2022 Semiannual Crypto Briefing
To Our Readers
Bitget has been constantly working on innovative solutions for the digital asset space since 2018 and currently ranks in the top 5 best crypto exchanges in the world. Impressive enough, we have claimed the leader position in the crypto derivatives market within less than three years and set an all-time high of US$8.69 billion for daily derivatives volume at the beginning of 2022.
Bitget applies a phased rollout to deliver refined products over the years. 2022 marks a new chapter for us with exceptional records of user activities and the growth of Bitget Token (BGB). Dedicated to bringing crypto to more people, we then decided to launch the educational arm known as Bitget Academy, where you can find high-quality, informative, and self-explanatory articles on blockchain, cryptocurrencies, and emerging technologies.
As you may know, our recent launch of Bitget Bites, Bitget Hot Takes and BGB Sail has been well received by not only Bitget users but by industry experts also. Bitget Crypto Briefing is an entirely new series looking at cryptocurrency developments on a semi-annual basis to prepare you for the next phase of your crypto journey. We hope that together, we can turn crypto into an integral element of the global financial system.
Crypto is here to stay. And so are we.
Bitget Team
Executive Summary
The crypto market got off to a good start this year following the glory of 2021. The Chicago Mercantile Exchange (CME) launched micro Bitcoin and Ethereum contracts, while Wall Street banks and giant tech firms started to explore the digital space. Although Bitcoin and Ethereum had a bumpy ride, the global market, especially Layer 1 projects, delivered a performance that was worth the US$5.3 billion new capital injections.
The euphoria wore off later on when Terra (LUNA) UST, at the time the third largest stablecoin by market value, fell from grace on May 9 and wiped off at least US$40 billion from the market. As if that wasn’t hard enough, Tether (USDT) dropped below its US$1 peg a few days later, raising the controversial question of crypto’s stability. Prices of all cryptocurrencies took consecutive hits thereafter: Bitcoin breached US$30,000, crypto lender Celsius and the celebrated Three Arrows Capital (3AC) hedge fund went bankrupt, reduced liquidity due to distrust, and accelerated regulatory action, even from crypto-friendly countries such as Singapore.
Centralised exchanges (CEXs) registered the lowest losses in all crypto sectors in Q2 2022. By the end of June, Bitget’s daily volume of all futures contracts was standing above US$100 billion, and Bitget Token (BGB) surrendered a 20% decline in returns compared to the market’s average of 50%. This is proof that Bitget, together with other CEXs, has been and will continue to be one strong warrior.
This report will take a look back at what we have been through in the first half of 2022 in hope that we can embrace the next months with hope and confidence. Sometimes, we must break completely in order to rebuild fully, and in our view, the cryptocurrency market is heading into maturity, unwaveringly.
Bitget In Focus
The first half of 2022 has been a time of explosive growth for Bitget. Despite unwelcoming market conditions, we release a host of new products and services, expand our team, and partner with several world's top athletes. Bitget volume for derivatives rose to 10% of the global derivatives trading in Q1 2022, more than Q3 2021 and Q4 2021 combined, helping Bitget secure a seat at the big table.
When it comes to compliance and security, Bitget continues to provide top-notch customer protection and adhere to local regulations to ensure uninterrupted operations across the globe.
Relentless BUIDL
In the first quarter of 2022, Bitget Launchpad was improved and re-introduced. It empowers investors to get early bird access to promising new crypto projects before listing. Each project is carefully selected by the Bitget team and has to go through a rigorous verification process to ensure that only the real projects are featured. To make it more convenient for investors of every level to gain access to new promising tokens, Bitget Launchpad is designed so that users can join our IEO in more than one way. The results of the revamped Launchpad so far have been very impressive:
Bitget introduced its first-ever Referral Program in April 2022, as a part of our initiative to expand our global presence and welcome new users. Referral rewards are available in trial funds, USDT, BGB, and/or rebates. To further show gratitude towards the users, Bitget also offers several exclusive rewards for those who complete KYC, finish their first deposit, trade futures, trade spots, or do Copy-Trading. All the rewards and tasks can be tracked at Bitget's Rewards Center.
In June, two new features were released: Vote-to-List and GroupCoin.
