With all the paper hands and retail tourists gone long ago, crypto markets aren’t making any dramatic moves despite fresh bad news coming out daily. Bitcoin was down 2% on seven days ago to trade at A$25,485 (US$17,190) and Ethereum also lost 2% to trade at A$1,888 (US$1,273). XRP lost 4% (there are unconfirmed rumours of a settlement in the SEC case), Dogecoin fell 13% while Cardano lost 7%. November’s US inflation data comes out in the next 24 hours and markets expect the next rate rise will be 50 basis points.
From the IR OTC Desk
This week delivers a huge amount of critical economic data before central banks take a break over the new year period. The Federal Open Market Committee (FOMC), Bank of England (BoE) and the European Central Bank (ECB) are all scheduled to receive inflation data, as well as convene to discuss monetary policy. This will very much set the tone for how central banks (collectively) will fight inflation in 2023.
To begin, US CPI is scheduled for release on Wednesday the 14th of December at 12:30am (AEDT). The current market forecast is for a core inflation rate YoY (November) of 6.1% versus 6.3% in October. The headline inflation rate YoY (November) is also expected to move lower, to 7.3% versus an October reading of 7.7%.
Following, Thursday the 15th of December at 6:00am (AEDT) is the FOMC meeting. Currently, the market is expecting the fed funds rate to be increased by 50bps, to a target range of 4.25 – 4.50% (CPI dependent). The Committee will also be delivering an updated projection of the expected path of monetary policy, as well as the economic and labour market forecasts. Risk assets and cryptocurrencies are likely to exhibit reduced liquidity and high amounts of volatility during this trading period.
In Europe, the BoE is scheduled to receive inflation data on Wednesday the 14th of December at 6:00pm (AEDT), where the consensus forecast for the headline inflation rate is currently 11%! The BoE is then expected to increase interest rates by 50 bps to an underlying cash rate of 3.5% at the 15th of December at 11:00pm (AEDT).
Finally, on Friday the 16th of December at 12:15am the ECB are also expected to increase their target cash rates by 50bps, taking the deposit facility rate to 2%. Friday also delivers EU inflation data, which is forecast to print 10% on the headline for November.
In Australia, all eyes will be on RBA Governor Phil Lowe, who on Wednesday the 14th of December at 9:30am will speak on the topic of ‘An Efficient, Competitive and Safe Payments System’. This will be followed by the Australian labour market data on Thursday at 11:30am. Currently Australia has the tightest labour market since 1974, with an unemployment rate of 3.4%. The unemployment rate is forecast to move lower, to 3.3% for November. If this were to eventuate it would challenge the slower path of monetary policy being delivered by the RBA – despite having raised rates by 300bps since May.
In cryptocurrencies, volatility continues to be very well anchored in the front end, with pricing over the weekend trading in just a 1% range. This has also been reflected (in general) across the broader cryptocurrency complex. Price action has been relatively well supported, albeit at lower levels, on the bath of ETH/BTC stabilising around 0.0750, as well as the softening of the USD (.DXY currently trading near 105). Flows continue to be to the sell side, and are dominated by stable coins. Positively, USDT has maintained 1:1 USD pricing, as market cap looks to have now stabilised. This week’s macro economic data will likely define the pricing trend into the end of the year.
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The Bahamas Police reportedly arrested Sam Bankman-Fried this morning at the request of US authorities who have filed criminal charges and are set to extradite him. Prime Minister Philip Davis said in a statement both countries have “a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.” He said the Bahamas would continue to pursue its own investigations.
Before the arrest SBF was scheduled to testify via Zoom about the collapse of FTX before the House Committee on Financial Services investigation. “I still do not have access to much of my data — professional or personal. So there is a limit to what I will be able to say, and I won’t be as helpful as I’d like,” he tweeted. Reports emerged today of a secret Signal chat group he and other FTX insiders reportedly ran called ‘Wirefraud’ but he denies it even exists. New CEO Jon Ray also produced written testimony stating that there was “an utter failure of corporate controls at every level” and claimed FTX.US was not run separately from FTX.com as it was supposed to be.
SBF was also reportedly in another Signal group with Binance CEO Changpen Zhao and execs from Tether. The Wall Street Journal saw messages suggesting the Tether guys and CZ were very concerned about trades by Alameda Research that could depeg the stablecoin (make it trade for less than $1 USD). CZ reportedly confronted SBF saying “Stop trying to depeg stablecoins. And stop doing anything. Stop now, don’t cause more damage.”
There are seven class action lawsuits against SBF and FTX and news emerged on December 10 that US Federal Prosecutors were building a fraud case against him. Bloomberg reported that prosecutors from New York, FBI agents and other regulators had met with FTX’s lawyers to discuss the documentation investigators want to obtain. The Justice Department is “closely” examining whether FTX improperly transferred hundreds of millions around the same time as the company declared bankruptcy. US Federal Prosecutors are also investigating whether Alameda’s market manipulation caused the downfall of the Terra ecosystem earlier in the year. FTX’s new management has also hired forensic investigators to track down missing billions in customer funds.
Blocked and reported
A major crypto research and journalistic publication “The Block”’s CEO, Michael McCaffrey, was secretly funded with US$43 million (A$64M) in loans by Alameda for the past two years, US$16 million (A$24M) of which McCaffrey used to buy himself property in the Bahamas. McCaffrey said that the first loan of US$12M (A$18M) was in early 2021 to keep the company afloat and he didn’t disclose it because he didn’t want people to think it had compromising the objectivity of their coverage.
Almost 7 million Chainlink tokens were locked up in the first 30 minutes of the new staking service that went live this week. The staking pool helps secure the oracle network and pays out 4.75% annually to stakers. However stakers can’t withdraw until the next version of the protocol is released in nine to 12 months. One whale has already been caught gaming the system by stacking 1.06 million tokens across multiple addresses, which are limited to 7,000 tokens each.
Having been caught unawares by the collapse of FTX, Crypto Twitter is now interpreting every tea leaf as a sign Binance might collapse. There are questions being raised about its proof of reserves audit showing it has 1:1 Bitcoin reserves along with concerns about a possible criminal prosecution. Reuters reported there is conflict among US prosecutors over whether to press criminal charges against the exchange in a long running investigation for non-compliance with anti money laundering laws and sanctions.
Good news part 1: Shanghai fork set for March
Ethereum creator Vitalik Buterin has written a new blog post naming five things in the ecosystem that are exciting him including stablecoins, DeFi, DAOs, verified identities and hybrid applications. Crypto lender Nexo is withdrawing from the US after various state regulators and the federal Consumer Financial Protection Bureau began investigating its “Earn” offering. The Financial Times reported this week that crypto lender Genesis owed US$900M ($1.34B) to crypto exchange Gemini, however a law firm representing exchange customers now claims the figure is twice as high. Michael A Gayed from the Lead-Lag report told his 700K followers that “conditions now favor an imminent stock market crash“.
Good news part 2: Goldman Sachs has faith
Goldman Sachs clearly has faith in the long term future of crypto as it intends to invest tens of millions in crypto companies in the depressed market. Mathew McDermott, an executive at the merchant bank said he was seeing opportunities that are “priced more sensibly” and they are already doing due diligence on some crypto companies.
Until next week, happy trading!