UK promises robust crypto regulation, Hamilton Lane tokenizes fund on Polygon, and more!

The crypto market traded sideways in a macro-heavy week, with some notable outperformers. All eyes were on the FOMC meeting on February 1 as the Fed hiked interest rates by 25 bps, as widely expected, while the UK government introduced a plan to regulate cryptoasset activities. Bitcoin registered a flat performance (-0.24%) week-over-week, while Ethereum rose by 3.09%. The scalability vertical was this week’s big outperformer, with Optimism registering a 36.62% price increase, followed by Boba (20.46%) and Polygon (9.37%). Cardano stood out amongst smart contract platforms with a TVL increase of 36.80% as Djed – Cardano’s first decentralized stablecoin – launched on January 31.

Figure 1: Weekly TVL and Price Performance of Major Crypto Categories

Source: 21Shares, CoinGecko, DeFi Llama. Data as of February 6 (close price).

Key takeaways

• UK government promises robust crypto regulation, Treasury and Bank of England detailed the groundwork for a potential CBDC launch this decade.

• Avalanche onboards first institutional “subnet,” BNB introduces native storage solution.

• Hamilton Lane launches an on-chain tokenized fund on Polygon, Rocket Pool voting to limit its growth.

• Roofstock onChain completed its second property sale on an NFT marketplace, with Teller Protocol providing on-chain leverage for the transaction.

Spot and Derivatives Markets

Figure 2 – BTC Perpetual Swap Open Interest / Market Cap

Source: Glassnode

Figure 2 shows BTC perpetual swap open interest (the number of futures contracts open) relative to Bitcoin’s market cap. We can see that the number of contracts built up relative to the market size increased significantly in 2022 until the FTX collapse. Since then, we have observed a general deleveraging of the system. However, in the past two weeks, the ratio has increased slightly as BTC’s price has consolidated, suggesting that risk appetite is picking up among investors.

On-chain Indicators

Figure 3: Ethereum Spent Output Profit Ratio (SOPR)

Source: Glassnode

SOPR, or The Spent Output Profit Ratio, is a metric that can be used to visualize the rate of profit taking on a network at any given time. Looking at the period from January to December 2022, the purple line struggled to break out to the upside and was rejected at the 0 level, indicating that traders were very aggressive in liquidating their ETH. There is a slight change in behavior now, which signifies that traders are employing cautious risk-on behavior. SOPR bouncing off the support line of 0 suggests a positive sentiment from investors as they would be inclined to leaving their assets intact.

Next Week’s Calendar

Source: Forex Factory, CoinMarketCal

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