In the week just past, BTC has been range-bound – stuck in a channel 4% wide. Last night there was an attempt to break out to the upside, but as most of this has been given back, we resume the “crab” market. Bitcoin is currently up 3.2% to trade around A$34k (US$23.7k), Ethereum continues its merge exuberance and is trading 10% up – currently A$2,526 (US$ 1,765). XRP is flat, Cardano is up 5%, Solana (2.4%), Dogecoin (3.5%). The Crypto Fear and Greed Index is at 42, and while technically “Fear”, this is on equal footing with high on the 30th July, and the highest it’s been since April.
From the IR OTC Desk
Economic data this week will likely confirm that US inflation has finally peaked. Scheduled for release on Wednesday, the 10th of August, the US headline inflation rate YoY (July) is currently forecast to print at 8.7%. If this were to occur, it would be a small reduction from last month’s annualised print of 9.1% and would indicate to the Federal Open Market Committee (FOMC), that their data dependent stance is appropriate. Interestingly, it is less clear whether the components of the core inflation basket have slowed. The market is expecting core inflation to be 6.1% for July, relative to 5.9% in June.
Last Friday, the US unemployment rate (July) moved down to 3.5%, from 3.6% in June. This reduction in the unemployment rate corresponded with 528k new jobs. Key to the employment series is the pace of wage growth – as indicated by the Average Hourly Earnings (AHE) data. For July, the AHE remained steady at 5.2%. The combination of high wage growth, and a robust labour market has seen commentators dismiss the negative sentiment of the technical recession.
In the most recent monetary policy press conference, Chair Powell reiterated that the Federal Reserve’s legal mandate is headline inflation. He also noted that once headline inflation peaks, core inflation would be a better indicator of how persistent high levels of prices would remain. From a bond market perspective, it feels too early to determine whether a 50bp or 75bp increase at the September meeting will be appropriate – given the Fed have announced a path based on data dependency. The FOMC will receive the August non-farm payrolls data, as well as the August inflation data prior to the September meeting. These data points will have a materially higher economic weighting, due to the long and variable lags associated with monetary policy.
In Australia, the Terms of Trade remain at a historically high level. Balance of Trade (June) increased A$17.67b against a forecast of A$11b. AUD/USD has remained buoyant, now approaching 0.7000, and well above the short-term support found at 0.6700. With the price of crude oil below US$100, the USD index (as expressed by the DXY) has softened. Expect this week’s inflation release to remain critical to the path of the AUD.
On the OTC desk, risk sentiment continues to improve, with two-way flow continuing to be the core theme. Our stable coin volumes are improving, with USDT and USDC leading. Additionally, we have seen a high volume of trades from our Singapore customer base. ETH/BTC has been volatile as it continues an upward trajectory to trade near 0.0755. While BTC and ETH continue to gain more investment attention, staking token flow has remained light. Continue to watch the correlation between US tech stocks and cryptocurrencies. While their relative movements have become almost session dependent, the broad sentiment of US equities continues to remain critical for risk assets and cryptocurrencies.
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All your coins are belong to us
The US Securities and Exchange Commission is reportedly investigating every single US based crypto exchange – along with Binance for good measure – for alleged securities violations. Forbes based its report on an unnamed staffer to pro crypto Senator Cynthia Lummis. There are more than 40 major crypto exchanges in the US, however the SEC has refused to confirm or deny or comment on the investigations. Another US regulator, the Commodities Futures Trading Commission, believes crypto should fall under its remit and be classified as commodities instead and the staffer said it was pushing back on the SEC’s “regulation through enforcement.”
Ethereum is scaling massively
Ethereum co-founder Vitalik Buterin was at ETH Seoul and Buidl Asia this week, talking about Ethereum’s plans for scaling with layer 2 solutions, zero knowledge proofs and two Ethereum upgrades called proto-danksharding and (full) danksharding. Buterin also warned that stablecoin USDC was getting so big that it could actually decide the future of contentious hard forks and instead encouraged Ethereans to embrace more decentralised stablecoins like DAI instead.
World’s largest asset manager embraces crypto
The world’s largest asset manager Blackrock, which oversees US$10 trillion (A$14.4T) in assets, has partnered with Coinbase Prime to provide its institutional clients with access to crypto. Bitcoin is the first asset being offered via Blackrock’s Aladdin investment platform. It’s been a long journey for Chair Larry Fink who called Bitcoin the “index of money laundering” five years ago, but in March this year told shareholders in a letter that the company was studying digital assets with a view to see how they could help the firm serve its clients. Coinbase shares slumped to US$53 (A$76) two weeks ago on the news it was being investigated by the SEC, but they’ve now jumped back up to US$93 (A$134).
Crypto raised more in first half of 2022 than all of 2021
The cryptocurrency industry attracted US$30.3 billion (A$43.5B) in funds in the first six months of the year, outpacing all of 2021 despite the bear market. According to Messari and Dove Metrics, around one third of the funds went to the centralised finance sector (exchanges, market makers etc), with infrastructure, Web3 and NFT businesses also faring well. However the DeFi sector only attracted US$1.8 billion (A$2.6B) in new funding.
Saylor gets even more Bitcoin focused
MicroStrategy announced a net loss of US$1.062 billion (A$1.52B) in the second quarter, the vast majority of the loss coming from ‘digital asset impairment charges’ of US$917.8 million (A$1.174B) after the price of Bitcoin tanked. Michael Saylor is stepping down as CEO… not because of the loss but so he can become ‘executive chair’ and pursue his goal of owning all the Bitcoin full time without having to worry about running the software side of the business. Saylor owns about 24% of the company.
Metaverse worth $50B by 2026
Tech research firm Technavio estimates the Metaverse sector will grow 21% annually over the next four years and have a market share value of US$50.37 billion (A$72B) by 2026. Speaking of which, Meta rolled out NFT support across 100 countries this week, with a couple of different wallets supporting NFTs on Ethereum, Polygon and Flow.
A serious exploit this week syphoned US$8 million (A$11.5M) from 8,000 Solana wallets. This time it had nothing to do with the Solana network per se – it turned out that the wallet provider Slope stored seed phrases in plain text on a centralised event logging service which was compromised.
Ethereum to $7000?
Cofounder of BitMEX Arthur Hayes says Ethereum could hit US$5,000 (A$7,180) following the merge based on the so-called ‘triple halving’ ETH will go through. Ether is set to become deflationary following the move to proof of stake and Hayes says the event is not yet priced in. His caveat for the prediction is that if the Federal Reserve stays hawkish on interest rates the price is more likely to be around US$3,500 (A$5K). Meanwhile Alameda Research billionaire Sam Bankman Fried says the crypto winter is already over. “I think we’ve already seen the worst of it; there’s a little more to come, but it’s not very bad,” he said. His caveat was that if the stock market plunged 25%, interest rates hit 7% and there was a long recession. “In that world, I think Bitcoin might go down to US$15K or US$10K (A$21.5K or A$14.3K)”.
The Nomad cross chain bridge suffered the fifth largest hack in history, losing nearly US$190M (A$273M) in crypto assets. The hack became a crowd sourced free for all as it was easy to copy, and Nomad has since offered a 10% bounty for any ‘white hat hackers’ who took the funds to ‘save’ them from the original hackers, or to just prompt those who feel guilty enough to hand it back. According to Chainalysis a whopping $2 billion (A$2.87B) has been lost in 13 different cross chain bridge hacks this year.
Until next week, happy trading!