First Mover Asia: Hong Kong’s OSL Sees Strong Institutional Interest in Crypto, Despite Luna-Induced Volatility; Bitcoin and Ether Surge

Good morning. Here’s what’s happening:

Prices: Bitcoin and ether surge after Fed chair's defiant tone.

Insights: Institutional interest in digital assets remains strong.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover,our daily newsletter putting the latest moves in crypto markets in context.

Prices

Bitcoin (BTC): $21,082 +5.6%

Ether (ETH): $1,143 +9%

Biggest Gainers

Asset Ticker Returns DACS Sector Polygon MATIC +21.8% Smart Contract Platform Cosmos ATOM +14.5% Smart Contract Platform Avalanche AVAX +12.3% Smart Contract Platform

Biggest Losers

There are no losers in CoinDesk 20 today.

Bitcoin and Ether Surge After Fed Chair's Defiant Remarks

In the tug of war between the forces driving bitcoin over $20,000 and those dragging it below, the drivers won in Thursday trading.

Bitcoin was recently trading at about $21,100, a more than 5% increase over the past 24 hours that helped the largest cryptocurrency regain much of the ground lost the previous day. Ether, the second-largest crypto by market cap, was changing hands at over $1,140, an 8% gain. Other major altcoins assumed various shades of green with STORJ and POLY assuming two of the darkest hues, rising more than 30% and 20%, respectively at one point.

Crypto increases dovetailed with equities gains as investors relaxed at least temporarily from their risk-averse crouches. The tech-focused Nasdaq, which has increasingly mirrored digital assets' performances, rose 1.6%, and the S&P 500, which contains a heavy tech component, climbed almost a percentage point after a second day of testimony by Federal Reserve Chairman Jerome Powell, whose defiant tone about inflation and frank acknowledgement that the Fed's monetary hawkishness might lead to a recession soothed markets craving clarity.

Still, analysts are pessimistic about the staying power of Thursday's crypto surge amid inflation and geopolitical uncertainty. "Bitcoin remains a risky asset and probably won't trade on crypto fundamentals until a firm bottom is agreed upon for U.S. stocks," Oanda Americas senior analyst Edward Moya wrote in an email.

Crypto markets absorbed a mix of good and bad news, mostly bad. Among the more encouraging events, Solana Labs, the main stakeholder in the Solana blockchain network, announced that it was building a Web3 mobile phone called "Saga."

And Binance CEO Changpeng Zhao wrote in a blog post that his firm would remain committed to helping crypto projects with fixable problems and strong potential. "With our position as one of the largest industry players with healthy cash reserves, we have a duty to protect users," Zhao wrote. "We also have a responsibility to help industry players survive and hopefully thrive."

But physical futures crypto exchange CoinFLEX paused withdrawals, citing the same “extreme market conditions” that other firms in the crypto sector, including Celsius Network, have blamed for their troubles. CoinFLEX CEO Mark Lamb said in a blog post Thursday that the decision tied to a certain counterparty, although he added that it was not the struggling crypto hedge fund Three Arrows Capital or “any lending firm.”

Late Wednesday, cryptocurrency broker Voyager Digital reduced its daily withdrawal limit to $10,000 from $25,000 after detailing its exposure to Three Arrows Capital earlier this week. Voyager shares plunged by more than 60% Wednesday after the company said it had exposure of $720 million to Three Arrows Capital in the form of stablecoins and bitcoin. And ratings agency Moody’s has downgraded Coinbase’s corporate debt and also placed its debt ratings for the crypto exchange under review for further downgrade.

Even as Oanda's Moya was upbeat about bitcoin's longer-range future, he noted for the present that "no one is confident that the bottom is in."

"Bitcoin will remain a volatile trade and the correlation with equities seems like it will last for quite a while," he wrote.

Markets

S&P 500: 3,795 +0.9%

DJIA: 30,677 +0.6%

Nasdaq: 11,232 +1.6%

Gold: $1,822 -0.7%

Insights

Hong Kong’s OSL: Institutional Interest Remains Strong in Crypto, Despite Luna-Induced Volatility

It’s no secret that retail volume on crypto exchanges is down significantly from around 12% at Binance to 44% for Coinbase for the first quarter from the fourth quarter, but the same isn’t being felt at institutional exchanges.

