“Hunters in the Snow” --- --- Pieter Bruegel the Elder

Introduction:

Although the market remains sluggish, volatility is gradually decreasing, and uncertainty is diminishing. As U.S. ETFs begin to shift towards net inflows, a rebound in the market is expected. However, macro indicators remain key signals determining market trends.

1. Investment and Financing Observation

Last week, there were 41 investment and financing events in the crypto market, an increase of 28.12% week-on-week, with a total funding scale of $170 million, up 13.33%:

In the DeFi sector, 11 investment and financing events were announced, including a $28 million financing round for the quantitative trading platform Arbelos Markets, led by Dragonfly Capital;

In the GameFi sector, 5 investment and financing events were announced, including a $12 million seed round for Web3 game developer Seeds Labs, with participation from Blizzard Fund;

In the infrastructure and tools sector, 16 investment and financing events were announced, including a $13 million seed round for the cryptography startup Lagrange, led by Founders Fund;

In the NFT-related field, 1 investment and financing event was announced, with Singapore's Web3 platform Galaxis completing a $10 million financing;

In the DePIN sector, 2 investment and financing events were announced, including a $2 million seed round for the Solana ecosystem DePIN project Ambient, led by Borderless Capital;

In other Web3/crypto applications, 6 investment and financing events were announced, including a $10 million financing for the Web3 social application Kiosk based on Farcaster, led by Electric Capital;

From the week-on-week data, the number of investment and financing events in the cryptocurrency market has increased for two consecutive weeks, and the total funding scale also rebounded last week. Institutions are still actively raising funds and expanding their layouts even in a cooling market, with market enthusiasm betting on the Bitcoin ecosystem, GameFi, and infrastructure sectors. Among VCs, the notably active institutions last week were Animoca Brands, Dragonfly, and Solana Foundation, primarily focusing on GameFi and infrastructure.

About Arbelos

Arbelos Markets is a quantitative trading platform focused on providing necessary trading liquidity for institutional participants and acting as a counterparty for products such as options and futures.

About Arch Network

Arch Network is a Bitcoin-native application platform that introduces smart contract functionality directly into Bitcoin through an innovative architecture that utilizes the Rust-based zero-knowledge virtual machine ArchVM, paired with a decentralized validator network, collectively known as the Arch Network.

About UXUY

UXUY is a next-generation decentralized multi-chain trading platform based on MPC wallets, actively participating in the construction of the Bitcoin Layer 2 ecosystem, fully integrating into the Bitcoin Lightning Network and Taproot ecosystem, providing users with Lightning address DID services, and becoming an important bridge connecting the Bitcoin and Ethereum ecosystems.

2. Industry Data

VRP Index Shows Market Stabilizing, Uncertainty Diminishing

Bitfinex analysts' tracking data shows that since the BTC halving on April 20, the monthly VRP (Volatility Risk Premium) has plummeted from 15% to 2.5%. Analysts indicate that the significant narrowing of the VRP suggests that market expectations are being readjusted, entering a relatively low-volatility market environment, and uncertainty has diminished, which can be viewed positively by long-term investors. A week ago, former BitMEX CEO Arthur Hayes stated that BTC has bottomed out, but the anticipated rise may be slow.

About VRP (Volatility Risk Premium)

The VRP data is calculated based on the gap between Volmex's BTC 30-day implied volatility index (BVIV) and 1-month realized volatility (VBRV);

VRP reflects the trend of implied volatility caused by asset options (a measure of expected price fluctuations) exceeding actual volatility over time;

U.S. BTC Spot ETF Net Inflows, Only GBTC Experiencing Outflows

According to HODL15 Capital monitoring: Last week, the U.S. BTC spot ETF purchased 1,318 BTC, with only GBTC experiencing outflows. As of May 10, global BTC spot ETFs held a total of 949,756 BTC. Since the launch of the BTC spot ETF, GBTC has seen a cumulative net outflow of $17.6329 billion, with its assets under management dropping to $17.647 billion.

From the correlation between U.S. ETFs and market performance, if ETF inflows continue and begin to strengthen, it will indicate that the market will gradually start to rise. However, considering that selling pressure still exists, the upward trend is likely to rise slowly amid fluctuations.

It is reported that a significant portion of the early outflows from GBTC is related to bankruptcy proceedings (such as Genesis and FTX), profit realization from GBTC discount trading (which was discounted to NAV by 40% a year ago), and transfers to low-fee products (<0.5% compared to 1.5%).

Hong Kong ETFs Show Continuous Net Redemptions, Liquidity Normalizing

According to SoSo Value data, both Hong Kong ETH and BTC spot ETFs are experiencing net redemptions, with the ETH spot ETF showing net redemptions for three consecutive days:

• On May 10, the BTC spot ETF had a net redemption of 99.99 BTC in a single day, with a total holding of 4,160 BTC, a daily trading volume of $1.46 million, and total net assets of $262 million. Huaxia ETF still holds 1,940 BTC, ranking first;
• On May 9, the ETH spot ETF had a net redemption of 471.25 ETH in a single day, with a total holding of 15,630 ETH, a daily total trading volume of $542,000, and total net assets of approximately $46.71 million. Bosera Hashkey ETF holds 6,500 ETH, ranking first;

Currently, the liquidity of ETFs in the Hong Kong market is expected to normalize, and the current liquidity direction of ETFs will not lead to a structural trend reversal in the market. Investors are advised to use Hong Kong ETFs as tracking indicators to monitor trend dynamics, but as leading indicators for investment.

