In Markets

The stock markets have welcomed a report the US Federal Reserve is set to debate a less-aggressive interest rate hike in December. However, with economic turmoil in Britain and the looming spectre of recession, the overall picture remains bleak. Crypto markets are running fairly steadily with Bitcoin finishing the week at A$30,545 (US$19.3K) and Ethereum down slightly to trade around A$2,120 (US$1,340). XRP lost 9%, Cardano (-5%), Solana (-12%) while Dogecoin finished flat. The Crypto Fear and Greed Index is at 20, or Extreme Fear, which is where sentiment has been stuck since last month.


From the IR OTC Desk

Global markets are beginning to question whether there might be a rate ‘pivot’ from the US Federal Open Market Committee (FOMC).  And as we enter the moratorium before the 2nd of November Fed rate announcement, there is limited information to drive price action – risk asset pricing continues to melt up.

This broad change in interest rate sentiment was caused initially by WSJ Fed watcher Nick Timiraos, who tweeted that “some officials are more eager to calibrate their rate setting to reduce the risk of overtightening”.  This was then followed up by an explanatory piece the next day in the WSJ:

“Federal Reserve officials are barrelling toward another interest-rate rise of 0.75 percentage point at their meeting Nov. 1-2 and are likely to debate then whether and how to signal plans to approve a smaller increase in December”

This sentiment was backed up by San Francisco Fed President Mary Daly last Friday: “The time is now to start planning for stepping down”.

Interest rate markets continue to forecast that the FOMC will increase the underlying fed funds rate by 75bps next week.  This will take the target fed funds band to 3.75%-4.00%.  What will prove critical for risk assets, is whether a formal change in rhetoric will be delivered at the November FOMC press conference.

In Australia, last week delivered the labour market data for October which highlighted that the unemployment rate remains near a 50 year low at 3.5%.  This week, we will receive the Australian Q3 CPI print (the most important data in the calendar for the Reserve Bank of Australia).  Scheduled for release on tomorrow at 11:30am, market expectation is for the Inflation Rate YoY Q3 to hit 7% with the RBA Trimmed Mean CPI YoY Q3 to move from 4.9% (Q2) up to 5.6% (Q3 expectation).  This will paint a very clear picture of the current inflationary landscape for the RBA before their 1st of November board meeting.

On the OTC desk, cryptocurrencies have been broadly supported on the back of more positive US equity sentiment.  Over the course of the week, layer 1 tokens have stood out due to the on-exchange issuance of Aptos (APT).  This has resulted in layer 1 outperformance relative to BTC.  Last week we highlighted that cryptocurrencies are currently exhibiting low rates of realised volatility, and this continues to be the case.  Flow has appeared in batches, and while the overall volumes remain consistent, the timing of flow is now very much aligned with changes in price action.  This week, we have seen a particular interest in XRP and ETH in OTC.  This has also been the case in volume numbers on the exchange.

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In Headlines

Ripple turns ten

Ripple has just celebrated its tenth anniversary on October 20. As something of an unexpected birthday present Ripple’s general counsel Stuart Alderoty, said the legal team had finally received the long awaited SEC documents relating to the so-called ‘Hinman speech’ that the former director of the Division of Corporation Finance gave in 2018 in which he stated that Bitcoin and Ethereum are not securities. Ripple has been fighting for ages to see the legal reasoning behind the speech as they hope to use it to show that XRP isn’t a security under the same rationale, and thus defeat the SEC’s case against them for selling illegal securities. In another development, Ripple Labs’ director of engineering Nik Bougalis announced he was stepping down from the company after a decade.

Fidelity expands crypto division

Fidelity Investments, which manages more than US$4.5 trillion (A$7.13T) in assets, is set to expand its digital assets division by another 100 people, to a total of 500. Fidelity also announced it will offer ETH trading and custody services to its institutional clients from October 28.