For example, OSL is on pace in 2022 to set a record for trading volume.

“Our global platform volumes are higher than our average volumes of 2021, and 2021 has been our biggest year,” Fernando Martínez, OSL's head of Americas, told CoinDesk in an interview.

Luna’s collapse has affected some exchanges, which have suspended withdrawals, and in turn shaken market confidence, even if some of the exchanges were victims of technical issues.

Martínez points to growing institutional anxiety with these issues as a reason for the increased volume on OSL.

“They are actually afraid of the counterparty risk because of everything that's happening,” Martínez said, sharing the perspectives he’s heard from OSL clients: “I cannot trust this or that exchange because you're blocking withdrawals. I cannot trust this or that counterparty because they're not regulated, or because I know that they had some exposure to these types of uncollateralized lending type of activities.”

Institutions continue to want to double down on crypto assets because they understand that the current correction is merely cyclical, just like any other drawdown. Retail investors are backing away after so many of them got rekt and because of anxieties about inflation and the prospect of a recession.

“From the TradFi institutions that have already entered the market, we're already seeing them turn up the heat,” he said.

In contrast, Martínez points to the recent sharp spike in outflows from the Toronto-listed Purpose bitcoin ETF as an example of the shaky confidence retail has in the market.

Indeed, Glassnode data shows that on June 17 there was an outflow of 24,500 bitcoins from the exchange-traded fund. A similar trend can be observed with the 3iQ Bitcoin ETF, which saw an outflow of 8,400 bitcoins a few days earlier on June 14.

“It's a combination between retail that has lost confidence and crypto participants that are not managing risk carefully,” Martínez said.

Important events

8 a.m. HKT/SGT(12 a.m. UTC): European Union Leaders Summit

2 p.m. HKT/SGT(6 a.m. UTC): U.K. retail sales via Office of National Statistics (May/MoM/YoY)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Can Bitcoin Rebound From $20K? Ledger Expansion Plans

"First Mover" dove into the latest crypto news and price action in the markets with Martin Leinweber, a digital asset product strategist at MV Index Solutions. Also, Pascal Gauthier, chairman and CEO of crypto wallet provider Ledger, discusses ambitious expansion plans during the crypto bear market.

Headlines

Shiba Inu's SHIB Jumps Amid Speculative Frenzy, BONE Proposal: SHIB rose by nearly 48% in value since the weekend before a sell-off this morning.

Voyager Digital Cuts Daily Withdrawal Limit to $10K Amid 3AC Exposure: The decision comes off the back of a heavy decline in the Voyager share price on Wednesday.

CoinFLEX Pauses Withdrawals Amid ‘Extreme Market Conditions’ and Counterparty Uncertainty: The counterparty is not crypto hedge fund Three Arrows Capital, CoinFLEX's CEO said.

Moody’s Downgrades Coinbase’s Debt on Profitability Concerns: The ratings agency has also put the crypto exchange’s ratings under review for further downgrade.

Solana Labs Is Building a Web3 Mobile Phone: The backers of the Solana blockchain said the devices will cost around $1,000 and be available for delivery in early 2023.

Longer reads

The Risks and Benefits of On-Chain Credit Protocols: "Unsecured lending" repeats some of issues of undercollateralized lending that blew up some crypto firms, but offers a potential solution.

Other voices: Do Kwon’s Crypto Empire Fell in a $40 Billion Crash. He’s Got a New Coin for You.

Said and heard

"Trevor Lawrence Turned His $24 Million Signing Bonus Into $9 Million by Getting It All in Crypto" (Barstool Sports/Twitter) ... "We think it’s important to clarify some information that we’ve seen about Coinbase Pro and our plans to launch Coinbase Advanced Trade." (Coinbase/Twitter) ... "As you all know, current market conditions are tough. With our position as one of the largest industry players with healthy cash reserves, we have a duty to protect users. We also have a responsibility to help industry players survive and hopefully thrive. This is the case even if there are no direct benefits to us or we experience negative ROIs. Having said that, the word 'bailout' can have different meanings to different people. And as with most things in the real world, it’s not a binary situation." (Binance blog)