Septem-bear is generally a pretty rubbish month for Bitcoin prices, with nine out of the past 12 years seeing prices finish in the red. The three outliers saw only modest gains too, apart from one outlier year where it increased 15%. On average Ethereum loses 12% in September and the overall crypto market cap loses 7.5%. Spiralling energy prices, the US dollar hitting new highs and sentiment tanking don’t seem to suggest this month will buck the trend either. The Bitcoin price has just been crawling sideways for the past week, trading in a $1,000 range. It finishes the week down 4% to trade just around A$29,500 (US$20,100). Ethereum increased 4% to trade around A$2,450 (US$1,665). Cardano leapt 9% on the news the Vasil hard fork has a date while XRP and Solana were flat. The Crypto Fear and Greed Index is at 23, or Extreme Fear.
From the IR OTC Desk
At today’s Board Meeting, the Reserve Bank of Australia (RBA) increased the cash rate by 50bps to 2.35%. This is the fifth rate increase in a row and represents the fastest pace of rate adjustment since 1994. In the Monetary Policy Decision, Governor Philip Lowe highlighted: ‘the Bank’s central forecast is for CPI inflation to be around 7.75 per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024’; and that ‘the Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market’.
This week also delivers critical Australian economic data. On Monday the 5th of September, Retail Sales MoM (July) printed at 1.3% versus 0.2% in June. Additionally, ANZ Job Advertisements MoM (August) was materially positive at 2% versus -1% for July. Job ads remain one of the key real-time labour market indicators for the RBA.
Further, this week (Wednesday) is Australian GDP Growth Rate Q2, which is expected to show an increase in the pace of growth to 3.5% (YoY); as well as July’s Balance of Trade (Thursday) which is forecast at A$14.5b.
In the US, the USD currency basket (as expressed by the DXY) continues to move higher, currently trading at 109.50 – having reached a new 20-year high of 109.63. The strength in the USD is being felt across the board and is most attributed to the EUR/USD, USD/JPY and GBP/USD. This week EUR/USD fell to the lowest level since 2002 (0.9885), USD/JPY has reached its highest level since 1998 (140.60) and GBP/USD has fallen to its lowest level since 1985 (1.1454). With global commodities primarily being denominated in USD, imported inflation remains of great concern for Europe, UK and Japan.
On the data front, the US Non-Farm Payrolls delivered +315k jobs in August, beating the market expectation of +300k. While the unemployment rate increased to 3.7% versus 3.5%, the increase was attributed to positive labour market participation. In general, this data highlights an incredibly strong US labour market. US 10yr Treasury yields have continued their move higher, to now trade at 3.217%. US inflation data, scheduled for the 13th of September will likely decide whether a 50bp or 75bp increase in the Federal Funds rate remains appropriate for the FOMC at their 22nd of September meeting.
On the OTC desk, ETH has performed incredibly well relative to other risk assets. ETH/BTC has moved materially higher over the week, as the market prices in an increased probability of a successful ‘merge’. Pricing is also reflecting a widening in yield between PoS ETH and BTC.
Flows on the desk remain skewed to the sell side, however as communicated over the last few weeks, volumes have remained high in ETH, USDT, USDC and LTC (in particular). Critically for the DeFi market will be the correlation between ETH and DeFi. Historically we have always highlighted that as ETH/BTC rallies, staking coins have also performed strongly due to positive correlation. This relationship will be important to monitor over the next few weeks.
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AFP’s Crypto Squad
The Australian Federal Police has set up a new cryptocurrency unit to target money laundering. National manager of criminal asset confiscation command Stefan Jerga told the Australian Financial Review a dedicated squad with specialised skills was required due to a big increase in criminals using crypto. “It’s targeting assets, but it’s also providing that valuable, investigative tracing capability and lens for all of our commands across all of our businesses, whether they’re national security-related, child protection, cyber – or the ability to trace cryptocurrency transactions across the relevant blockchains.”
Merge in a week
The Merge is a week away now — that’s when Ethereum transitions to the 99.9% more energy-efficient Proof of Stake consensus mechanism. There’s A$7.8 billion (US$5.3B) of ETH already staked on the Beacon Chain. It’s a massive undertaking and there’s an outside chance it could all go horribly wrong, so analyst Marcel Pechman recommends traders keep an eye on how blocks are being produced and validated on Infura’s API to see how DApps are travelling, and on data about how many validators are being slashed. It looks like you’ll get airdropped ETHW tokens for the new Proof of Work fork, and CoinGecko’s Bobby Ong has advice on what to do there. You’ll need to record the price for tax purposes and make a quick decision whether to sell or not. Despite the fact there’s been no surge of enthusiasm for the Ether price, Kyle McDonald controversially told Coindesk the event could hit the BTC price due to climate change concerns. “I think after the Merge, investors and regulators are going to realise that [Bitcoin’s] proof-of-work was never really necessary and we’re slowly going to see a huge crash in the Bitcoin price.”
Vasil upgrade scheduled
Cardano’s long-awaited Vasil hard fork upgrade will go live on September 22, and ADA surged this week to overtake XRP as the sixth largest cryptocurrency. Founder Charles Hoskinson said the date had been determined after consultation with “all the teams” who were happy with how things were progressing. Vasil, which has been delayed five times, will turbocharge the network and enable devs to deploy smart contracts and build DAapps on massive scales. “Vasil is going to help a lot of DApp developers out…I think people are going to be very happy with what they have and there is a lot they can build,” he said.
One year on …
A year ago crypto was riding high: Michael Saylor’s MicroStrategy was gobbling up Bitcoin to put on its balance sheet and El Salvador had just implemented its Bitcoin Law. Today however MicroStrategy and founder Michael Saylor are being sued by the District of Columbia for avoiding US$25 million (A$36.7M) worth of taxes, with the final bill including penalties potentially topping US$100M (A$146M). Meanwhile El Salvador’s billion Bitcoin bond, announced in November 2021 to buy more BTC and finance a Bitcoin city has been delayed again until the end of this year. The El Salvador government has US$58M (A$85M) in unrealised losses on its Bitcoin reserves, and only 2% of remittances in the country are sent via cryptocurrency wallets. However the Bitcoin Law has sparked a crypto tourism boom, 59 crypto businesses have registered offices in El Salvador and the government crypto wallet Chivo now has 4 million users.
Bits and piece
Attorney and XRP stan Jeremy Hogan believes the SEC’s case against Ripple for selling unregistered securities is likely to be resolved between now and the end of November. Sneaky fake Google Translate, YouTube Music, and Microsoft Translate apps have been installing crypto mining software undetected on around 110,000 computers. The apps were available on sites like Softpedia and Uptodown. The Block estimated the adjusted transaction volume of all stablecoins increased by 32.9% to a new high of US$866.2B (A$1.27T) due to the sanctions imposed on crypto mixer Tornado Cash. Ethereum has added 70,000 new addresses per day in the past month and now has 204,571,827 unique addresses. Interest in the Merge has seen ETH account for 57% of the combined Ethereum and Bitcoin futures trading volume recently.
Until next week, Happy Trading!