Vote-to-List is one of many ways our users get to decide the projects they want to support on Bitget. When a project in Vote-to-List meets the vote count, the project's token is listed on Bitget and all the participants (or voters) can claim from the reward pool. The BGB used for voting will be returned as soon as the voting ends. Since its debut, Vote-to-List has held two voting events for two projects, namely AFKDAO (AFK) and PlatON (LAT). Both of them were hugely successful. More Vote-to-List rounds are coming soon to Bitget and they are bound to achieve favourable outcomes too.
GroupCoin is a unique feature on Bitget that allows investors with small capital to invest in any projects they desire and receive great benefits in return. GroupCoin lets the users buy their favourite coins and tokens at up to 50% off. The more participants, the greater the discount. GroupCoin debuted on June 16 with BTC.
The earlier half of 2022 also saw the advent of Spot Grid Trading and Futures Grid Trading on Bitget. These sophisticated tools are perfect for crypto traders in volatile markets.
Grid trading is a type of quantitative trading strategy designed to buy low and sell high in a range-bound market. Grid Trading profits from the ups and downs of the market. A user sets a Price Range for the bot, adjusts how many grids they want, and as long as the price stays within the set range, the bot will always sell a portion when the price goes a bit up and buy a portion when it goes a bit down based on the user's setup.
Grid Trading is profitable if markets are bumpy, meaning traders do not need to constantly sit in front of the screen and predict the next price trend. It substantially takes advantage of the market’s natural movements in quieter times.
Besides, consider the amount of work associated with this strategy. The bot will do its job automatically after receiving the input data; of course, the users are recommended to routinely monitor the results and pay attention to market news, but in general, it is simpler trading with less pain. One thing to keep in mind is Grid Trading involves the execution of many orders, therefore traders should monitor and adjust the number of trades to manage their trading fees wisely.
Bitget's Grid Trading has two modes:
- AI Strategy (Automatic Mode): Bitget will give the users recommendations for the parameters using the analysis of their trading data over the last seven days.
- Manual Creation (Manual Mode): This mode is designed for more experienced traders. These advanced settings are recommended for better risk management and improved grid performance.
Thriving Social Trading
At Bitget, we believe in the power of social connections. Social trading allows people to interact and observe other traders, as well as follow or execute the strategies of more experienced peers. The model taps into our innate need for connection, whether that means sharing, celebrating or even commiserating in the company of others while we trade.
Copy-Trading, one of Bitget's flagship products, experienced incredible performance during the first half of 2022. Even though the market had many unpredictable fluctuations in this time, our traders got phenomenal trading results as shown in the photo below. Many got an ROI that was higher than 100 times. Those who followed their trading strategies also enjoyed great profits.
Major partnerships with World-renowned Athletes
Other than a range of new products and services, these past six months saw the partnerships between Bitget and numerous world-class athletes - from esports organisation Team Spirit, to Turkish football club Galatasaray Spor Kulübü, to footballer Keisuke Honda. These partnerships will not only allow non-crypto users to learn more about cryptocurrency and Bitget, but also pave the way for more acceptance and collaboration between the blockchain and traditional worlds.
Improved Compliance and Security
As one of the biggest crypto exchanges in the world, Bitget is committed to protecting our clients’ assets, and we take this responsibility seriously. We are adamant about adhering to cryptocurrency AML regulations to mitigate financial and reputational risks. Bitget has made every effort to provide the most compliant, safe, and professional digital currency trading services for users worldwide by getting the operational licence from different authorities. As the regulations around crypto and blockchain are uncertain, ever-changing, and divergent in every jurisdiction, we are doing our best to follow and fulfil local regulations to conduct uninterrupted operations across the globe. For better compliance, Bitget now gives numerous rewards to users who complete eKYC.
Expansion of the Bitget team
These relentless BUIDL efforts are the results of the Bitget team. Despite volatile markets, the team has been expanding two folds to more than 600+ employees from 38 countries. Thanks to the diverse team, Bitget can support users from all over the world 24/7 and offer services in 12 languages. We have plans to recruit more talents so Bitget can provide better and better products and services to our users.
BGB at the core of the Bitget Ecosystem
Data shows that the trading volume of Bitget Token (BGB) remains above US$5 million for the entire period. Trading volume declined since April - May, partially due to the spreading market contagion. The main reason is, however, more BGB have been locked so that holders can participate in several ludicrous events by Bitget.
Check out our recent events here:
Bitget’s US$4,163 welcome bonus
Open the treasure chest to receive up to 1,000 BGB
Enjoy the 20% transaction fee discount with BGB
BGB holders were victims of extreme market conditions in Q2 2022, too, but that was a modest number against the market’s average of 50%. If you are a short-term trader, there have been favorable opportunities every week as explained here.
