Futures volumes continue to climb as crypto prices pull back: the week in markets

Crypto prices pulled back this week following two weeks of relatively unencumbered growth at the tail end of July. 

At the time of writing, bitcoin was trading at $23,119, down 0.2% over the past 24 hours, while ether was at $1,701 according to CoinGecko. 

Earnings calls provided much of the news this week as MicroStrategy revealed CEO Michael Saylor would transition into an executive chairman role from Monday, Robinhood’s crypto revenue ticked up from quarter-to-quarter and Block announced a 6% decrease in its second-quarter net revenue year-on-year.

Meanwhile, futures have begun to surge as bitcoin and ether activity heats up, as seen through more bitcoin and ether open interest — which indicates the value of all outstanding contracts that have yet to settle. Bitcoin open interest for August is already ahead of July at $1.54 billion, compared with $1.47 billion the previous month.

The Block reported earlier that ether derivatives activity was heating up as large traders began speculating on the forthcoming merge, which commentators noted again this week. 

Here’s what key players had to say about this week’s price action and what to watch for next week:  

Recession fears grow

Market maker QCP Capital noted several positives in its weekly market update on Friday, namely that the peak inflation narrative is playing out as West Texas intermediate oil prices fell below $90. The update suggested that falling inflation may allow central banks to be less hawkish.

However, the Singapore-based firm went on to say that economic data globally is pointing to poor growth and an impending global recession. Based on this, the company’s view is that markets will trade sideways and be sensitive to economic data releases — such as the US CPI release on Wednesday.

Finally, QCP suggested that there is increasing concern the merge will not be as smooth as most expect. It has now been suggested that ethereum could see a hard fork — creating two active chains, ethereum proof-of-stake and ethereum proof-of-work. 

If the proof-of-work chain were to retain some material value, there could be significant price disruption akin to a stock split or special dividend, according to the market maker. Chicago-based Cumberland echoed this sentiment in a Twitter thread on Tuesday.

Founder of Dfinity, Dominic Williams, spoke to The Block on Friday, sharing his thoughts on what was driving the market over the past week. According to Williams, the macro outlook for crypto markets is hostile, although a global recession and tightening monetary policy have already been priced in. 

Williams went on to say that earning reports were significantly better than many had feared.

Earnings heat up   

MicroStrategy surprised many with the announcement that Michael Saylor would be stepping down as CEO from Monday to take up an executive chairman role. Saylor insisted the move made sense for all involved and will give him more time to concentrate on his bitcoin advocacy. The firm remains committed to its bitcoin strategy, according to new CEO Phong Le. 

The stock popped during early morning trading on Wednesday, gaining more than 10% shortly after 9:30am ET. Speaking to The Block at the time, Forex.com and City Index global head of market research Matt Weller said:

“When you bet the farm and lose, there will inevitably be consequences. While Saylor’s conviction in bitcoin seemingly remains stronger than ever, the shakeup means that MicroStrategy will have a new CEO for the first time in its 30+ year history following a nearly $1 billion loss on its bitcoin holdings. Despite the change at the top, not much is likely to change for investors, with MicroStrategy likely to remain a de facto leveraged bet on bitcoin for the foreseeable future, given its massive holdings and relatively small enterprise software business.”  

Elsewhere, Block (née Square) reported total net revenue in the second quarter of $4.4 billion. Excluding the impact of bitcoin, the company’s total net revenue jumped 34% to $2.62 billion, it said in a letter to shareholders prior to its earnings call.

Cash App’s parent company reported a net loss of $208 million for the quarter, including a $36 million impairment loss related to bitcoin. The firm reported $1.79 billion in bitcoin revenue in the second quarter from Cash App, a drop of 34% year-on-year. The app’s bitcoin gross profit was $41 million, down 24% from the same three-month period a year earlier. 

Robinhood dished out several surprises this week, first announcing layoffs, before dropping its earnings a day early in which it revealed revenue was up modestly versus the first quarter of the year.  

Next up this week are Marathon Digital’s earnings on Monday, before Coinbase — which revealed it’s working with BlackRock to offer its institutional clients access to crypto — announces its Q2 results on Tuesday. Core Scientific, Hut 8, Cipher and CleanSpark all have results dropping in the next seven days.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.