Coinsquare Market commentary May 4th 2023

Market Commentary – March 27th, 2023


At the time of writing, Bitcoin is trading at $26,900 USD and Ethereum at $1,711 USD. The crypto market was range bound last week with the price of BTC not able to touch the $30,000 barrier. BTC tried twice to breach $29,000, only to be met by huge selling pressure which took its price back lower to around $27,000. Throughout the week, BTC danced between $27,000 and $28,800 a number of times without much conviction.  With BTC locked in a directionless consolidation, altcoins too suffered the same fate as prices merely drifted up and down without a clear direction over the course of the week. Despite the short-term lack of direction, the fundamental argument for cryptocurrencies has improved materially since the series of banking system stresses. Even though the situation with the banks appears to be under control at the moment, the possibility of more troubles popping up is high, as we have seen in the case of Deutsche Bank. As such, depositors would likely want to diversify where they keep their money and deploy some funds to crypto, which could keep the price of BTC well-supported. With such a backdrop, the sharp falls in price which we have seen in 2022 may have come to an end, which implies that dips going forward may be more shallow. As we have seen early last Tuesday, even when the White House condemned the crypto sector in its annual economic report, prices failed to fall materially, showing an underlying strength.

The 7-day recent price performance of BTC when compared with its previous cycles is showing a price increase style that had only been observed in the early stages of a new bull market. According to Glassnode data, BTC has jumped by 37.85% mid-March, and such a big price appreciation within one week has only been seen four other times in the past, and all four such instances occurred at the beginning of a new bull market cycle.


Early last week, the markets stabilized as no new bank announced that they were in dire straits ever since Credit Suisse was bought over by UBS, while the US Treasury’s backstopping of bank deposits could likely contain the troubles at US banks for the time being.  Conflicting messages from US Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell regarding the guaranteeing of all bank deposits caused some confusion. However, markets ultimately decided that the guidance from the Fed meeting was dovish, as the 25-bps rate hike as well as the standard press conference remarks was in line with expectations.

US Federal Reserve President Kashkari spoke over the weekend, noting that recession risks have risen after the financial volatility. There is a case to be made that the Federal Reserve was tightening policy too far. While monetary tightening should slow profit-led inflation it can cause a lot of unnecessary damage in the process. Nevertheless, the Federal Reserve remains focused on its inflation fight, as repeatedly noted by Jerome Powell following this week’s FOMC meeting. During his press conference, he specifically made two critical comments. The first was that inflation remains too high and is well above the Fed’s two-percent goal. The second was that the bank crisis would tighten lending standards which would have a “policy tightening” effect on the economy and inflation.

While the market is starting to price in just one additional rate hike by the Fed, the “lag effect” of rate hikes remains the most significant risk. The problem for the Fed is that the economy still shows plenty of strength, from recent employment numbers to retail sales which may cause more inflation down the line.

Equities, Fixed Income, FX and Commodities


The markets did have a temporary scare from Deutsche Bank, which saw its credit default swap (CDS) move higher for no apparent reason on Friday, which caused stocks to come off. However, by the close of Friday, US stocks managed to recoup their losses while European stocks closed the week lower. For the week, the Dow was flat, while the S&P rose 0.4% and the Nasdaq gained 1.63%.

Fixed Income, FX & Commodities

There was a noticeable flight to the US dollar since the Deutsche Bank scare started towards the end of the week, as DXY reclaimed all its losses post the dovish Fed meeting to finish the week only 0.66% lower, while the EUR/USD and GBP/USD retreated off their mid-week highs. The dollar strength was also evident in the price of Gold, which ended the week flat after trying two times to break the $2,000 barrier but could not. In the end, Gold closed the week retreating back to the $1,977 level. Silver fared much better, gaining 3.75% to close at $23.22. Oil prices moved higher on the back of the dovish Fed, with the WTI higher by 3.28% and Brent Crude gaining 1.76% by the week’s close.

News we’ve been reading

  •  Silicon Valley Bridge Bank, National Association (SVB) is being purchased by fellow regional bank First–Citizens Bank & Trust Company, Raleigh, North Carolina. Unlike for its peer, Signature Bank, the press release did not include any mention of SVB being required to shut down its crypto business. SVB has made headlines in the crypto space due to its relationship with Circle, acting as a custodian of USDC reserves. – link – @FDIC
  • MicroStrategy (NASDAQ: MSTR) announced that it purchased BTC 6,455 for USD 150M since mid-February. Its treasury now holds BTC 138,955 which it purchased at an average price of USD ~29,817 per coin. The company also announced it prepaid its USD 161M loan owed to Silvergate, fully paying off its debt to the collapsed bank. – link – @CoinDesk
  •  The Ethereum Foundation set a maximum bug bounty of USD 500k for vulnerabilities identified related to the network’s planned upgrade, Shanghai. The upgrade, which will enable staked ETH to be withdrawn, is scheduled to take place on April 12, among other features. – link – @TheBloc
  • Crypto derivatives exchange Deribit announced it will cease offering services to Canadian users. The exchange said its decision to add Canada to its list of restricted jurisdictions coincides with guidance released by the Canadian Securities Administrators in February. – link – @Deribit

The fine print

Click here for the fine print.

Leave a Reply

Your email address will not be published. Required fields are marked *