Crypto/Digital Assets flow

Crypto/Digital Assets flow

Last month (March), with the banking crisis/turmoil and uncertainty in the air, investors turned to digital assets to diversify and hedge their investments.

Partly thanks to the lower-than-anticipated terminal target rate, digital assets have seen price appreciations in the same time frame.

The terminal target rate is the final interest rate that the Federal Reserve sets as its long-term target of the federal fund rate, which is the short-term interest rate at which commercial banks lend to each other overnight. The terminal target rate reflects the Federal Reserve's expectations of the ideal interest rate level to achieve price stability and keep inflation under control.

Due to the banking crisis, the Federal Reserve adopted a more accommodating and "dovish" stance.

The Federal Reserve injected nearly $500BN of newly printed reserves into the markets, and risk assets such as digital assets jumped.

The injection had done the trick as the cost of holding non-interest-bearing assets diminished.

Tip: Use the play button to listen to the article instead of reading. Sit back and relax

Popularity for Real-World Applications

Real-world applications of digital assets are becoming more popular. Tokenized gold holdings have already reached over $1bn, and stablecoin divided payments might become more common.

Rumors persist that Amazon may offer NFT marketplace, further catalyzing interest in NFTs and other digital assets.

Of course, a clear regulatory framework for digital assets remains a significant hurdle to overcome. If it can be navigated, however, then digital assets may have the potential to see widespread adoption into the mainstream over the next 4 years. (Possibly not in the way we want, who knows)  

FTSE Global, Galaxy Crypto, and Defi Indices

It's been an exciting week for digital asset investors as FTSE Global Digital Asset Indices, Galaxy Crypto Indices, and Defi Indices have all seen large gains.

FTSE Digital Assets Large-Cap Index (MVDALC) tracks the performance of the largest digital assets by circulating weight. The jump was driven by the growing popularity of Ethereum and Dogecoin, which went up.

The price appreciation in Ethereum is linked to the upcoming Shappella upgrade, which promises to reduce gas fees and enable staking withdrawals.

Meanwhile, Dogecoin's pump is linked to Twitter, temporarily logo swap from the famous Twitter bird into the Dogecoin mascot.

FTSE Digital Assets Mid-Cap Index (MVDAMC) tracks the performance of midsized digital assets due to the good performance of the governance token LDO associated with Lido, a liquid staking platform for Ethereum.

Traders were excited by Lido's plan to enable stETH holders to exchange their tokens for ETH after the Shappella upgrade.  

FTSE Digital Assets Small-Cap Index (MVDASC) increased, mainly driven by CHZ and SNX. CHZ is the token powering Chiliz, a fan engagement platform. There has been "apparently" excitement about a soon-to-be-launched Chiliz Chain 2.0, which drove the price of CHZ up.

SNX is a governance token from Synthetix, a decentralized protocol that tracks the prices of various real-world assets. SNX holders were happy with a recent governance proposal to add ARB perpetual futures to the Synethix platform, which helped the price appreciation of SNX.

Overall, it's been a great week for us crypto bros. With upgrades and partnerships, the digital asset market continues to grow and become more attractive. (Yes, we don't need Sam/Alameda)

Before continuing reading, consider subscribing to the premium newsletter if you're enjoying it and getting value from it. Even if you don't trade, the airdrops can get your investment out of it.
Anyways you can continue to read further. The article doesn't stop here.

Premium subscription

Exclusive access to content


Social Media

• Largest mentions increase wk/wk: LDO, MKR, TUSD
• Largest mentions decrease wk/wk: GRT, HNT, ATOM

Weekly flows Bitcoin

This weekly flow is an overview of of the money flow of Bitcoin, Ethereum, and stablecoins transferred to and from exchange wallets to evaluate investor behavior.

Exchange net flows refer to the difference between assets from into and out of the exchanges.

Net flow = inflow - outflow

1 week net flow ($mn) into personal digital asset wallets (BUSD +$416m, BTC +$368m, ETH -$225m)

Positive net outflows mean more coins/tokens leave the exchange instead of being deposited to the exchange. This can indicate bullish sentiment and strong conviction as investors hold their assets in their wallets rather than being deposited on an exchange prepared to sell if there's any setback.

Negative outflows mean that more coins/tokens are deposited on the exchange than withdrawn from the exchange, which can indicate a bearish or low conviction sentiment as investors and traders are ready to sell if they see any form of disappointment.

Bitcoin net outflows were the second largest of the year, following the prior week's largest outflow of the year. That means that a large amount of BTC was withdrawn from exchanges into other wallets, such as cold storage.

That can signify investor confidence in BTC's long-term value and are unwilling to sell at those prices yet.

It could also imply that investors diversify their portfolio by rotating into BTC from USDC. USDC is a stablecoin pegged to the US dollar, which saw a 25% decline in market cap in the last 4 weeks.

Another reason for the large BTC outflows is that investors are moving their funds off exchanges due to US regulatory concerns, such as the proposed tax reporting requirement for crypto transactions over $10k.

That factor can be considered neutral as it does not reflect the demand and supply of BTC in the market.

Weekly flows Ethereum  

On the other hand, Ethereum exchange net inflows were the largest of the year, meaning that a large amount of ETH was moved from other wallets to exchanges.

1-week net flow ($mn) into personal wallets (tokens)

This may indicate that investors are moved their tokens to exchanges ahead of the Shapella upgrade, which is a hard fork. The upgrade lines up a series of improvements for Ethereum, including Ethereum Improvement Proposals (EIPs) Shanghai and Shappella.

The largest change of Shapella is that it enables validators who have staked at least 32 ETH on Ethereum 2.0 to withdraw their tokens immediately and anytime they choose. This feature was previously unavailable, and validators had to lock up their ETH indefinitely until Ethereum 2.0 is launched.

BofA (Bank of America) doesn't expect the Shapella liquidity event to drive sell pressure directly but does expect heightened volatility around the event due to decreased liquidity, exchange inflows, and derivatives activity.  This factor is also considered neutral as it does not reflect the demand or supply of ETH in the market.

Flows stablecoins

The top 4 stablecoins (USDT, USDC, BUSD, and DAI)

The top 4 stablecoins saw net exchange outflows for the 12th consecutive week, over which $15.2bn in liquidity has been withdrawn from exchanges.

This could mean investors are moving stablecoins to other platforms or wallets, indicating that they aren't using them to buy assets.

That may suggest that investors are cautious about the market conditions and are moving to the sidelines until they see more clarity or opportunity.  

Another reason could be fear of exchanges being solvent or not and US regulations.

Bitcoin may continue to outperform Ethereum and other cryptocurrencies in terms of price appreciation and market dominance.

Token flow

Analysis of YTD Digital Asset Market Value Appreciation Relative to SPX and CCMP Performance

An analysis of the year-to-date performance of digital assets reveals that their market value has appreciated by 47% after falling 64% in 2022.

The rest of this article is for premium subscribers only. A Discord discussion channel for premium members has been included since today
A subscription is $25, which will also include airdrop hunting which should cover the subscription fees if you stay subscribed & committed. You're also supporting me into continue to deliver more writing, research etc.