Congressman Sherman Questions SEC, Bitcoin Developers Debate BRC-20

May 12, 2023

Market Update

  • Stocks and crypto continue to slide as BTC fell 2.0% while the S&P dropped 0.52%. The S&P is on track to close its second negative week after the University of Michigan’s consumer sentiment index estimate came in at a 6-month low of 57.7 vs. 63 expected. The survey also showed consumer outlook for inflation over the next 5 years has reached the highest level since 2008, with 3.2% inflation expected. BTC has reached 2-month lows trading at $26.3k, just above the key level of its 200-week moving average at ~$26.1k. The downward price action has followed a string of negative headlines which led to uncertainty in the market, including network congestion issues (more below), Binance temporarily halting Bitcoin withdrawals, and unconfirmed (potentially fake) reports that the U.S government is continuing to unload Bitcoin seized in the closure of Silk road. LDO (+7.5%) and KAVA (+7%) are outperforming among the top 100 cryptos. LDO is preparing for its V2 upgrade which would enable withdrawals of staked Ether, expected to go live on Monday pending a community vote. Layer-1 blockchain KAVA announced its mainnet launch was one week away. 
  • U.S. Congressman Brad Sherman has expressed concerns about the situation surrounding Grayscale Bitcoin Trust (GBTC) in a letter to the Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler. Sherman highlights that approximately 850,000 retail investors, some of whom invested their individual retirement account funds, are currently unable to exit their GBTC investments due to actions taken by GBTC and its parent company, Digital Currency Group (DCG). Sherman estimates these investors may risk losing billions of dollars from their savings. The concerns arise from the fact that GBTC shares are trading at a significant discount compared to the value of the bitcoins in the trust, and Grayscale has declined to redeem GBTC shares, citing regulatory restrictions. Sherman alleges that Grayscale's actions prioritize increasing assets under management over the interests of GBTC's retail investors. Additionally, Grayscale charges an annual fee that is more than four times higher than its competitors, resulting in substantial revenue for the company. Sherman has posed several questions to the SEC regarding the regulatory barriers and Grayscale's governance structure.
  • A divisive debate is occurring among Bitcoin developers regarding the potential censorship of Ordinals BRC-20 tokens. The significant number of tokens minted using the Ordinals protocol has congested the Bitcoin network and led to skyrocketing transaction fees, sparking concerns among developers about how to address the issue. Some suggest implementing changes through a Bitcoin Improvement Proposal (BIP) or modifying Bitcoin Core, while others argue for maintaining the status quo and allowing the market to dictate usage. The escalating fees have driven crypto exchange Binance to integrate the Lightning Network scaling solution for Bitcoin after it was unable to process withdrawals this past Sunday. This situation challenges Bitcoin's core principles of being a peer-to-peer payment network that is free from censorship.

Daily Technical Strategy

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Mark L. Newton, CMT

Head of Technical Strategy

Bitcoin's break of former April support lows at $26,981 is a temporary negative, though doesn't suggest this rally from last November has run its course. Three key positives are worth considering as to why dips likely should be still buyable and BTC could halt its decline just above $25k and turn higher. First, structurally the six-month uptrend remains intact technically despite the volatility. Second, from an Elliott-standpoint, this recent drawdown doesn't seem too bearish, resembling a three-wave ABC pattern which likely finds support near the prior swing high from February 2023, which now should provide support on weakness. Third, DeMark counter-trend exhaustion was never present at April's peak to suggest a meaningful peak might be in place. Thus, until/unless BTC were to break $25k, this pullback should find support at $25-$25.3k within the next few days and turn back higher. This level coincides with a meaningful 38.2% Fibonacci area of support for the larger low to high range and should allow for stabilization and a turn back higher. Upside targets once BTC exceeds $30k lie at $33-35k. Bottom line, this pullback likely should run its course within 2-3 days and start to stabilize and turn back to the upside.

