In Markets
Having recovered from last week’s DeepSeek dip, Bitcoin surged to A$170K/US$106K before President Donald Trump launched his infamous trade war. The resulting crypto carnage saw Bitcoin plunge below A$152K/US$92K and altcoins lose 20%-30% each, pushing BTC dominance above 62%. Ethereum lost 29% over two days, including a sudden 11% plunge in an hour, seemingly due to a cascade of liquidations. But as news emerged this morning that Trump had done a deal with Mexico to delay tariffs there and a similar deal with Canada, markets bounced. Bitcoin finishes the week up 1% at A$163,652 (US$102,569), while Ethereum is down 8% and trading at A$4,635 (US$2,873). XRP is down 9% on the same time last week, along with Solana (-6%), Dogecoin (-11%), Cardano (-12%), and Shiba Inu (-6%). Independent Reserves’ newly listed dogwifhat is on sale at a 25.2% discount to last week, while Render is down 17%. The overall crypto market cap has regained about half its losses from the plunge and is currently at A$5.38T (US$3.35T). The Crypto Fear and Greed Index is at 44, or Fear. Independent Reserve has also listed two new tokens, Official Trump (TRUMP) and Pepe (PEPE), which are now available for trading.
From the IR OTC Desk
Market Performance:
- Intense Volatility: The week was marked by significant market fluctuations. Initially, there was optimism due to expectations of a dovish policy stance and more supportive crypto regulations from the U.S. administration. However, this sentiment shifted dramatically after President Donald Trump announced tariffs on Canada and Mexico, sparking fears of a global trade war, inflation, and sustained high interest rates.
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- BTC/USD saw a decline from 105,400 on January 31st to a low of 91,290.
- ETH/USD fell from 3,425 to a low of 2,105, indicating altcoins were hit harder.
- Bitcoin Dominance increased from 58% to 64%, with market speculation suggesting cryptocurrencies were acting as a proxy for the stock market, which was closed over the weekend.
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- Record-Breaking Liquidation Event: The cryptocurrency market experienced massive liquidations, with Coinglass data showing $2.2 billion in liquidations, surpassing previous benchmarks from the COVID crash and FTX collapse. Bybit reported $2.1 billion in liquidations just on their platform, estimating the total market liquidations to be between $8 and $10 billion.
- Sharp Recovery: The market rebounded significantly following news that the proposed tariffs on Canada and Mexico were temporarily on hold, pending negotiations. This was seen as a negotiation strategy, with both countries agreeing to implement policies to curb drug trafficking and immigration into the U.S.
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- BTC/USD climbed back to 102,000, remarkably closing the day with a green candle.
- ETH/USD made an impressive recovery, jumping from 2,100 to 2,900 intraday. This was partly due to a tweet from Eric Trump, “It’s a great time to add $ETH, you can thank me later” though the tweet was quickly edited to remove the last part.
OTC Desk Activity:
- There was a noticeable spike in trading volumes over the week. There was significant two-way trading reflecting mixed market sentiments. Some participants were buying into the dip, while others were reducing their long positions due to fear of the increased volatility.
- USDT traded at a premium over the week, but despite this the desk saw buy flows dominating volumes.
Key Economic Calendar Events (AEDT):
- Thursday, February 6, 2:00 a.m.: ISM Services PMI (Consensus: 54.2)
- Thursday, February 6, 11:00 p.m.: BoE Interest Rate Decision (Consensus: 4.5%)
- Friday, February 7, 3:30 p.m.: RBI Interest Rate Decision (Consensus: 6.25%)
- Saturday, February 8, 12:30 a.m.: U.S. Non-Farm Payrolls (Consensus: 170k)
- Saturday, February 8, 12:30 a.m.: U.S. Unemployment Rate (Consensus: 4.1%)
- Sunday, February 9, 12:30 p.m.: China Inflation Rate YoY (Previous: 0.1%)
For any further information, please feel free to reach out.
In Headlines
Why have a trade war?
Commentators are confused about what Trump hopes to achieve with his trade war: Is it a negotiating gambit, a return to protectionism, or an attempt to shift taxes to other countries? Jeff Park, head of alpha strategies at financial services firm BitWise, believes the strategy aims to weaken the US dollar in international trade to correct trade imbalances and make US exports more attractive. He predicted the trade war would send “Bitcoin violently higher.” But, so far, the tariffs have caused the dollar to rise, and this morning’s deals with Mexico and Canada suggest it may just be a negotiating tactic. Polymarket now has 80% odds Mexico’s tariffs will be removed by May.