BGB Volatility took off during the same period, quite expectedly as it’s the same for other digital assets. A positive correlation suggests that BGB has successfully mingled with the global market, and still managed to hold its position amid uncertainty.
To keep up with the latest BGB monthly updates, please subscribe to our channels:
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Market Outlook
Following the record-breaking year of 2021, many expect crypto markets to reach an apex in 2022 but things got out of hand in Q2. Both external and internal factors chipped in; the whole digital space is seeing a chain reaction, with Bitcoin struggling to keep its US$20,000 support.
Correlations
The correlation between Bitcoin and the tech-savvy NASDAQ stayed above 50% for most of H1, meaning that Bitcoin has been efficiently tracking institutional appetite 50% of the time. The correlation started to soar in late March before cooling off in May.
Source: Kaiko
Throughout the first six months of 2022, Bitcoin’s correlation with the U.S. Dollar and the precious metal stood firm below the 0% mark. That is, the stronger the U.S. Dollar is, the less attractive Bitcoin may look. Same for gold, but the indicator has been rising since May and even became positive in June, showing that Bitcoin and gold are going more in tandem. As fears of a new recession creep in, many have once again called in the glorious victory of Bitcoin as ‘a replacement for gold’ and ‘the hedge against inflation’.
Market Performance
Among the top 15 largest cryptocurrencies by market capitalisation are Bitcoin, Ethereum, Stablecoins (USDT, USDC, BUSD, DAI), Layer 1 projects (BNB, XRP, ADA, SOL, DOT, AVAX), Layer 2 project (MATIC), and memecoins (DOGE, SHIB).
The cumulative return of all 15 cryptocurrencies (yes, even stablecoins) has been declining persistently. Except for the breakouts of AVAX (+11.5%), DOT (+9.5%), DOGE (+7.8%), and ADA (+17%) in January, the lines pretty much went all below 1 for the first half of the year. By the end of June, the top 15 have lost at least 50% of their value; the most suffered were SOL holders (-80.3%), MATIC holders (- 80.6%), and AVAX diamond hands (-82.7%).
We will discuss more stablecoins later. Now, look at the monthly change in returns for the top 15. BNB and XRP were quite robust compared to the rest. Solana (SOL) registered the highest uptick in March, and as a result, was listed as one of the top four cryptocurrencies to consider buying by GOBankingRates.com that month. However, the misfortune of May cost SOL investors four-fifths of their portfolios.
For Bitcoin and Ethereum, May was not the one to wreak havoc. June did. In these extreme cases, holders lost 36.65% and 44.94%, respectively, after just one month.
There is no need for explanation here, right? All red. Talk about the agony.
Spot and Derivatives
The chart below shows the relation between spot and futures volume on crypto exchanges. Futures data consists of the monthly volume for Bitcoin contracts and Ethereum contracts.
In terms of trading volume, the spot market made up only a fraction of futures markets. Speculation significantly jumped in June, lowering the ratio between spot and futures to 0.29.
Source: Coinglass
Consider the aggregated volume of all crypto contracts and the number of liquidations on well-known exchanges. Please note that data for liquidations is available from April only.
Source: The Block
It was no coincidence that futures volume skyrocketed from May 9 - May 12 and from June 12 - June 15, at the same time the number of contracts going into forced liquidation. The first time frame is directly linked to the collapse of Terra (LUNA) and the second one was when Bitcoin breached below US$24,000, the lowest since December 21, 2020, and wiped off profits from the last 18 months.
Source: Coinglass
As perpetual contracts are more popular in the crypto space, funding rate is an insightful indicator of market behaviour. Based on the difference between the perpetual market and the spot market, traders will either receive or pay fund fees to the counterparty. This is how perpetual futures contract prices stay close to the index prices.
A positive funding rate suggests the long sentiment is dominating (long traders are willing to pay the fee) and vice versa. We see a dominating short sentiment for Bitcoin around May 9 - May 12 as well, which eventually led to a Bitcoin price drop in June.
On-chain Activities
In difficult times, investors have a tendency to withdraw their holdings from assets and hot wallets to their cold wallets, thus becoming more inactive.
Source: Glassnode
This is proof. Fear and uncertainty caused investors to drain their custodial wallets; Bitcoin reserves on exchanges already fell to the lowest levels since July 2018 and on-chain activities obviously could not escape the fate.
