The markets are seeing red.
Mark Wong, HashKey OTC’s head of trading, chatted with Blockworks about the market, giving a little peek under the hood at the overall vibe.
“What’s interesting is that there’s been no significant technology of yet to build a catalyst. We do feel that sentiment has been basically revolving around most of the same players,” he told me.
The big catalyst earlier this year was clearly the bitcoin ETFs, which led bitcoin to hit a fresh all-time high following the previous bear market. But now, outflows could signal a “true correction” according to CoinShares, which noted that outflows from the US bitcoin ETFs topped $584 million last week.
“We see some dissociation between, for example, bitcoin prices [last] week against the backdrop of soaring stock prices if we look at the S&P. So it does feel as though if there’s a downturn in the overall macro environment… For example, if the [Federal Reserve doesn’t] cut interest rates at the rate that the market wants them to, there may be more pain on the downside.”
There’s also the news early this morning that Mt Gox will start repayments next month, but Wong says this is all just “very cyclical.”
He told Blockworks he’s currently seeing some profit-taking from early bitcoin adopters, but he also sees buying interest from institutions such as family offices and asset managers. Outside of bitcoin, he’s seeing a trend of folks buying into thematic coins, including real-world assets and DePIN.
“They’re just thematic sort of movements going on in the space, I think,” he said.
He’s also watching airdrops as they evolve and he’s curious to see how the “tokens increase their user pool going forward. I think that’s something that we’re also looking at as a firm overall.”
In the Empire newsletter, my co-author and Blockworks editor David Canellis has analyzed a lot of data around memecoins, especially celebrity memecoins. For Wong, this is another subsect of crypto to pay attention to.
“I think memecoins have resulted in quite a decent amount of dilution of value all around in terms, but there will be some that are there to stay,” Wong said.
He further noted that the ones that build a good community and also provide “significant entertainment value” are the ones that show the most promise for a long, lasting run.
But outside of the US ETFs and memecoins, Wong thinks we’re in the “eye of the storm” currently, and that this isn’t the start of a more volatile period. But is this a sign of the market maturing, and if that’s the case, can we start to expect less volatility?
“All around, I believe that the volatility may not have begun yet,” he added. “We haven’t quite seen the 2021 levels of excitement.”
Given that it’s summer, he also pointed out that the classic Wall Street saying “sell in May and go away” may actually be applicable right now.
“I think bitcoin does show better performance within the fourth quarter, so the market may be looking forward to that,” he told me.
His view is in line with others, as we’ve previously discussed. Despite the lower levels, I’m told there’s still a pathway to bitcoin near or at $100,000 by the end of the year.
While US bitcoin ETFs have dominated the headlines, Wong’s actually feeling pretty “positive” about the Hong Kong counterparts. HashKey, in partnership with Bosera, launched both an ether and bitcoin ETF at the end of April.
“There are a number of ETF flows that are related throughout arbitrage so there’s a trade ongoing that people buy for ETFs and sell sort of CME futures, where that volume may be a lot bigger than just pure buy volume. This is a hedge trade so within the Hong Kong side, we have, in total, [flows coming in around] $10 or $15 million US. We feel like it’s very positive, and everything that we are confident and continues to grow in the space,” Wong said.
A shorter version of this article first appeared in Monday’s Empire Newsletter. Sign up here to never miss an issue.
Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.
Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.
The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.