Sovereign Wealth Fund
Trump has signed an executive order to establish a US Sovereign Wealth Fund, headed up by the pro-Bitcoin Secretary of Commerce Howard Lutnick and Treasury Secretary Scott Bessent. This fund is separate from the digital asset stockpile, which is under consideration by the working group until mid-year. However, it has ignited speculation that the fund may end up holding Bitcoin.
SEC reigns in investigations
The new leadership team at the SEC has reportedly told lawyers and enforcement staff they need to seek permission before formally launching probes, sources told Reuters. Previously, such authority was delegated to lower-level staff, with commissioners having the right of refusal. Highlighting the change in direction for the SEC, Kraken has resumed staking services on 17 different coins for US clients for the first time in two years. It previously reached a US$30 million (A$48.2M) settlement with the SEC back in February 2023 and agreed to cease providing staking.
Congress hearings
This week, Congress will launch hearings into crypto debanking, and there will be concerted efforts to repeal the Internal Revenue Service’s recently finalised broker rule that imposes the same reporting obligations on DeFi projects as centralised brokers. Next week will see hearings into the market structure and stablecoin legislation. Crypto Czar David Sacks has organised a press conference for later tonight to discuss how “to secure America as a leader in the digital asset ecosystem.” And finally Elon Musk has indicated support for running the US Treasury on blockchain.
Fed gives greenlight to banks on crypto
Federal Reserve Chair Jerome Powell has given the greenlight for US banks to serve crypto customers and offer crypto services. At a press conference last week Powell said that “banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks.” Castle Island Ventures partner Nic Carter, who coined the term Operation Choke Point 2.0 to describe crypto debanking policies, described Powell’s comments as an “immense shift.”
Apollo’s tokenised private credit fund
Apollo Asset Management, a US$733 billion (A$1.2T) alternative asset manager, has announced the launch of a tokenised private credit fund. Apollo partnered with Securitize to distribute the tokenised version of its US$1.2 billion (A$1.93B) Apollo Diversified Credit Fund on several blockchains, including Aptos, Avalanche, Ethereum, Ink, Polygon, and Solana.
MicroStrategy offering oversubscribed
MicroStratetgy’s ongoing plan to buy all the Bitcoin, took another step forward with its perpetual strike preferred stock option offering oversubscribed by nearly 3x. It has raised US$584M (A$938M) to purchase approximately 5571 Bitcoin. Founder Michael Saylor also featured on the front cover of Forbes.
Czech National Bank considers Bitcoin
The Governor of the Czech National Bank, Ales Michl, says it’s considering holding billions worth of Bitcoin in its reserves. The country is not part of the Eurozone, but the bank’s governor is a member of the European Central Bank’s General Council. That’s significant because ECB head Christine Lagarde said, “I’m confident that Bitcoins will not enter the reserves of any of the banks of the general counsel. I had a good conversation with my friend from the Czech Republic… I’m confident that he’s convinced, as we all are, of the necessity to have liquid, secure and safe reserves.”
ETF frenzy
The SEC has approved the 19b-4 form for Bitwise Asset Management’s ETF tracking the price of Bitcoin and Ether. It invests in the assets based on market cap, so at the date of filing it would have been buying 83% BTC and 17% ETH. The ETF now just needs the S1 approved to go live. Grayscale launched a Dogecoin Trust and, on the same day, filed a 19b-4 application to convert it into an ETF. Bitwise has also filed for a Dogecoin ETF, while 21Shares filed for a Polkadot ETF.
Hong Kong steps up its game in digital assets
Hong Kong’s Legislative Council has reviewed the proposed “Stablecoins Bill,” requiring issuers to be licensed by the HKMA, maintain HK$25 million in paid-up capital, and adhere to strict reserve and risk management rules.
Meanwhile, new Chinese investment guidelines have raised hopes that Greater Bay Area residents could soon access Hong Kong’s Bitcoin ETFs, signaling a potential legal pathway for mainland investors. The People’s Bank of China (PBOC) and other regulators have announced plans to expand the Cross-boundary Wealth Management Connect scheme, allowing mainland investors to purchase eligible financial products from Hong Kong and Macau. While cryptoassets were not explicitly mentioned, Hong Kong has already introduced Bitcoin and Ethereum ETFs, reinforcing its position as a leading virtual asset hub.
Until next week, happy trading!
