% to 2.6% and raised its forecast for monthly non-farm payrolls as employers struggled to recruit workers. Under these conditions, job cuts may not be immediate, or they will be caught off guard when demand rebounds. At present, the PCE forecast of most institutions is above 3%.
The reason for the greater upward pressure on the "super core inflation" is that the wage growth rate remains high (approaching 5%). This "salary-inflation spiral" is the most difficult. The service industry and consumer goods will reach a new steady state after a strong rebound in prices, and then the prices will remain flat or gradually fall back, but the rising cost of wages is very sticky, and it will affect the profitability of enterprises and further reduce The driving force of economic growth, so this is the most concerned about the Fed. "Thus, in terms of policy logic, the Fed does not necessarily value economic growth, and the two indicators of inflation and unemployment are the key.
The U.S. job market is also currently stronger than expected, with the unemployment rate at a historically low 3.4% and structural shortages remaining. JPMorgan Chase believes that this round of unemployment rate rise may hit 4.5%, while in previous normal economic recessions, the unemployment rate in the United States should have increased by at least 2 to 3 percentage points from low to high, which is consistent with structural changes in the labor market. Relevant - after the epidemic, a considerable part of the labor force over the age of 55 in the United States has chosen to withdraw, and the overall labor market participation rate will decline sharply in 2020, but after 2021, the labor market participation rate of those under the age of 55 will return to normal levels. Those above the age of 55 did not return to employment. This group of people may have chosen health as their top priority.
Another supply shock stems from the tightening of immigration policies after the former US President Trump took office. In the past five years, the cumulative number of immigrants has decreased by about 3 million. This has especially led to the difficulty of recruiting workers in the service industry. Immigrants are a very important source of labor supply.
Overall, inflation in the United States is indeed on the decline. However, even against a high base, the current inflation is still over 4%, far higher than the Fed's 2% target, and the future downward path is not smooth. This also means that there is no hope of interest rate cuts this year, but the market is currently pricing in two rate hikes (a total of 50BP).
After the rapid appreciation in the first two months, the volatility of the RMB has intensified recently. Under the influence of the US non-agricultural data in January, the RMB tested the 6.8 mark, and it is approaching the 7 mark after the release of the US PCE data this Friday.
The rapid appreciation of the renminbi at the beginning of the year was driven by the depreciation of the US dollar and the expectation of China's recovery. Previously, the long positions of overseas hedge funds in RMB were relatively light, and some of them had covered their positions. Northbound funds poured in 140 billion yuan in January alone. This is likely to make the appreciation of the renminbi biased towards the front this year, and there may be some reverse risks starting from the second quarter, which will restrict the appreciation of the renminbi.
Another reason is seasonality. Usually, the RMB tends to appreciate in January every year, especially before the Lunar New Year (such as factors such as corporate foreign exchange settlement). But by the end of the first quarter and the second quarter, the yuan will depreciate slightly in many years. The countercyclical operation of the exchange rate may also be gradually reversed. In the past few cycles, the People's Bank of China will cancel the foreign exchange risk reserve whenever the renminbi appreciates sharply. When the USD/RMB falls below 6.7, there is a greater risk that such measures will be reversed, especially as exports may decline rapidly this year. In addition, the market's earlier expectations of the Fed's monetary policy easing are very sufficient. Once such expectations are reversed, the momentum of the dollar's rebound will be amplified.
From a technical point of view, it is reasonable for the USD/RMB to rebound around 6.7 this round. There is indeed a strong support position here, and the possibility of filling the gap left above is relatively high (temporary depreciation of the RMB). Going back to 7 and above is not ruled out.
In addition, in the view of institutions, the recent rapid retracement of the renminbi is also related to credit data. In January, M2 (broad money) increased by 12.63% year-on-year, and M1 (narrow money) increased by 6.73% year-on-year. This was slightly different from the previous expectations of economic stabilization and monetary tightening, and poured cold water on the excessively fast-growing RMB.
From the perspective of "real money", in terms of the current account surplus, it is generally expected that exports will be greatly dragged down by the decline in demand in Europe and the United States, and the contribution of net exports to GDP will drop from 0.5 percentage points last year to -0.5 percentage points, that is, the regular The account surplus will fall to about $180 billion from about $400 billion last year.