The chart below shows that the number of active addresses on Bitcoin, Ethereum, and Solana networks should go in the same direction as trading volume.
Most fascinating is how active Solana users have been since the beginning of the year. Data for SOL active addresses has taken out the voting transactions, which means only financial transactions are reflected here. And the figure still leaves Bitcoin and Ethereum way behind.
Stablecoin Market
Stablecoins are cryptocurrencies whose market value is kept at the 1:1 ratio to an outside asset, mostly the US-Dollar. Any ‘de-pegging’ event can quickly create chaos in the global crypto market, especially in the case of major stablecoins.
The first half of 2022 doesn’t seem so stable, eh? Algorithmic stablecoins (USTC, previously UST, and USDD) are not included in the chart above for two reasons:
(1) USTC completely lost its peg in May and is no longer a stablecoin and;
(2) USDD has been introduced in early May; the time frame is too short for trend identification.
Overall, USDT and DAI have been justifiably the most stable, considering that they have been around for the longest time. However, with the support from BlackRock and Fidelity, Circle (USDC) has been eating ou t USDT’s market share. Its peg also stabilised at 0.0014% in June from May’s 0.2167%.
Source: Glassnode
Let’s get into the case of algorithmic stablecoins. After the Terra event, market anxiety soared to unprecedented levels. Some even dismiss the concept and its applications altogether.
See how quickly USTC lost its peg? USTC volatility was supposed to be absorbed by LUNA, the native token of Terra. But it is not an independent reference and often criticised for having no intrinsic value. More importantly, the minting and burning magic of LUNA couldn’t outrun the market speed, and even if it could, LUNA would have become a sacrifice to USTC anyway. Either way, LUNA’s price had declined by 97% in just one night on May 11 and hardly recovered ever since.
Source: Kaiko Analytics
The average standard deviation of USTC price in the first four months stands at 0.1981%, higher than physically or collaterally backed stablecoins, but actually not that bad. The project’s loyal supporters, speculators, and opportunists have been keeping USTC volume above US$1 billion in June; it is unfortunately a steep contraction from US$30 billion in May.
An emerging stablecoin is USDD of the Tron network. It is fueling DeFi’s Total Value Locked (TVL) in Tron, surpassing several Layer 1 by May 30. The volatility of USDD was extremely high in May; now that it has levelled off to 1.325% by June’s end, there’s still a long way to earn public trust.
Institutional Moves
Bitcoin is becoming the new asset class, unarguably. The appeal of crypto markets in recent years has finally captured the attention of traditional financial institutions, and Bitcoin is the safest choice for an entry ticket.
Source: buybitcoinworldwide.com
Most recent data shows that 6.311% of Bitcoin’s total supply is currently held by large institutions, mostly via ETFs, and sovereign governments like El Salvador. Capital inflows into the digital space have been unstoppable, although the contagion pretty much slows down the process in H1 2022.
Funding
The main keywords for VC funding in the first six months of the year are NFTs, Web3, and Data Intelligence. The number of successful deals increased by 22.5% to 534 from H2 2021’s 456 with the participation of Andreessen Horowitz, Sequoia Capital, Bain Capital, Castle Island Ventures, Pantera Capital, FTX, and Huobi Global - to name a few.
Some recent notable investments are:
6-month capital inflows have declined by 25.6% from US$12.5 billion in H2 2021 to US$9.3 billion in H1 2022, and Q2 of course saw fewer capital (US$4.1 billion) allocated to the industry than Q1 (US$5.3 billion).
Meanwhile, a report from McKinsey Company in early June reveals that US$120 billion have so far been injected into the Metaverse industry. It is more than twice the total investment of 2021 (US$57 billion). Venture capitals, private equity, and large tech companies expect the virtual realm to ‘generate up to US$5 trillion by 2030’, hence the growing interest.
CME Activities
Note: Large traders by CME definitions are traders with at least 25 contracts open, each consisting of 125 Bitcoin or 1250 Ethereum.
Going back to Bitcoin gateway, data on CME shows that large traders have been consistently active in the Bitcoin futures market despite the overall drop in total Bitcoin Open Interests (OI). Both asset managers and hedge fund managers appear to have reduced their speculation significantly to below US$1 billion since March.
