Crypto Prices Are Surging as Macro Data Shows Rays of Light

Blue bitcoin chart rising with error bars in red

Crypto prices remained uncharacteristically stable as 2023 began and a plethora of news hit the market.

Although volatility was expected following a key unemployment release on Friday, crypto markets remained subdued while stocks rallied on Friday. However, it seems the market reaction was merely delayed as crypto markets rallied Monday morning.

Uncertainty regarding crypto bank, Silvergate, and crypto venture firm, Digital Currency Group, did little to force cryptos lower.

Markets now look ahead to December’s CPI results which are set to be released on Thursday, January 12th.

  • Latest unemployment figures barely move the needle for crypto prices
  • Bitcoin futures volume falls to two-year lows
  • Crypto bank, Silvergate, falls over 50% after withdrawal concerns
  • Digital Currency Group closes Wealth Management Division amid struggles

Latest unemployment figures barely move the needle for crypto prices

Although the first seven days of 2023 were packed full of news, volatility remained extremely low within the crypto markets. The world’s leading crypto, Bitcoin, appeared to be unaffected by both positive and negative releases. 

According to data collected by TradingView, by midday Monday, Bitcoin had recorded a modest 3.24% increase for the week, gains that were outpaced by Ethereum which was up 8.67% and Litecoin that has surged 10.19% as traders anticipate the Litecoin halving later this year.

Meanwhile, investors were expecting key US unemployment figures and concerns regarding Silvergate bank and Digital Currency Group to move the needle.

Nonfarm payrolls data, which were released on Friday, showed that the US had added a higher-than-expected 223,000 jobs in December. 

US Non Farm Payroll figures between Jan 2022 and Dec 2022

US Non Farm Payroll figures between Jan 2022 and Dec 2022

Although lower than November, a higher-than-expected figure is, ordinarily, linked to the possible continuation of Federeal Reserve interest rate hikes. A move that is harmful to risk-on asset prices, such as crypto. However, slower average wage growth allayed investors’ fears.

As a result of a decrease in wage growth, stocks rallied hard on Friday, with the Dow Jones and S&P 500 closing out the week with a 2.37% and 2.67% respective increase. Although the same positivity was expected within the crypto market, bitcoin remained unphased into the weekend.

Likewise, although crypto bank, Silvergate, and crypto venture capital firm, Digital Currency Group endured heavy scrutiny, negative sentiment was not enough to force the price of bitcoin lower.

From a year opening price of $16,500, the price of bitcoin eventually closed the week at $17,100. 

Investors now look ahead to December’s CPI results that will be released this week and the Fed’s next decision on monetary policy which is coming up in less than a month. 

Crypto market cap heat map for the first week of January 2023

Crypto market cap heat map for the first week of January 2023

Bitcoin futures volume falls to two-year lows

According to data collected by The Block, bitcoin futures volumes plummeted to a low of $386.6 billion in December, which marked the worst month of futures trading since October 2020.

Monthly trading volumes were down 39% in comparison to November.

Futures trading on the regulated Chicago Mercantile Exchange (CME) also fell to October 2020 lows, a 53.1% decrease in comparison to the previous month.

The drop in bitcoin trading activity was not limited to the derivatives market. Spot trading volumes on centralized exchanges also fell 47.5% throughout December.

This marked the lowest spot trading volumes in over two years and highlights the lack of risk appetite for speculation in the crypto markets. 

Experts believe that the collapse of FTX was the likely catalyst for a restriction of trading activity throughout December. Investors need to build trust in centralized exchanges once more.

According to 21.co Research Analyst, Carlos Gonzalez, “A possible explanation of this behavior is that FTX’s collapse in November has led to a lack of confidence in centralized exchanges, leading to less trading activity. It will also depend on macroeconomic and general market sentiment”

Although the failure of FTX weighs the heaviest in investors’ minds, worsening macroeconomic conditions and the threat of recession have not been forgotten.

Bitcoin futures volume between March 2020 and January 2023.

Bitcoin futures volume between March 2020 and January 2023.

Crypto bank, Silvergate, falls over 50% after withdrawal concerns

Silvergate, one of the first global banks to offer cryptocurrency services, lost over 50% of its value last week as investors became concerned by negative withdrawal news.

According to fourth-quarter results, over $8 billion was withdrawn by customers between October and December 2022; an act primarily driven by the contagion from the collapse of FTX.

The withdrawal activity reduced the company’s assets under management to approximately $3.9 billion and resulted in the bank selling assets at discounted prices to lower the risk of liquidation. The sale locked in $718 million worth of loss which is equivalent to the earnings collected by the bank for the previous seven years.

As news of customer withdrawals broke on Thursday, SIlvergate’s share price tanked 43%. The share price then continued to fall a further 9% on Friday as it was revealed that the bank would also be reducing its staff by 40%. Over 200 employees will be removed to help sustain losses.

The bank’s value has now fallen 91% from its all-time highs that were recorded in 2021.

Alongside retail concerns with the crypto community, the eyes of Wall Street were equally dismayed by the Q4 results. 

In a Friday note from Steven Alexopoulos at J.P Morgan, “There is no way to sugar coat that what the company released as the preliminary results were far worse than we expected and with near- as well as longer-term implications to the business.”

Logo for Silvergate bank shown on a phone

Digital Currency Group closes Wealth Management Division amid troubles

Digital Currency Group, a venture capital firm that controls Grayscale Investments and the Genesis brokerage, is set to close its Wealth Management Division called HQ.

According to a statement released on Thursday by The Information, “due to the state of the broader economic environment and prolonged crypto winter presenting significant headwinds to the industry, we made the decision to wind down HQ.” DCG’s HQ is set to close on January 31.

The Wealth Management Division holds more than $3.5 billion in assets under management.

Back in December, DCG’s brokerage platform, Genesis Global Capital, ran into difficulties due to a connection with the failed exchange, FTX. According to reports, $175 million had been locked within an FTX trading account. This forced the platform to pause lending at the tail end of 2022.

With additional losses throughout 2022, such as a $1.5 billion loss due to the collapse of Three Arrows Capital, there is now heavy skepticism over the liquidity held within the entire DCG ecosystem.

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