As far as the capital account is concerned, at the beginning of the year, northbound funds poured into 150 billion yuan sharply, but the bond market was sold off by foreign capital. In January, the custody scale of major bond types of overseas institutions decreased by 106.6 billion yuan month-on-month (an increase of 57.1 billion yuan in the previous month), recording the largest drop since March 2022. After the increase in holdings last month, it turned into a reduction again. The varieties held are interest rate bonds (government bonds - 66.3 billion yuan). Barclays said that this may be affected by expectations of rising yields and a moderate weakening of the yuan.
On the one hand, hedge funds may be under pressure to take profits. After all, the MSCI China Index has rebounded by nearly 60% from its lowest point in October last year; Be more cautious.
As far as the general direction is concerned, more views tend to believe that the economic and monetary policy cycles of China and the United States may be approaching a turning point, and the view that the RMB exchange rate will be bullish in the future can still be maintained. At present, international investment banks' forecasts for the RMB in 2023 are generally In 6.3~6.8. However, the US dollar index has always been the most difficult indicator to predict, and the direction of geopolitics will also dominate the market pattern this year. At the beginning of the year, we believed that the main trading range of the US dollar against the RMB would be 6.80~7.15, even considering the recent exchange rate dynamics, this range remained unchanged.
A list of important financial data and events this week:
Monday (February 27): The monthly rate of durable goods orders in the United States in January and the monthly rate of existing home sales index;
Tuesday (February 28): Japan’s seasonally adjusted monthly retail sales rate in January, Australia’s monthly seasonally adjusted retail sales rate in January, France’s February CPI annual rate, fourth-quarter GDP annual rate final value, and the United States’ December FHFA house price index monthly rate , S&P/CS monthly rate of house price index after seasonal adjustment of 20 major cities, US February Conference Board consumer confidence index;
Wednesday (March 1): Australia's fourth-quarter GDP annual rate, China's official manufacturing PMI, non-manufacturing PMI, composite PMI, Caixin manufacturing PMI in February, France and Germany's final manufacturing PMI in February, the euro zone The final value of the manufacturing PMI in February, the manufacturing PMI of the United Kingdom in February, the initial value of the CPI monthly rate in Germany in February, the final value of the ISM manufacturing PMI and Markit manufacturing PMI in the United States in February.
Thursday (March 2): The number of initial jobless claims in the United States for the week ending February 24, the final value of non-agricultural unit labor costs in the fourth quarter of the United States, and the final value of non-agricultural productivity;
Friday (March 3): Japan's January unemployment rate, Japan's February Tokyo core CPI annual rate, Markit service industry PMI, China's Caixin service industry PMI and comprehensive PMI in February, France's monthly industrial output rate in January, Germany , France, the United Kingdom, and the euro zone's February services PMI final value, the United Kingdom's February services PMI, and the United States' February ISM non-manufacturing PMI.
Currency market attention:
The core developers of the Ethereum blockchain plan to upgrade Shanghai+Capella on the Sepolia test network on February 28 at epoch 56832.
Shanghai+Capella, also known as Shapella, is designed to enable ETH withdrawals from network validators, a feature that was not enabled during the network’s transition to PoS consensus (“merging”). This upgrade combines changes to the execution layer (Shanghai) and the consensus layer (Capella).
February 27 (Monday)
• At 16:00, Binance will charge users with negative USDT balances in their U-margined futures accounts new interest, and interest charges will be charged daily based on the average market interest rate.
It should be noted that the interest will only be charged when the USDT balance in the U-margin contract account is below a certain threshold. The current interest threshold for each U-margin contract account is -200,000 USDT.
• At 17:00, Binance delisted Aion (AION), Mirror Protocol (MIR) and Anchor Protocol (ANC). AION/USDT, MIR/BUSD, ANC/BUSD trading pairs will be removed.
February 28 (Tuesday)
• Quix, the Optimism ecological NFT market, ceased operations
• HOPEX, a digital currency derivatives trading platform, has officially ceased operations. Specific rules: from February 1, all trading pairs will stop opening new positions, closing account recharges, and closing OTC fiat currency withdrawals; after February 5, all trading pairs will stop trading; The on-chain withdrawal function will be available for a limited time every day until February 28.
• Defiance ETF announced that it will close and liquidate its NFT-focused exchange-traded fund (ETF), NFTZ, by February 28. It is reported that NFTZ was launched in December 2021 and listed on the New York stock exchange platform Arca, Inc., tracking companies involved in the NFT and cryptocurrency fields, including toy collection company Funko, online marketplace Ebay and digital asset exchange Coinbase.
Coinbase listed Euro Coin (EUROC). According to the latest information, if the liquidity conditions are met, the transaction will start on or after 01:00 (UTC+8) on February 28.