Source: The Block
Open interests and trading volume go hand in hand for both the Bitcoin and Ethereum markets, but the latter wasn’t as juicy as the former: In January when the number of open contracts was at its peak for both underlying cryptocurrencies, Bitcoin OI of over US$62 billion was substantially more than three times of Ethereum’s US$17 billion.
Source: The Block
ETFs
Bitcoin ETFs provide a fresh avenue for investors to capitalise on the cryptocurrency price movements, even though the U.S. regulators have yet to approve a spot Bitcoin ETF.
Source: ProShares and Arcane Research
ProShares is a leader in this category. Their first Bitcoin futures ETF (BITO) made its debut in October 2021 as the second-highest traded fund in history. More than US$1 billion in assets flowed to BITO within the first few days, psyching the market up for another ProShares product: The Bitcoin short strategy ETF (BITI). The highest daily inflow to BITI recorded since June 19 is equivalent to 1,684 Bitcoin, outpacing the long exposure of the same day (-715 Bitcoin).
As more Bitcoin ETFs come into play, Grayscale Bitcoin Trust (GBTC) is suffering the painful experience of customers’ cashing out. The pressure comes from the tumbled premium, which shows no signs of recovery since the Purpose Bitcoin ETF (BTCC) started trading on the Toronto Stock Exchange in February 2021.
Source: Coinglass
Grayscale has submitted an application to the U.S. Securities and Exchange Commission (SEC) in hope that they can convert GBTC into a Bitcoin spot ETF, but was rejected on the last day of June. Grayscale took legal action against the SEC almost immediately after receiving the rejection.
Looking Forward
Given the crypto meltdowns and tightening crypto regulations in the first half of 2022, it is likely that the continued bearish sentiment will remain for a few months to come. Here is our suggestions on what to expect in the near future:
(1) Investor protection and awareness:
Global regulatory coordination can benefit investors greatly when it comes to market manipulation and extreme price volatility. The ripple effect of recent bankruptcies and extended withdrawal suspension does not seem to have slowed down, and investors are taking direct hits. Investors will be prepared with authorised information and consequently greater confidence in the market.
(2) CBDC and stablecoin regulation:
Stablecoins are the backbone of the crypto industry. Swapping riskier assets to Tether’s USDT or Circle’s USDC allows traders to keep their holdings safe without any fiat involvement. Regulations are meant to improve operational efficiency and resilience of this particular sector. Plans of CBDC could also accelerate the adoption rate of blockchain technology, driving more institutional investors to the digital space.
(3) Web3 and monetisation tools:
The digital economy is attractive because it gives literally everyone the opportunity to monetise their personal activities, from collecting points, participating in competitions to creating content. Industries that can take advantage of Web3 developments include consumer and retail, media and telecommunications, healthcare and education as well. As a result, big players are still flocking to Web3, NFT and Metaverse to hunt for growth online.
As a dominating crypto derivatives exchange, it is our mission to create a safe environment for crypto enthusiasts as well as providing informative guidance on the market’s essentials. Expect efficient, stress-free trading with Bitget!
DISCLAIMERS
This report has been prepared by Bitget solely for informative, educational, and/or entertainment purposes. It should not be taken as investment advice and/or recommendation, constituting any basis for an investment decision, nor contributing to the formation of an investment strategy.
The information contained herein may include or incorporate certain forward-looking statements and opinions. Forward-looking statements are statements that do not relate to historical facts and events, and such statements and opinions pertaining to the future. Forward-looking statements are based on current estimates and assumptions made according to the best of Bitget’s knowledge as of the date of publication and are subject to change without notice. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results. In light of the risks, uncertainties, and assumptions associated with forward-looking statements, it is possible that the future events mentioned in the report may not occur. Any data, charts, or analysis herein should not be taken as an indication or guarantee of any future performance. Moreover, despite Bitget's best efforts at obtaining and verifying to ensure the most accurate, valid, and reliable information, the forward-looking estimates and forecasts derived from third-party studies referred to in the report may prove to be inaccurate and/or incomplete to some extent.
Investing in digital assets is deemed highly speculative and involves significant risks including price volatility and illiquidity and may not be suitable for all investors. The authors of this report may hold positions in digital assets, and this should be seen as a disclosure of potential conflicts of interest. Bitget will not be liable whatsoever for any direct or consequential loss arising from or pertaining to any documents, products, and/or services of Bitget, including but not limited to this report. Please do your due diligence or consult a financial advisor before investing in any digital assets.
