Week of Feb 1, 2022

Microstrategy Buys The Dip (Again)

Arizona Introduces Bill to Make Bitcoin Legal Tender. Highest Traded Volume in S&P Contracts in More Than 20 Years.

💬 Market Commentary


After dropping to a low of under $33k last Tuesday, bitcoin has rallied over +16% and is currently trading at $38,500 at the time of writing.

Much of the volatility can be attributed to macro conditions like the Federal Reserve’s FOMC announcement - as equity markets were also rocked with volatility last week. 

Looking at bitcoin-specific news from last week, we saw that the SEC rejected Fidelity’s spot bitcoin ETF proposal.  

The SEC still needs to issue a decision on GBTC before February 6th. However, the fund is currently trading at a near-record discount from the net asset value of their shares. 

This suggests that investors believe there is a low chance of it being approved. 

Keep an eye out for the news. While the market seems to be “expecting” the rejection, it could still cause unfavourable headlines.

On the regulatory front, there were some interesting developments out of the U.S. 

Late last week the news broke that the Biden administration is preparing to issue an executive action that would task federal agencies with regulating digital assets such as bitcoin as a matter of national security.

While the executive order has still not been released, sources close to the matter expect that a memorandum could come “in the next few weeks”. There’s a good chance that this event introduces volatility to crypto markets. 

Shortly after, the news also broke that an Arizona State Senator had introduced a bill to make Bitcoin legal tender in the state.

The bill still needs to be approved by the state house and senate before it gets signed into law. It is still questionable whether a law like this could come into effect, given that the U.S. constitution does not allow for individual states to create their own legal tender.

Looking at other bitcoin market fundamentals, we see that the options flow for Monday has been more optimistic - with an even number of call contracts bought and sold, and more put contracts being sold than bought. 

Interestingly, the funding rate on the Binance perpetual futures contract for Bitcoin is in negative territory as bitcoin price rallies. This could imply that leveraged traders are looking for further downside - and could get squeezed on the way up if the tides turn.

Short interest on Bitfinex is still more than double where it was at the start of the month.

Lastly, just a few hours ago MicroStrategy announced that it had bought an additional 660 bitcoins for around $25 Million between December 30th and January 31st. The average purchase price was $37,865.

Microstrategy now holds 125,051 bitcoins at an average price of $30,200.

It’s a quiet week in terms of Fed activity and inflation data, but we have a slew of corporate earnings. More on this in our What's Ahead section.

S&P 500

It was a volatile week of heavy volume for equity markets. After being down by more than -3.50% intraweek, the S&P 500 rallied to close higher by +0.82% on Friday. 

The week saw the highest traded volume in S&P contracts in more than 20 years. 

Looking back on the chart, we see that last week’s “candle” has some similarities with previous ones. Interestingly, in previous trend-changing weeks, we have seen high traded volumes and price recoveries from the lows.

Judging by how the markets reacted to the Fed’s announcement, it seems as though the Fed’s plans to raise rates in March had been mostly priced in. As the Fed did not present any surprises, the market was able to find some relief.

There was a fascinating chart shared over the weekend comparing interest rate forecasts vs. the actual funds rates over time.

The chart can be best summarized as “even a broken clock can be right twice a day”. Most forecasts trying to predict the overnight interest rate have been largely unsuccessful. 

With the Fed and inflation out of the equation for a few days, the market will likely focus its attention on corporate earnings. So far 77% of companies are beating estimates for the 4th quarter, and they are reporting earnings 4% above expectations.

This week we get to hear from the likes of Alphabet (Google), Meta Platforms (Facebook), and Amazon. More details in our What’s Ahead section later today.

While price action looks encouraging, it is important to note that the VIX, which tracks the volatility of S&P 500 contracts, still remains elevated relative to historical levels. 

Similarly, the number of put contracts on ETF indexes has reached a historical high in terms of notional volume traded. 

Said differently, some investors are still looking to protect against potential further downside.


Last week gold printed a loss as it fell again below the $1,800 mark, dropping 2.29% as markets digested Fed Powell’s speech. 

The dollar has risen against other currencies based on expectations of Fed rate hikes. The dollar index was set for a monthly gain, making the bullion close January with a 1.7% loss, its worth month since September.

But Goldman Sachs is keeping faith in gold, raising its 12-month price forecast to $2,150/oz., up from its previous target of $2,000.

On the other hand, UBS is bearish on gold, saying "the dollar could be strong and this means gold could be weak" in 2022, as it recently introduced a year-end 2022 target of $1,600/oz.

As the Fed prepares to end asset purchases in March, gold investors may continue to sit tight waiting for the Fed’s signals to become a reality, until then we see gold being stuck between the famous yields, dollar and inflation narrative we’ve covered in the past.


It was a relatively quiet week in the world of DeFi. Price-wise, the DeFi index found some footing last week, as did Ethereum.

The biggest news that could impact Defi is the fact that the Biden administration is allegedly preparing a memo to task federal regulators with regulating the crypto industry. While this has not yet been confirmed, it may cause headwinds as investors await further details. 

Last week the news also broke that DeFi platform Qubit had suffered an $80 million hack.

It appears to be the 7th largest hack in DeFi history - and the platform held over $730 Million in total value locked at its peak.

Another interesting news broke last week when the pseudonymous founder of a DeFi project was revealed to be a former Quadriga executive. 

Wonderland is a DeFi project on the Avalanche protocol that was bidding to create a stablecoin. 

The project has been in turmoil since the news broke and there are rumours that it will wind down.


Russia made headlines last week when president Vladimir Putin changed his tune to support regulation for Bitcoin mining and cryptocurrencies in the country.

The news came one week after the Russian Central Bank proposed a bill that would ban Bitcoin mining and cryptocurrency trading.  Putin also asked the Central Bank to reach an agreement with the country’s Ministry of Finance, who holds a friendlier stance towards cryptocurrencies. .

Russia ranks third in terms of global hash rate. The country is now home to ~11.2% of global hashing power, as measured by Cambridge’s Bitcoin Electricity Consumption Index:

We also continue to see encouraging signs from U.S. politicians - with Greg Abbott from Texas recently rallying miners to help support the Texas electrical grid.

We continue to see the  “one man’s trash is another man’s treasure” narrative play out after the Chinese mining exodus.

What's Ahead

It’s a relatively quiet week in terms of Fed activity and inflation data. 


Alphabet (Google), Exxon Mobil, Starbucks, AMD, PayPal, Electronic Arts report earnings.


Meta Platforms (Facebook), Qualcomm, Spotify report earnings.


Amazon reports earnings.

It's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.


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About the author

Mauricio Di Bartolomeo

Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.