GB Market Commentary 09/07/2021
by Marcus Sotiriou
Bitcoin tumbled as much as 6% on Thursday, reaching a low of around $32,000, as Santander blocked payments to Binance for UK customers due to ‘a large increase in UK customers being a victim of cryptocurrency fraud’, following in Barclays’ footsteps. This crackdown on Binance in the UK comes after the FCA issued a warning to Binance Markets Limited (Binance’s UK entity) about being allowed to engage in regulated activity, as they are not FCA registered. This brings more opportunity to exchanges and custodians who are registered in the UK. Binance’s compliance issues have not been limited to the UK however - Thailand, Japan, Canada and the Cayman Islands have also issued warnings to the world’s largest cryptocurrency exchange in regards to operating without authorisation.
Global markets also showed weakness yesterday, with the S&P 500 falling 0.86% by close amid concerns with the pace of global economic recovery. As analysts predicted jobless claims data to come in at 350,000, it was actually 373,000 - thus signaling a slower recovery than many anticipated. In addition, coronavirus worries heightened as Japan declared that, in a state of emergency, spectators at the Tokyo Olympics would be prohibited from attending the various venues. This weakness in equity markets may have contributed to the decline in the cryptocurrency markets on Thursday, as the two industries, as of yet, have not fully decoupled.
Furthermore, US treasury yields dropped sharply yesterday, which have been uncannily correlated to Bitcoin since the 2020 COVID crash, as shown below (Bitcoin price action in blue, 10 year treasury yields in red):
A fall in yields occurs due to bond buying, as bond prices and yields move in opposite directions. This suggests that analysts predict inflation to be transitory, because in an inflationary environment bonds are sold in order to seek higher returns. I believe that, if these assumptions on inflation are correct and global growth is slow, Bitcoin will enjoy the second half of 2021. This is due to the US government potentially being forced to roll out greater fiscal stimulus, hence fueling Bitcoin’s ‘hard money’ narrative.
Visa announced that they have partnered with 50 crypto-related companies. This allows customers to spend cryptocurrencies on everyday transactions at 70 million merchants around the world. A total of $1 billion has been spent on goods and services using Visa’s crypto-linked card, as the payments giant is helping digital currencies reach mainstream adoption.
Axie Infinity (AXS) has been one of the most trending coins recently, rising by over 100% this week alone, from $6 to $12 approximately. Axie is a popular crypto game where, unlike traditional games whose decisions are made by developers, decisions are made by token holders who can vote on the direction of the game’s universe. It has managed to attract many users, with land and houses in the game selling for hundreds of thousands of dollars.
Kucoin exchange’s KCS token has also seen impressive gains, appreciating by 80% over the past 7 days. This is upon the launch of Kucoin chain, which attempts to replicate the success of Binance’s BSC (Binance Smart Chain). KCS has an attractive token model, as the exchange plans to buyback and burn half of the max supply of 100 million from using trading fees.