March 1 (Wednesday)
• Liquidity protocol Onyx (XCN) plans to complete the review and launch the mainnet on March 1st. "
• Web3 communication protocol WalletConnect indicates that WalletConnect v1.0 will be shut down on March 1 for WalletConnect v2.0 migration.
March 2 (Thursday)
• Final hearing on Binance.US acquisition of Voyager assets. Earlier news, the U.S. Securities and Exchange Commission (SEC) opposed Binance.US’s acquisition of more than $1 billion in assets belonging to the defunct cryptocurrency lending company Voyager Digital.
• US mobile payment company Affirm announced the closure of its cryptocurrency business and plans to lay off 19% of its workforce. It is unclear what percentage of these layoffs are related to the encryption business. Previously, Affirm Crypto allowed customers to buy, sell or hold cryptocurrencies.
March 3 (Friday)
• SBF asks federal judge to extend deadline to March 3 to negotiate bail terms.
March 5 (Sunday)
• At 01:00 (UTC+8), Coinbase will temporarily go offline due to technical system upgrades, and all transactions and transfers will not be possible at that time.
2. Market News
This week's key news:
1. Coinbase launches Ethereum Layer 2 network Base (February 23, Thursday)
Coinbase announced the launch of the Base test network, which is based on Optimism and is based on the L2 expansion network of Ethereum. It aims to provide a safe, low-cost, and developer-friendly way to build decentralized applications on the chain. Its vision is to create a standard, modular super chain powered by Optimism, attracting the next wave of 1 billion users into the encryption economy. Base will serve as the home of products on the Coinbase chain and allow anyone to build an open ecosystem Currently, Base has not issued coins, and uses ETH as the original gas fee. Coinbase also focuses its strategic planning on decentralization.
The previous weekly report mentioned that due to the opacity of centralized pledges and the potential risks of insider operations, the US Securities and Exchange Commission (SEC) hopes to cancel retail cryptocurrency pledges in the United States. According to Coinbase's revenue report for the third quarter of 2022, staking revenue is approximately US$62.8 million, accounting for approximately 11% of Coinbase's net income (US$580 million). Faced with such a large piece of cake, it seems that the centralized staking service will usher in the "termination" in its largest US market, which must be unacceptable. On the other hand, the decentralized staking service track is ushering in new opportunities . It is believed that due to the occurrence of various situations, Coinbase is more aware that it should accelerate its strategic layout in decentralized business.
According to the information disclosed in the official press release, Base has the following four characteristics: security based on Ethereum, support by Coinbase, powerful functions and low cost, and open source.
For the construction of infrastructure, in addition to the advantages of the technology itself, ecological development is also the core element. For Base, its biggest advantage at present is the basic support based on the ecological partners and user levels that Coinbase has built for a long time , expecting that Base can take advantage of Coinbase to accelerate the arrival of the next billion users, and continue to promote the large-scale adoption of Web3. The addition of Coinbase makes the OP's story more credible and grander.
2. Hong Kong is issuing relevant licenses for virtual asset services (February 21, Tuesday)
Among the licenses currently issued, OSL Digital Securities Limited and Hash Blockchain Limited have previously obtained licenses for virtual asset trading platforms in Hong Kong, and others, including OKX, Huobi, BKEX, Bitget, etc., are in the process of applying. It can be seen that in addition to the implementation of policies being actively formulated by the Hong Kong government, the issuance of relevant licenses is also gradually liberalized. In terms of policies, Hong Kong will recently establish a virtual asset development task force to promote the development of the Web3 ecosystem. They are all making the final preparations and trials for the opening of the market. Judging from the current trend of opening up in Hong Kong, I believe we will usher in more important policies to be implemented in the next few months.
3. EigenLayer, the Ethereum re-pledging protocol, released the V1 white paper. The module list includes MEV, sorting, etc. (Tuesday, February 21)
On February 21st, the Ethereum re-pledging protocol EigenLayer released the V1 white paper, which describes the key ideas implemented by the core developers in the upcoming first version of the protocol, including a list of potential EigenLayer modules.
EigenLayer is a protocol built on top of Ethereum that introduces the concept of restaking, allowing ETH to be restaked on the consensus layer. Users who stake ETH can opt-in to the EigenLayer smart contract to re-stake ETH and extend cryptoeconomic security to other applications on the network.
From the user's point of view, other applications or services can be maintained while staking ETH. Users can obtain more incentives while taking more punishment risks, so as to realize "one pledge, multiple benefits".
For other third-party agreements, EigenLayer provides an Ethereum security network module that can be "purchased" (or "rented") in the open market, which can save the process of generating and maintaining trust internally.
