Market deep dive: Cryptocurrencies are currently consolidating from recent highs

 

The war in the Ukraine has been going on for almost half a year now, and new geopolitical tensions arose this week as well. Nancy Pelosi, US house speaker, arrived in Taiwan late Tuesday night and provoked harsh reactions from China, who is currently firing missiles around Taiwan as part of unprecedented military drills. The implications of an actual attempt to invade Taiwan would be widespread: given Taiwan’s dominant position in the global chip industry, the US would likely stand by Taiwan (in one way or another) to defend against a Chinese attack. 

This would cause the world to be divided (yet again) into two main blocks: Europe and the US on one side and China and Russia on the other. Looking at a very long timeline, this seems to be the path the world is currently on. Having said that however, it seems likely that China will first wait until its military is stronger and its economy is more self-sufficient to better withstand western sanctions. 

And now on to the market side: cryptocurrencies are currently consolidating from recent highs. BTC$ is trading -3% lower at 23.2k and ETH$ has been down -4% compared to one week ago, trading at 1.66k. As has been seen many times in the past, the correlation between crypto and equity is especially high during market downturns and, unfortunately, lower when equity markets are recovering. 

NDX futures are currently trading 3.6% higher vs. last Friday’s close. 

On Monday, the blockchain bridge Nomad was hacked, and nearly USD 200m of funds were drained. The hack was possible due to a misconfiguration in the main smart contract, and the attack was so simple that many copied the original hacker’s code and participated in the hack.  

After the USD +300m hack of the Wormhole bridge and the USD +600m attack on the Ronin blockchain earlier this year, it remains a puzzle why so much money is put at risk without performing proper due diligence. Especially when it is obvious that blockchain bridges are an attractive target. 

In addition to this, another hack happened to Solana hot wallets, e.g. Phantom and Slope. It has been reported that more than 7k users are affected, and that a single digit million dollar amount was stolen. Solana, previously the darling among Layer 1 blockchains, is trading -6.9% lower over the week and almost -84% since its all-time high. 

In other news, Blackrock and Coinbase announced a partnership yesterday that will allow institutional investors of Blackrock’s Aladdin platform to invest in bitcoin. Coinbase shares closed 10% higher yesterday after jumping almost 40% intraday. 

The market is also awaiting the US Nonfarm payrolls later on today. Any large deviation from expectations of currently 250k might change market expectations of future inflation as well as Fed rate hikes. 

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