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ETFS 21Shares Crypto Monitor - 16th June 2022


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This Week in Crypto

The crypto market endured another brutal meltdown as Celsius - one of the biggest custodian managers within the space - announced they'll pause withdrawals due to the extreme market conditions. The company, which as recently as the 17th of May had more than $11.7B of users’ AUM, was heavily invested in multiple risky DeFi strategies. Celsius is a CeFi (Centralised Finance) entity offering lucrative yields for depositors and borrowers by allocating huge sums of capital in riskier strategies such as Terra's Anchor, or the other previous cases such as stakehound and badgerdao. It is estimated that they lost a figure north of $100M in the hacks that plagued the two latest aforementioned protocols while managing to get out of UST without incurring substantial damages.

On-chain forensics from the past 48 hours has also illustrated that Celsius had borrowed the DAI stablecoin against locking a WBTC position on MakerDAO, combined with holding a massive position of stETH (liquid-staking derivative of ETH) on Lido Finance worth almost $475M. The company has been topping up its loan vault with additional BTC collateral to reduce the liquidation price. On the contrary, the secondary market for trading stETH against ETH has been in turmoil as the peg broke, potentially instigating the firm to exit its derivative position at a loss.

With this brief coverage in mind, we’ll seek to provide three case scenarios for how we believe the crypto market could rebound going forward - with an exclusive focus on the two biggest assets by market cap. We’ll include the different factors and triggers that could play a role in dictating what type of recovery the industry could embark on.

Quick Summary:

  1. Positive development that we’re nearing the bottom lies in that both BTC and ETH have reached near-capitulation areas of previous market cycles that preceded a price reversal.

  2. Regulatory clarity could provide a way forward for the restructuring of the crypto industry so that further implosions like UST and Celsius don’t re-materialize.

  3. Bitcoin and Ethereum have strong fundamentals with continuous development and user growth including institutions over the past year, complemented by a resilient NFT market.

  4. The key potential trigger for further drawdown is Celsius’s liquidity crisis and its contagion effect. On the flip side, the merge could be a potential fuel for Ethereum to gain a wider spectrum of investors thanks to cementing its scarcity as well as living up to the ESG standards which will help paint the asset in a more-favorable light with institutional clients.

1) Best Case - Market Bottoms and Starts To Recover

Market Sentiment Indicators


  • NUPL1 is showing an upward trend. The current level at -0.01 in the capitulation phase could be a bottoming signal.

  • Bitcoin reserve risk2 has reached the level of the 2019 market bottom.

  • Bitcoin production cost is currently at $30,000. Miners are more inclined to hold theirBitcoin position instead of selling it. Miners' Bitcoin reserves have increased by 19K YTD


  • Total Ethereum staked on Beacon Chain has reached 12.8M (182% YTD Growth), which shows the confidence from investors towards the future of Ethereum.

Derivatives Data


  • $539M liquidations in Bitcoin and Futures long liquidations dominance has dropped from 81% to 78%, which could be a sign of capitulation.

  • Future short liquidations increase, and the funding rate turns negative. A potential short squeeze could push Bitcoin prices up.


  • With $336M liquidations, Ethereum’s fund rate has turned negative and open interest has dropped meaning traders could be capitulating and closing out their positions.

Potential Market Triggers


  • More regulatory clarity from regulators after the crypto bill from Senator Lummis. The paper has built a foundation for future crypto regulation. Regulatory clarity can help crypto to be more accessible for retail and institutional investors.

  • Another centralized lending platform BlockFi has reassured