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Good morning. Here’s what’s happening:

Prices: Bitcoin (BTC) was valued at $26.8K, but Craig Erlam, the Senior Market Analyst at Oanda, expresses doubt regarding a substantial price increase for bitcoin in the coming months due to the prevailing uncertainty in the industry and economic news.

Insights: Many crypto exchanges incorporate market makers, but do they pose conflicts of interest? An article from the Financial Times delves into the market maker of Crypto.com, providing further insight.

Prices

Bitcoin (BTC) $26,816 +440.3 ▲ 1.7%	Ethereum (ETH) $1,736 +11.5 ▲ 0.7%	CoinDesk Market Index (CMI) 1,120 +12.6 ▲ 1.1%
S&P 500 4,409.59 −16.3 ▼ 0.4%	Gold $1,963 +4.8 ▲ 0.2%	Nikkei 225 33,370.42 −335.7 ▼ 1.0%

BTC/ETH prices per CoicryptoUs, as of 7 a.m. ET (11 a.m. UTC)

 

BlackRock's Influence Lifts the Market, Yet Bitcoin's Vulnerability Raises Concerns

Both bitcoin and ether are starting the Asian trading day on a positive note, with the world's largest digital asset experiencing a 1.7% increase to reach $26,816, while ether has risen by 0.7% to reach $1,736.

Despite the market's overall optimism regarding BlackRock's application for a bitcoin spot exchange-traded fund, Craig Erlam, a Senior Market Analyst at OANDA, expressed caution, stating in a note that bitcoin continues to appear "vulnerable."

“Bitcoin ended last week quite positively after dropping to three-month lows on Wednesday, but it continues to look vulnerable to further declines,” Erlam said. “The two-month trend is not in its favour, and the news flow isn't exactly helping the situation either. It's had a remarkable year and remains more than 50% higher, so it's hardly a dire situation.”

Erlam maintains a bullish stance on bitcoin, acknowledging that the potential for positive market conditions exists but has not materialized thus far.

He contends that the recent downturns are merely a corrective phase occurring within a broader and more positive bull market.

“However, there's little evidence indicating any imminent improvement, especially considering the Securities and Exchange Commission's intensifying scrutiny of major exchanges,” he concluded.

Asset	Ticker	Returns	DACS Sector
Solana	SOL	+4.3%	Smart Contract Platform
Polygon	MATIC	+3.1%	Smart Contract Platform
Bitcoin	BTC	+1.8%	Currency

Asset	Ticker	Returns	DACS Sector
Chainlink	LINK	−0.6%	Computing
Polkadot	DOT	−0.1%	Smart Contract Platform

 

In an exclusive report on Monday, the Financial Times revealed that Crypto.com has officially joined the league of cryptocurrency exchanges that boast an in-house market maker.

Market makers are essential entities that employ their own funds to expedite token trading on exchanges by assuming the opposing position in a trade, enabling investors to swiftly exit positions without relying on a counterparty. Without the presence of market makers, exchange liquidity would significantly diminish, particularly for all tokens except the most prominent ones.

“We have an internal market maker that operates on the Crypto.com exchange, and that internal market maker is treated exactly the same as third-party market makers that identically facilitate tight spreads and efficient markets on our platform,” the company told the FT. “This is not a controversial practice.”

In the realm of Decentralized Finance (DeFi), the existence of automated market makers is what empowers platforms like Uniswap to thrive.

Most cryptocurrency exchanges typically have internal market makers as part of their operations. Recently, there has been a lot of attention on Binance's Sigma Chain and Merit Peak. Alameda was the market maker associated with the now-disgraced FTX exchange. However, Coinbase denies running a market maker.

Crypto.com informed the Financial Times that all participants on their platform, including market makers, are treated equally. They emphasized that the exchange does not generate revenue through proprietary trading.

Without an internal market maker, listing smaller cap tokens and expecting a market to develop around them would not be profitable, and in fact, it might not even be feasible. There would simply not be sufficient trading activity to efficiently match buyers and sellers, resulting in an unattractive bid depth for traders.

Instead of relying on an internal market maker, certain exchanges opt to permit external market makers to function on their platform. For instance, as an example, Bullish utilizes B2C2.

There are various potential concerns regarding the involvement of internal market makers, which can lead to allegations of conflict of interest. Alameda, as a market maker, had investments in numerous tokens it traded. However, it should be noted that claims of market manipulation by Sigma Chain or Merit Peak have not been substantiated in a court of law.

Naturally, this presents a negative perception of the industry. However, it is simply the prevailing operational method. Numerous retail equity trades function according to the same principles – it's just the nature of the industry. Decentralized Finance's automated market makers may offer a more preferable alternative, being both algorithmic and open source, but even they can face accusations of prejudice.

If Crypto.com indeed deceived external entities, as alleged by the FT, regarding its market-making activities, then that would be a significant revelation. However, as things currently stand, and as Crypto.com stated in its responses to the FT's inquiries, it is simply following the practices adopted by others. While it may create a negative perception, this is a common occurrence in the crypto industry.