Crypto Corner - Summary of the week 31/01/2022

Written by: Yves, Head of Trading at Wirex

The total cryptocurrency market capitalisation bounced back this week by more than 7%, driven largely by the performance of the second largest cryptocurrency Ether (+18%), Solana’s SOL (+18%), Avalanche AVAX (+14%) and Polkadot’s DOT (+8.5%). The Bitcoin price is also up by more than 2% this week, and more than 12% from the year’s low, quoting near $2,800 at the time of writing. For last year’s market entrants, including institutions, the rebound is certainly a relief given that January was for Ether the worst performing month since March 2020.

Historical backers of Bitcoin and Ether are voicing their support for the sector this week. Fidelity Digital Assets released a report called “Bitcoin first”, reminding us that the main cryptocurrency is ‘fundamentally different from any other digital asset’ because it is ‘the most (relative to other digital assets) secure, decentralised, sound digital money’. Ark investment’s analysts published the most bullish report called “Big Ideas 2022”, expecting ‘cryptoassets and digital wallets to command nearly $50 trillion in Equity market capitalisation’, mentioning also a potential Bitcoin price above the million dollars (near $1.5m), ‘scaling more than 25-fold in the next decade’, and an Ether price above $150,000 by 2030.

But the most hopeful projection this week is probably on Google Pay’s potential integration of Bitcoin and Ether. The hope followed the recruitment of a former Paypal executive. As reported by Bloomberg, Google’s president of commerce mentioned that ‘The move is part of a broader strategy to team up with a wider range of financial services, including cryptocurrencies’. Google’s executives are certainly showing a growing interest in cryptocurrencies, but Google’s interests, like Facebook’s, might stand at odds with their controlling centralised stance.

From a market perspective, more than $900m worth of Bitcoin long future contracts have been liquidated on centralised exchanges in the past two weeks and the open interest in USD is naturally falling. Still, the market leverage in BTC remains above the 400,000 BTCs: fresh positions are built as the long interest persists despite the correction.

Daily liquidations of future contracts (long and short) in USD and BTC as of 04/02/2022

Futures Open Interest reported by Coinglass in BTC value as of 04/02/2022

Centralised (CEX) and decentralised (DEX) exchanges have suffered severe liquidations in January. But one DEX suffered extreme losses on Wednesday for a different reason: 120,000 ‘Wormhole ETHs’ (wETHs) were minted out of the DeFi platform Wormhole, unbacked by Ether (ETH). The quantity represents a value well above the $300 million. The hack pushed Jump Trading, the largest market-maker and owner of the project’s developing company, to step in and inject ETHs back into the reserves to ensure a one-to-one backing. The details of the hack have yet to be analysed and released. This is the second largest hack in DeFi history, below the infamous $600m hack of another cross-chain protocol, namely the Poly Network. Cross-chain protocols are probably the most exposed to hacking because their security protocol must account for the security protocol of each one of the bridged blockchains. The $1bln Total Value Locked in the wormhole network made it a hacker’s target of choice.


The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.