First Mover Asia: DBS bank's ditching retail exchange delivers a small blow to OSL

Good morning. Here’s what’s happening:

Prices: Bitcoin and other major cryptos dipped early over the weekend but regained ground and were up late Sunday.

Insights: DBS Bank's decision to abandon its retail crypto plans did not affect affect the stock price of OSL parent BC Technology Group, and is unlikely to have a big impact on Singapore's crypto industry.

Technician's take: BTC's upside momentum signals remain intact.

Prices

Bitcoin (BTC): $46,702 +1.2%

Ether (ETH): $3,544 +2.1%

Top Gainers

Top Losers

There are no losers in CoinDesk 20 today.

Markets

S&P 500: 4,545 -0.3%

DJIA: 34,818 +0.4%

Nasdaq: 14,261 -0.2%

Gold: $1,925 +0.2

Bitcoin, ether rise late

Bitcoin started the weekend quietly, but by late Sunday, the largest cryptocurrency by market capitalization had soared past $47,300 at one point, a 2.6% gain from 24 hours earlier. BTC, which had dropped below $46,000 early Saturday, was more recently trading at about $46,700.

Ether, the second largest crypto by market cap, followed a similar pattern dipping and then regaining ground to jump past the $3,550 level, up about 3% over the same time period.

Major altcoins were mixed, some rising and others falling slightly. Meme coin DOGE rose about 5% on at least one occasion from 24 hours earlier. DOGE alternative SHIB rose more modestly. Solana and Cardano recently rose 3% and 2%, respectively. Terra's Luna token was off about 2%.

Trading was off from higher levels earlier in the week as is often the case on weekends.

Crypto's late weekend surge veered slightly from major equity markets' performance on Friday, which did little more than hold ground from the previous day. The tech-heavy Nasdaq and the S&P 500 fell slightly as investors seemed to be girding for the U.S. Federal Reserve and other central banks worldwide to continue more hawkish monetary policies.

Low interest rates and central bank stimulus that may jar an economy from a slumber lead to rising asset prices. But when inflation increases and the economy overheats, central banks reverse these accommodative policies, typically spurring higher market volatility.

Meanwhile, the macroeconomic environment remained as unsettled as it has been since Russia invaded Ukraine five weeks ago. After pictures emerged of horrific civilian casualties in Bucha, a town near the Ukraine capital Kyiv, Germany's defense minister, Christine Lambrecht, said in a television interview that the European Union should consider halting Russian gas imports.

EU bloc countries have resisted this action, fearful that it would send their economies into recession. Brent crude oil, a widely watched measure of energy prices was trading at $102 per barrel, a massive increase from where it started the year.

Still, the crypto rally late last month may not be over, said Joe DiPasquale, the CEO of fund manager BitBull Capital.

"Bitcon's consolidation above $46,000 will be key for bullish continuation toward the $50,000 milestone," DiPasquale said, striking a cautiously optimistic note. "While we did see rejection around $48,000, as long as BTC remains above $46,000, bulls can be hopeful of another move. If we lose these levels in the new week, another test of the low $40Ks is the probably scenario."

Insights

DBS crypto reversal hurts OSL, but only a little

DBS’s about-face decision on a retail crypto exchange – canceling its plans to open one by the end of 2022 – leaves us with two questions: Is this another chapter in Singapore’s continued tightening of crypto regulations? And will this stymie OSL, the Hong Kong-based institutional exchange that provides DBS with exchange software?

The answer to both is, not really.

It’s not a secret that authorities in Singapore aren’t fans of retail crypto trading. Earlier this year, regulators banned direct-to-consumer marketing for exchanges and told crypto ATM operators to turn off their machines. It also put DeFiance Capital, one of the larger crypto funds in the city-state, on an investor alert list because it was “wrongly perceived as being licensed or regulated by the Monetary Authority of Singapore.”

But Singapore hasn’t changed its tone on institutional investment in crypto. That has always been what the country has been interested in developing as a hub, not retail, which requires nanny-like regulations to ensure amateur traders leveraging their retirement savings don’t get rekt when their crypto position is liquidated. Needing to regulate with a heavy hand isn’t what Singapore wants.

If DBS were to actually launch a retail crypto exchange it wouldn’t look like what many retail traders are used to seeing. There would be a limited selection of tokens, and decentralized finance (DeFi) would definitely be out of the question. While there would undoubtedly be an element of convenience because of the integration with the bank, it would be challenged to attract significant volume because it wouldn’t be competitive with leading exchanges in terms of features.

 In its recent earnings, OSL’s parent, BC Technology Group, highlighted its Software-as-a-Service (licensing its exchange software to other entities) as a growth point.

The company cites “service fees from SaaS of HK$10.1 million (US$1.2 million), an increase of 104.2% year over year,” as a driver of this quarter’s growth, specifically naming its partnership with DBS as a way to expand the business past institutional only and on to retail.

But against group revenue of HK$352 million (US$45 million), this amount is insignificant.

“OSL’s institutional exposure and licensed status far eclipse that slight negative,” Esme Pau, an analyst with Tonghai Securities, told CoinDesk. “With [its] core business in serving professional investors. OSL is a proxy to digital assets institutionalization. In the broader scheme of things, increasing regulatory clarity is the definite future direction of travel for digital assets.”

Investors didn’t seem to care either. Even after the news broke, the stock continued its week-long winning streak on the Hong Kong markets up 5%.

Tonghai predicts the company will turn a profit in the medium term given the competitive moat it has of being the only licensed exchange in Hong Kong – a much larger, and less competitive, market than DBS’s retail crypto play.

Technician's take

Bitcoin weekly price chart shows support/resistance, with MACD on bottom. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) bounced off short-term support at $44,000 as momentum improved.

The cryptocurrency is up 5% over the past week, although resistance at $48,000 and $50,996 could stall the rally, similar to what occurred in September of last year.

This time, however, pullbacks could be brief, so long as buyers defend support above $43,000-$45,000. Further, the significant loss of downside momentum, per the MACD indicator, over the past few weeks could encourage additional buying on price dips.

The relative strength index (RSI) on the daily chart is approaching neutral territory after an overbought reading appeared on March 28. That suggests a pause in the current price rally, which typically occurs during the beginning of the month.

For now, BTC is testing support around its previous breakout point at $45,000. Upside exhaustion signals, per the DeMARK indicators provided a timely countertrend reversal set-up earlier this week, although a continuation of that sell signal has not been confirmed. That means price action is currently neutral, pending a decisive break above or below the five-day price range.

Important events

Celo Connect digital conference featuring project leaders and investors

9:30 a.m. HKT/SGT(1:30 a.m. UTC): Australia and New Zealand Banking Group job advertisements (March)

10 p.m. HKT/SGT(2 p.m. UTC): U.S. factory orders (MoM March)