This week has been pretty hectic for the crypto and traditional markets and investors will find that central banks are introducing a new expansionary monetary policy Bitcoin (BTC) and altcoins are starting to go their own way.
Before reading the summary, Find out about the most widely read Bitcoin stories, The macroeconomic outlook and the DeFi phenomenon are gaining ground.
A crucial moment for Bitcoin and digital assets
Central bank policy developed for the first time after the great recessionwhich were later considered exceptional, they have become commonand concerns come from every corner of the world.
Quantitative easing, long-term low interest rates, economic reviews and other measures are increasingly being used to stimulate the economy, Jobs and Financial Markets Affected by Government Response to the COVID-19 Pandemic.
This caused that Federal Reserve and the United States Treasury Department Rewrite the fiscal rules to prevent the country from sinking under the weight of a seemingly almost certain financial collapse.
The scope of this effort is a marked departure from previous policies such as TARP, which mainly focused on the financial industry, and They brought us to a defining moment for bitcoin and other digital assets.
This cold you feel is not the end of summer It’s a collective cool-down following comments made by Fed officials in Jackson Hole this week.
The Chairman of the Federal Reserve, Jerome Powell, recognized the Federal Reserve’s new approach this week and The responsibility, he said, is to strengthen the US labor market with less worry about rising inflation.
Significantly Powell acknowledged that the decline in unemployment historically raised concerns about rising inflation. and they got the Fed to raise interest rates; The central bank will no longer take such measures.
This is a perspective potentially scary for anyone interested in the value of money And it has seen the disastrous effects of rampant money expansion in countries like Venezuela, Russia, Brazil and elsewhere.
There are two reasons why it is important for digital assets: Technology and anti-inflation potential: the ability to tap into unbanked communities and spread “credit and trust”.
In terms of market reaction, Long-term US Treasury bond yields rose to their highest level in months on ThursdayThis steepened the yield curve after Powell announced this policy framework that encourages higher inflation to encourage economic recovery and job creation.
Weekly performance of the cryptocurrency market. Source: Coin360
With a view to the future, it is worth keeping an eye on the raw material pool and the development of expectations. The correlations that can be applied now may no longer be true, especially those related to inflation.
Unsurprisingly, Bitcoin (BTC) and gold traded at a snail’s pace for most of the session., initially higher before reversing and dropping to new session lows.
You could be up to something
Another week brought another wave of capital inflows into DeFi projects. The total amount locked is now $ 7.22 billionand the three main assets, This includes companies like Aave, Maker, and Curve, each of which has more than $ 1 billion blocked.
Total value locked in DeFi (USD). Source: Defi Pulse
The total amount of Bitcoin trapped in the ecosystem has now increased to $ 46,086, wBTC represents $ 30,798, followed by renBTC at $ 8,408. Although transaction costs on the Ethereum network have fallen from recent highs, This did not lead to a significant increase in the trading volume on decentralized exchanges.
This suggests that the market is likely to be putting pressure on smaller participants and It is now dominated by larger funds and token holders.
Therefore, future growth is more of a by-product of innovation and further development of the underlying infrastructure. Capital flows don’t seem to be a problemThis can be seen in the continued growth of almost every known DeFi platform.
According to the latest CME post, The number of unique accounts that have traded bitcoin futures since its inception exceeds 5,400. When new entrants enter the market, The number of Open Interest Large Holders (LOIH) continues to grow. That article had a record 94 owners in the week of August 18th.
Open interest and volume of BTC futures on CME. Source: Skew
Also, The number of LOIHs has increased dramatically since the fourth quarter of 2019This indicates a growing institutional interest as a LOIH holds at least 25 contracts. In the week of August 18th, a record 94 owners were set.
In addition, along with the increase in LOIH, The average daily open interest has risen steadily since March and has exceeded the average daily volume (ADV) in the past four months.
Open Interest hit a record 15,406 contracts (77,030 Bitcoin equivalents) on August 17 and an average of 13,672 contracts per month, an increase of 40% over July. The ADV in August is 9,570 contracts (47,850 Bitcoins), about 30% more than in July.