Bitcoin to the moon

This week’s outrageously optimistic Bitcoin price prediction comes courtesy of Equity Management Associates founder Larry Lepard who told the Quoth the Raven podcast he believes Bitcoin can “easily” do another 100X from here. When asked to clarify if he really meant BTC would hit US$2M/A$3.16M  (100X the current price) he said “yeah, easily easily.” Larry said it was a “risk” not to hold BTC as a hedge during a “sovereign debt crisis.” “Anyone who doesn’t have some position in these things is taking more risk than they need to take because of the upside optionality,” he said.


Retail has fled

The Executive Director of the Blockchain Association Kristin Smith told CNBC that Bitcoin’s current price appears to be propped up entirely by long term investors as retail fled due to bad macroeconomic conditions. But she says they’ll be back when the economy improves. “I think as we start to see the economy turn around and people putting more risk into their investment portfolios, we’re going to see the investment in Bitcoin rise and subsequently the price. She also tipped the Digital Commodities Consumer Protection Act to regulate exchanges and spot markets in the US would likely pass by the end of the year, after issues with DeFi regulation have been resolved.

Tesla not selling is bullish

It shows where we are at in the market cycle that Tesla not selling any more Bitcoin for the quarter has been welcomed as relatively bullish news. For those who came in late, Tesla sold off US$936 million (A$1.48B) in Bitcoin last quarter (for a $64M profit!), but this quarter it held on to the remaining US$218M (A$345M). CEO Elon Musk’s latest joke venture was selling 30,000 bottles of a fragrance called Burnt Hair – and he accepted payment in DOGE and Shiba Inu.

golden bull

Cardano is undervalued: Santiment

Santiment says that Cardano is largely undervalued based on the Market Value to Realised Value (MVRV) metric. “Cardano now sits at its lowest relative position compared to its realised value since Jan 2019,” the data analytics firm tweeted. The last time ADA’s score hit this level it went on to double within 90 days. Things are looking good for Cardano right now. Since the Vasil upgrade the number of projects being built on Cardano has surged from 517 to 1,122 while NFT volume on the platform spiked 320% in the past two weeks to 4 million ADA.

Ethereum disappearing

The Ethereum supply is on course to track lower than it was before the merge thanks to weeks of more coins being burned than created. The ETH supply at the time of the merge was 120,520,000 and it is now just 120,522,000 and falling. However most of the flurry of activity and gas fees being burned is due to a free claimable token called XEN which has been spamming the network and pushing up gas fees. Meanwhile active addresses on the network have dropped to a four months low. On October 17 there were fewer than 400K addresses using the network.

eth supply since merge

ETH supply change since The Merge. Image:

Hong Kong looks like it will forge its own path on crypto separate to China with the director of licensing of Hong Kong’s Securities and Futures Commission (SFC) Elizabeth Wong confirming that the regulator is considering allowing retail investors to invest directly in crypto assets. “We think that this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement,” Wong said, according to the South China Morning Post.

Bitcoin power use up 41%

Depending on who you ask, Bitcoin mining is either destroying the planet via rampant electricity use, or it’s saving the planet by making renewable energy projects economically feasible and making use of otherwise wasted energy from things like gas flares. The latest report from the Bitcoin Mining Council (BMC) says that while on one hand mining accounts for just 0.16% of the world’s power (266TW), uses 59.4% renewable energy, and contributes a ‘negligible’ 0.1% to global carbon emissions. However on the other hand its energy use jumped a whopping 41% in the past year and there are fears the increasing power consumption will see a regulatory crackdown in the EU. Recent data shows that Kazakhstan now accounts for 13.22% of the total Bitcoin hashrate behind the US (37.84%) and China (21.11%).

bitcoin-and-crypto-mining-farm-big-data-center- smaller

Guinness Book of Crypto

The 2023 edition of the Guinness World Records contains a whole section on Cryptomania. Bitcoin is recognised as the first and most valuable cryptocurrency, CryptoPunks was awarded the most “expensive NFT collectible” after Punk #5822 changed hands for US$23.7M (A$37.5M), Manchester City’s Socios token  was named “most valuable fan token” and El Salvador was honoured as the “first country to adopt Bitcoin as legal tender” in June last year.


Until next week, happy trading!