Could China drive the next bull market?
Tightening regulation and accelerating inflation in the US have led to minor losses for most cryptoassets in the last week.
Yet in Hong Kong, authorities are loosening crypto regulation as China looks to ramp up economic stimulus.
Against this backdrop, Chinese altcoin NEO is coming in hot with 25% gains, while Bitcoin is down 3%. Elsewhere, DeFi blue chip Yearn Finance is up 30% on a big announcement.
Read more after the jump.
This week’s focus
– Bitcoin defies the falling stock market — is this the “decoupling”?
– NEO adds 25% as Hong Kong wins support of China
– Yearn leaps 30% on Ethereum staking teaser — will it benefit from Shanghai?
Bitcoin defies the falling stock market — is this the “decoupling”?
Even as US stocks fall, BTC is holding support at $22,500
Back in 2022, Bitcoin moved almost in lockstep with the S&P 500, as both asset classes were beaten down by concerns about growth and inflation.
Yet in early 2023, Bitcoin appears to have broken free. Thus far, the leading cryptoasset is up 40%, while the S&P 500 has returned around 4% this year.
This decoupling was highlighted last week, as American equities sank lower on macroeconomic uncertainty, while Bitcoin remained relatively buoyant. As a result, Bitcoin’s daily correlation with the S&P 500 turned negative for the first time since the collapse of a major crypto exchange back in November.
Looking ahead, this decoupling could turn out to be temporary, as Bitcoin has historically been as vulnerable as equities to macroeconomic turbulence.
On the other hand, it could also mark a turning point in the relationship between the two asset classes. As eToro analyst Simon Peters has noted: “If the Bitcoin price does indeed move differently in response to macroeconomic events, then it could attract investors using it as a hedge against other markets — akin to gold.”
NEO adds 25% as Hong Kong wins support of China
Supported by a diagonal trend line, NEO could be heading back towards $15
As regulators in the US crack down on crypto, Hong Kong is opening its doors to the industry.
Excitement around China continued to grow last week, as Bloomberg reported that the country’s officials have been attending crypto gatherings in Hong Kong, and have shown interest in making the city a global hub for crypto.
Changes to economic conditions in the country could also be helping to support the crypto market: The People’s Bank of China is one of the only central banks that is ramping up economic stimulus, creating the looser monetary conditions that have historically been linked to crypto rallies.
In response to these favorable conditions, China-based Ethereum alternative NEO has added 25%. This follows a standout performance from another Chinese favorite, Filecoin, which pulled back 17% last week after rising more than 100% since the start of the year.
Yearn leaps 30% on Ethereum staking teaser — will it benefit from Shanghai upgrade?
YFI added 30% in the last week to briefly eclipse $10,000
As Ethereum approaches its Shanghai Upgrade, liquid staking derivatives have become one of the hottest sectors in crypto.
Capitalizing on this momentum, blue chip DeFi project Yearn.Finance added 30% last week as it announced a new token that will give investors exposure to a basket of staking derivatives. These derivatives protocols effectively provide tokenized receipts for staked ETH, enabling it to be withdrawn, traded, and deployed in DeFi applications.
Ethereum’s upcoming Shanghai upgrade, due in March, will allow investors to withdraw staked ETH for the first time. This will reduce the risk of staking Ethereum, and could help drive increased interest in Yearn Finance and other protocols relating to Ethereum’s staking ecosystem.