Daily Important Metrics

Crypto Size

Bullish signal is tied to the crypto market growing

Market cap $1.10T $-30.2B (-2.66%)
BTC Dominance
46.23% (-1.39%)
Stablecoins

Increase in circulating stablecoins is a Bullish signal

In Circulation $83B(+0.14%)
In Exchanges $12B(-0.61%)
BTC Metrics

A decrease in Bitcoin on exchanges is bullish, indicates investors are moving coins to cold storage

# BTC in Exchanges 2.3M(0.27%)
Funding Rates

Positive funding rates indicate traders are Bullish

Aggregate0.23 (0.21)
Binance0.12 (0.86)
Bitfinex0.41 (0.41)
Bitmex0.38 (0.21)
ByBit0.36 (0.76)
Deribit-0.01 (0.04)
Huobi0.80 (-0.20)
Kraken-0.40 (-0.03)
Mean0.23 (0.21)
OKex-0.24 (-0.54)
Sentiment
Congressman Sherman Questions SEC, Bitcoin Developers Debate BRC-20

BMI : 52 (4.00%)

Futures

A positive spread between Futures Prices and Spot Prices is Bullish

CME BTC Price$26,385 (-3.07%)
Spot Basis
$24.90 (0.09%)
Volume1.1M (-29%)
Open Interest
316,945 (7.15%)
Options all exchanges

Higher open interest change in a bull market is bullish for the sector

Volume26,095 (3.39%)
Open Interest325,633 (2.16%)
Volume Put/Call Ratio0.5039 (-24%)
Open Interest Put/Call Ratio0.4651 (-1.35%)

All metrics as of May 12, 2023 1:36 PM

All Funding rates are in bps

Crypto Prices

Symbol Market Cap Last Price Daily Change Year to Date Relative to BTC YTD
btc imageBTC
$510B $26,324 -2.04% 59%
btc imageETH
$218B $1,773 -0.60% 48% -11%
btc imageADA
$13B $0.3592 1.36% 46% -13%
btc imageDOGE
$10.0B $0.0714 2.09% 1.83% -57%
btc imageSOL
$8.1B $20.38 2.31% 106% 47%
btc imageMATIC
$7.7B $0.8354 -0.37% 9.61% -49%
btc imageDOT
$6.2B $5.24 0.10% 20% -38%
btc imageLINK
$3.3B $6.43 2.02% 16% -43%
btc imageNEAR
$1.5B $1.63 3.23% 28% -31%

Exchange Traded Products (ETPs)

Symbol Premium to Nav Last Price Daily Change Year to Date Relative to BTC YTD
GBTC -40% $14.02 -4.37% 69% 10%
BITW -56% $10.17 -2.21% 89% 30%
ETHE -52% $8.15 -2.68% 71% 12%
BTCC -0.19% $4.86 -1.42% 60% 1.49%

News

QUICK BITS

CoinDesk

Among Bitcoin Developers, Debate is Raging Over Whether to Censor Ordinals BRC-20s

Despite calls for censorship, many developers agree that maintaining the status quo is the right thing to do for now.

MARKET DATA

Decrypt.co

Bitcoin Liquidity on Binance Has More Than Halved Since February: Kaiko

Low liquidity and volumes on Binance have led to a serious uptick in volatility in the price action for Bitcoin.

CryptoSlate

BRC-20 tokens lose 600 million in market cap within four days

Quick Take On May 8, CryptoSlate reported that BRC-20 tokens hit a $1 billion market cap due to the soaring Bitcoin fees that miners were receiving. Yesterday, ...

DOSE OF DEFI

CoinDesk

Decentralized Exchange Uniswap Trading Volume Outpaces Coinbase for 4th Consecutive Month

Uniswap, the decentralized exchange, outpaced centralized exchange Coinbase in April.

REGULATION

CoinDesk

McHenry to U.S. SEC: Which Crypto Firms Have Tried to Register?

The U.S. Securities and Exchange Commission (SEC) has so far disregarded congressional requests for information on its interactions with crypto platforms seekin...

Bitcoin Magazine

U.S. Congressman Brad Sherman Sends Letter To SEC Chair Calling Attention To Grayscale Bitcoin Trust Situation

A member of Congress has now requested action in regards to billions of dollars locked in the Grayscale Bitcoin Trust.

BtcEthereum

SEC Slammed By U.S. Chamber Of Commerce For Regulatory Approach To Cryptocurrencies In Coinbase Filing

The Securities and Exchange Commission (SEC) is facing criticism from the United States Chamber of Commerce over its lack of clarity regarding which digital ass...

FUNDRAISING AND M&A

Decrypt.co

CZ Looking to Offload Some of Majority Stake in Binance US: Report

Binance CEO Changpeng Zhao is reportedly looking to hand over some of his majority stake in Binance.US to appease American regulators.

Reports you may have missed

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