Over 2.6 Million BTC in a Loss State, New Adjustments May Occur

Glassnode data shows that as BTC prices fall, as of May 9, over 2.6 million Bitcoins are in a loss state, while 86% of BTC supply remains in profit. This change indicates that many short-term holders are now at a loss, whereas data from February 28 showed that 99% of BTC supply was profitable.

Currently, the cost for short-term holders is approximately $59,800. If prices continue to decline, more BTC will be in a loss state. The next week may be a pivotal time for short-term holders. If a certain scale of selling occurs among short-term holders, the market may enter a brief adjustment.

3. VC Holdings

Note: The above data is sourced from https://platform.arkhamintelligence.com/, with the statistical time: May 13, 2024, 17:00 (UTC+8).

4. This Week's Focus

May 13

• Federal Reserve Governor Jefferson delivers a speech;
• 2024 FOMC voting member and Cleveland Fed President Mester speaks on central bank communication;
• Bitcoin re-staking infrastructure BounceBit launches its mainnet and distributes BB token airdrop, ending the Binance Megadrop on May 13 at 8:00;
• OKX Jumpstart will launch Notcoin (NOT), allowing TON holders to stake TON for NOT tokens;
• Aptos (APT) will unlock approximately 11.31 million tokens on May 13 at 2:00, valued at about $103 million, accounting for 2.64% of the circulating supply;

May 14

• U.S. April PPI;
• Federal Reserve Governor Lisa Cook delivers a speech;
• Federal Reserve Chair Powell and ECB Governing Council member Knot participate in a meeting and deliver speeches;
• A Dutch judge will rule on May 14 regarding Tornado Cash developer Alexey Pertsev;

May 15

• U.S. April CPI;
• U.S. April retail sales month-on-month;
• BNB Chain will conduct a snapshot for the second quarter airdrop alliance plan on May 15 at 8:00 (UTC+8);
• opBNB testnet nodes must upgrade to the latest version before the hard fork on May 15;
• Starknet (STRK) will unlock 64 million STRK on May 15 at 8:00, valued at about $77 million, accounting for 8.79% of the circulating supply;
• CyberConnect (CYBER) will unlock 886,000 CYBER on May 15 at 14:00, valued at about $6.84 million, accounting for 4.13% of the circulating supply;
• Aevo (AEVO) will unlock approximately 827 million AEVO on May 15 at 15:59, valued at about $1 billion, accounting for 752.36% of the circulating supply;

May 16

• U.S. initial jobless claims for the week;
• Federal Reserve Governor Bowman delivers a speech;
• Federal Reserve Governor Barr testifies before the Senate Banking Committee;
• Alpaca Finance's PYTH airdrop distribution plan will end on May 16;
• Arbitrum (ARB) will unlock approximately 92.65 million ARB on May 16 at 21:00, valued at about $92.57 million, accounting for 3.49% of the circulating supply;

May 17

• 2024 FOMC voting member and Cleveland Fed President Mester speaks on economic outlook;
• 2024 FOMC voting member and Atlanta Fed President Bostic speaks on economic outlook;
• The Chinese State Council Information Office holds a press conference on national economic operation;
• A Nigerian court has postponed the tax evasion hearing for Binance executives to May 17;
• WikiEXPO is hosting the "WIKI FINANCE EXPO HONG KONG 2024" offline event at Sky100 in Hong Kong;
• The "Witch Activity Self-Report" launched by LayerZero will end on May 17 at 19:59:59;
• ApeCoin (APE) will unlock approximately 15.6 million on May 17 at 8:00, valued at about $19 million, accounting for 2.48% of the circulating supply;
• Immutable (IMX) will unlock approximately 25.53 million IMX on May 17 at 8:00, valued at about $57.95 million, accounting for 1.75% of the circulating supply;

May 18

• 2024 FOMC voting member and San Francisco Fed President Daly delivers a speech;
• Nym (NYM) will unlock approximately 3.02 million tokens on May 18 at 8:00, valued at about $470,000, accounting for 0.39% of the circulating supply;
• Manta Network (MANTA) will unlock approximately 6.67 million tokens on May 18 at 17:30, valued at about $11 million, accounting for 2.66% of the circulating supply;

5. Conclusion

Last week, the crypto market continued to exhibit a fluctuating trend, with market activity at only 30% of the previous peak. However, market expectations suggest a slow upward trend may begin. Additionally, both the number of investment and financing events and the total funding scale showed an upward trend, with continuous inflows into DeFi, GameFi, infrastructure construction, and other Web3/crypto application fields, reflecting investors' recognition of the long-term value of these areas and optimistic expectations for the future development of the industry.

This week, the release of U.S. April PPI and CPI data is crucial. Given that the Federal Reserve has not ruled out the option of raising interest rates in managing inflation, the market needs clearer directional guidance to focus on the main direction of capital flows ahead. Meanwhile, APT, IMX, ARB, STRK, and AEVO are facing significant token unlocks, especially AEVO, which will unlock tokens worth about $1 billion, creating considerable uncertainty for the market. However, if U.S. inflation data remains controllable, the entire crypto market is likely to begin a slow recovery phase.

From a medium to long-term perspective, the infrastructure development and technological innovation in the crypto industry lay a solid foundation for stable growth and mature development. Therefore, for investors, maintaining strategic patience and focusing on the long-term value and development potential of the industry will be key to achieving success in the future.