Crypto’s Macro State – Past and Future

Crypto's Macro State - Past and Future

The Impact of Regulatory Events on the Blockchain Industry

Last week, a U.S. Judge ruled that XRP is not a security, and the SEC accepted the BlackRock bitcoin ETF application, moving it to the next stage of the approval process. These regulatory decisions have had a significant impact on the blockchain industry, particularly on the pricing and trade volume of digital assets. In this article, we will explore how current regulatory events and recent failures affect the industry and provide insights into the macro state of crypto and what to expect in the second half of 2023.

The Macro State of Crypto – Where It Has Been and What’s Next

In 2022, the collapse of Terra Luna, the bankruptcy of the crypto hedge fund 3AC, and the scandal surrounding FTX and other meltdowns pushed the industry into a bear market. Altcoins were hit the hardest by these events, causing a decline in the entire sector.

However, the first half of 2023 brought about a shift in the dynamics of the crypto market due to macroeconomic events. Bitcoin led the market higher in January as the Federal Reserve’s hawkish narrative began to soften. This move was accompanied by a positive “spot/vol” regime, where traders bought options as Bitcoin rallied. This relationship between fundamental macro news and Bitcoin’s price was not seen in 2022, where price crashes were the primary driver of volatility.

If Ethereum is considered a crypto “technology bet,” then Bitcoin can be seen as a monetary alternative “pure-play.” This narrative became evident in March during the SVB banking crisis. Comparing the year-to-date performance of BTC and ETH spot prices, it is clear that BTC began to outperform ETH in reaction to the banking crisis and the Fed’s emergency response. This outperformance has been sustained ever since.

To further understand this shift in trading dynamics, we can observe the forward-looking option market activity. The ratio of Deribit’s DVOL indexes, which measures option implied volatility for BTC and ETH, shows that the implied volatility premium of ETH over BTC started to dissipate in response to macro news events. For example, when the Fed began to slow down its hawkishness in mid-January, BTC’s implied volatility increased relative to ETH’s. On the other hand, when the Labor Department’s non-farm payrolls number indicated a strong performance in early February, BTC’s implied volatility decreased relative to ETH’s.

The recent regulatory events surrounding Binance, Coinbase, and XRP are becoming major drivers of activity in the crypto market. BTC is now defined as a commodity, while ETH’s categorization is more ambiguous. This regulatory uncertainty has increased sensitivity to ETH’s “technology bet” narrative. However, the market seems to be shifting its focus towards regulatory clarity, potential spot ETF approval, and the resolution of the XRP case. This paradigm shift could lead to increased interest in higher beta “altcoins” in the crypto space.

Historically, altcoins have outperformed BTC in bull markets, and the second half of 2023 is off to a bullish start, accompanied by mostly favorable crypto-specific news headlines. The increase in ETH’s implied volatility relative to BTC’s suggests that option traders are also paying attention to these developments.

Ask an Advisor

One question that often arises is whether advisors can invest in crypto in retirement accounts for their clients. The short answer is yes. It is possible to invest crypto in a range of retirement accounts, from 401K plans to individual retirement accounts. However, it is crucial to ensure that you are speaking to a licensed investment advisor who understands the intricacies of crypto investments. Investment management is highly regulated, and advisors should be properly licensed.

Clients can hold both pure crypto and funds in these retirement accounts. The accounts could hold pure crypto assets, crypto futures funds, trust products like GBTC, or equities like COIN stock, which holds pure Bitcoin on its balance sheet. When considering investments other than pure crypto, it is essential to evaluate tracking differences from the underlying assets and different fee structures.


Regulatory events have a significant impact on the blockchain industry, affecting the pricing and trade volume of digital assets. The recent rulings on XRP and the acceptance of the BlackRock bitcoin ETF application by the SEC have caused significant price movements in the market. The shift towards macro events and regulatory clarity, along with the potential approval of a spot ETF and the resolution of the XRP case, could lead to increased interest in altcoins in the second half of 2023.

It is important for advisors to stay informed about these regulatory events and their implications for the crypto market. By understanding the macro state of crypto and considering the possibilities and risks associated with investing in crypto assets, advisors can provide valuable guidance to their clients who wish to include crypto in their retirement accounts.

Note: This article has been edited by Bradley Keoun.

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