Interest Rate Hike Is Expected to Advance, Market Volatility Increased: Weekly Market Review From Blofin
- The expectation of central banks to raise interest rates ahead of schedule is an important reason for the sharp drop in the crypto market in the middle of the week this week, but the rigid demand for anti-inflation still makes the market rebound quickly from the low level.
- The supervision of the crypto market in various countries has been further refined, but most of them focus on determining the risk boundary and risk mitigation.
- Market volatility began to rise slowly on Tuesday, and the upcoming "Central Bank Super Week" may continue to amplify fluctuations in the crypto market.
Interest Rate Hike Expectation Worries Triggered the Largest Liquidation in October
This week, against the background of the increasing risk of "stagflation", many central banks have taken radical measures one after another. Brazil's Central Bank announced a 150 bps interest rate hike, the Bank of Canada announced the end of quantitative easing, and the Australian Federal Reserve and Federal Reserve's interest rate hike expectations also showed an early trend, triggering severe market turmoil. Bitcoin prices fell to about $58,000 at one time, while Ethereum's price fell to lower than $4,000 at one time, which had a greater impact on the derivatives market. The scale of contracts liquidated reached $926m, the highest in October.
However, from the perspective of market expectations, the overall market expectations have not been significantly affected. On the one hand, volatility data show that the impact did not cause volatility to jump, and the volatility difference did not show signs of narrowing. From the perspective of futures premium, the market's recent futures maintained a high premium of more than 20%, while the forward futures premium also rose, which indicates that investor confidence is still relatively sufficient.
However, it is worth noting that market volatility has shown some signs of rising, especially ETH. Investors' bets on next week's "Central Bank Super Week" are one of the reasons for the rise in volatility: this "Central Bank Super Week" will determine the trend of market liquidity in the past six months, which will have a significant impact on the medium and long term of the crypto market.
Crypto Regulation “Being Refined”
In terms of supervision, detailed control of the crypto market to control risks is becoming the consensus of regulators in various countries.
The SEC has been clearer on how to fine-tune its oversight. The Securities and Exchange Commission has gained an edge in the debate among US regulators over how to regulate stablecoins, paving the way for future regulation of stablecoins. The US Treasury and other agencies will make clear in a report, expected to be released this week, that the SEC has significant authority over stablecoins such as USDT. The report will also urge Congress to pass legislation specifying that stablecoins should be subject to similar regulation to bank deposits, a person familiar with the matter said. The SEC has also shelved an application for a leveraged bitcoin futures ETF from Valkyrie, citing market risk controls. The SEC's actions suggest that the core idea of both regulations of stablecoins and derivatives on cryptos is "controlling volatility".
Dubai, the Middle Eastern financial center, has also taken similar measures. The Dubai Financial Services Authority (DFSA) has established a regulatory framework for investment tokens to activate the digital financial and technological environment while meeting the needs of market participants. According to reports, the DFSA's regulatory framework divided investment tokens into "security tokens" and "derivative tokens". The creation of a new regulatory structure is the first step in the DFSA's cryptos Regime, which reflects the recommendations made in the consultation document issued in March 2021. The document sought public comments on the DFSA's plan to regulate security tokens.
Under the uncertain macro market situation, supervision and influence from within the crypto market have been at a low level in the near future. With the arrival of the "Central Bank Super Week", a series of important economic data including relevant Federal Reserve resolutions and non-agricultural employment will be released next week, which will have a significant impact on market liquidity expectations, while the volatility of the crypto market may also increase significantly.