This will bring heavier financial implications to ETH. It can be expected that in such a network, the package of benefits after holding stETH will increase again.
4. The daily trading volume of Blur surpassed that of OpenSea for consecutive days (February 26, Sunday)
According to Dune data, the number of daily transactions on the NFT trading market Blur has surpassed OpenSea for 7 consecutive days. It is not the focus of our discussion today on whether there is a "flush volume" in the number of daily transactions, because evaluating the real use (transaction) demand of a product needs to be judged from many aspects, such as the product's ease of use, liquidity, user retention rate, Whether the business model can be effectively closed-loop and sustainable, Blur’s current popularity alone is not enough to judge that Blur will eventually surpass OpenSea. It must be known that OpenSea has gone through a sufficient period of market verification, and Blur is still in its early stages. But it has to be admitted that, judging from the current market performance, Blur has indeed challenged OpenSea, and the emergence of competitors such as Blur will also make the development of the entire NFT market trading industry more balanced, because of the absolute "monopoly" Often at the expense of user and related participant friendliness.
Although the current Blur trading volume has overtaken OpenSea, it should also be noted that a considerable proportion of Blur's trading volume may be dedicated to obtaining airdrop rewards. How will Blur maintain its market share after the airdrop is expected to end? It will be a difficult problem for Blur to obtain more NFT users while maintaining its professionalism and keeping its professionalism as low as possible. And Blur currently has no stable profit point. Whether Blur can use its current hot momentum to find a truly stable profit point will be a decisive factor in determining its long-term development. That is, once the effective closed-loop business model and the sustainable development of the operating mechanism cannot be realized in the future, its life cycle will also come to an end.
Key financing events:
1. Polyhedra Network, a ZK start-up company, completed a financing of US$10 million, co-led by Binance Labs and Polychain (Tuesday, February 21):
On February 21, according to The Block, Web3 infrastructure startup Polyhedra Network raised $10 million in a round of financing co-led by Binance Labs and Polychain Capital. Animoca Brands and Dao5 participated in the investment. The startup plans to integrate with more blockchains and make it more accessible to developers through API and SDK tools. It also intends to improve its ParaPlonk protocol to attract developers looking for an efficient and distributed ZK-rollup solution.
The research and development of ZK requires a high technical threshold, which is well known in the industry, so we can also see that the background of the development team behind each ZK solution is "not small", ZK infrastructure start-up Polyhedra Network's The investment lineup is also very luxurious. According to the information disclosed by The Block and its official website, Polyhedra Network will use zero-knowledge proof technology to build the next generation of infrastructure for Web3 interoperability, scalability, and privacy. Currently, it has launched a system for sending assets between Web2 and Web3 systems. ZK bridge solution-zkBridge, ZK decentralized identity solution-ZK-DID, and a programmable NFT protocol-ZK-NFT. In addition, at the level of ecological promotion, Polyhedra Network also plans to improve its ParaPlonk protocol to integrate with more blockchains, and make it easier for developers to access through API and SDK tools, which plays an important role in the further improvement of the ecology. It is also a product that most current protocol layer project teams will launch. Currently, Polyhedra Network has launched a test network, and interested friends can conduct further research. 2023 will be the year of ZK landing, and we look forward to including Polyhedra Network to achieve outstanding results on this track.
2. Huma Finance completed a $8.3 million seed round of financing (Friday, February 24);
On February 24, according to The Block, DeFi startup Huma Finance has completed a $8.3 million seed round of financing, led by Race Capital and Distributed Global, with participation from ParaFi, Circle Ventures, and Robot Ventures. Funds will be used to structure a loan agreement backed by future revenue. Huma's first product is an on-chain factoring marketplace where individuals or businesses can borrow against their future income rather than their existing token assets. Initial partners on the protocol include stablecoin issuer Circle, as well as blockchain payments networks Request Network and Superfluid. This part of the financing sector belongs to the financing of the under-mortgage sector. Compared with using actual assets as collateral, using future earnings as collateral for borrowing is a very novel way.
3. Azra Games, a chain game studio, completed an additional seed round of financing of US$10 million, led by a16z (Tuesday, February 21):
Chain game studio Azra Games completed an additional $10 million seed round, led by a16z (through its $600 million game fund), with participation from NFX, Coinbase Ventures, Play Ventures, and Franklin Templeton. Combined with the $15 million seed round last May, Azra Games has raised a total of $25 million in net funding. Azra plans to release the first work of the game Legions & Legends later this year. a16z says it will be an NFT-oriented collectible and combat role-playing game, and has already started participating in its community Discord-based quests.
Detailed investment and financing events:
Last week (2.20-2.26) there were 37 investment and financing events in the global blockchain, which has increased compared with the previous week. The overview is as follows:
1. The popularity of the DeFi track has risen, and 5 incidents have been announced, namely:
DeFi startup Huma Finance has completed an $8.3 million seed round, co-led by Race Capital and Distributed Global;
Affine, a DeFi yield agreement, completed a financing of US$5.1 million, led by Jump Crypto and Hack VC;
Startup Renegade completes $3.4 million in seed round financing;
Multi-chain options protocol Optix completed $1.8 million in financing, led by Skynet Trading;
Aptos derivatives agreement Tsunami.Finance completed a pre-seed round of financing of US $ 1.3 million, led by Big Brain Holdings and Mirana.
2. Chain games have picked up, and 8 incidents have been announced, namely:
Web3 game studio Kratos completed a $20 million seed round at a valuation of $150 million, led by Accel;
Worldwide Webb, an NFT metaverse game, completed a $10 million Series A round of financing;
Azra Games, a chain game studio, completed an additional seed round of financing of US$10 million, led by a16z;
Web3 game platform Strider completes $5.5 million in financing, led by Makers Fund and Fabric Ventures;
iBLOXX completed a $5 million financing led by PrimeXM, which will be used for game development;
Blockchain game developer Curio completed a seed round of financing of US$2.9 million, led by Bain Capital Crypto;
The RPG chain game Chainmonsters completed US$1.5 million in financing and will be launched on Epic Games on March 6;
HDLabs, a Web3 game publishing and procurement company, completed 100 million won in financing, and Iskra participated in the investment.
3. The popularity of NFT and metaverse fields has dropped, and 6 financings have been announced, which are:
Lifeform announced the completion of Series A financing of US$5 million, with a valuation of US$100 million;
NFT lending platform PaprMeme completed $3 million in financing, with Coinbase Ventures participating;
Data Tibetan trading platform Broadway Exchange completed a $2 million seed round of financing;
NFT trading platform NeoSwap AI completed a $2 million financing led by DACM and AngelHub;
Web3 fashion start-up DE Star completes $700,000 in seed round financing;
The NFT project Awaken completed a seed round of financing of US$500,000, led by TopoStation.
4. The track of infrastructure and tools remained stable, and 12 incidents were announced, namely:
Privacy tech startup Beldex closes $25 million funding round from DWF Labs;
Chaos Labs completed a $20 million seed round led by PayPal Ventures and Galaxy Digital;
ZK startup Polyhedra Network completes $10 million in financing, co-led by Binance Labs and Polychain;
Kaito AI, an encrypted search engine based on artificial intelligence, completed a financing of US$5.3 million, led by Dragonfly Capital;
Blockchain infrastructure provider Gateway.fm completed $4.6 million in financing;
Blockchain index startup Superchain completes $4 million in seed round financing, led by Blockchain Capital;
Multi-signature wallet development company Den completed $2.8 million in financing, led by IDEO CoLab Ventures;
Web3 database developer Polybase completes $2 million Pre-Seed round of financing;
Intu, a decentralized account management protocol, completed a $2 million Pre-Seed round of financing, with participation from Fantom Foundation and others;
Japanese Web3 security company KEKKAI completed 50 million yen Pre-Seed round of financing;
Hardware wallet OneKey completed A+ round of financing with a valuation of US$85 million, led by IOSG Ventures;
Blocto, a multi-chain wallet, completed its Series A financing at a valuation of $80 million.
5. In the field of centralized finance, 1 financing was announced, which is:
Encrypted payment platform TipLink completed a $6 million seed round of financing, co-led by Sequoia Capital and Multicoin Capital.
6. The total financing scale of other Web3/encryption-related projects is the largest, and 5 incidents have been announced, which are:
Blockchain chip startup Chain Reaction raises $70 million to expand its engineering team, led by venture capital firm Morgan Creek Digital;
Sabre56, a Bitcoin mining consulting company, completed a $35 million financing and will build a 150MW mining hosting site;
Towns, a Web3 social app, completed a $25.5 million round led by a16z;
Sentio, a Web3 observability platform, completed a $6.4 million seed round, led by Lightspeed;
3RM, a Web3 customer relationship management company, has raised $3.5 million in financing.
Industry Overview Author: Lao Li(Analyst)
Market News Author: Leon (Analyst)
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