In markets

Bitcoin didn’t look healthy this week, dipping to two-month lows under A$39.1K/US26K a few days ago. Depending on who you talk to, Bitcoin’s chart either looks like a classic bearish head and shoulders pattern, or we’re about to see a short squeeze and shoot upwards. Bitcoin finished the week down 1.2% to trade around A$40,650 (US$27.5K) and Ethereum was down a similar amount to trade around A$2,710 (US$1,820). XRP and Dogecoin were flat, Cardano gained 1.4% and Solana rose 2.4%. The Crypto Fear and Greed Index is at 50, or Neutral. 

In headlines

1 million wholecoiners can’t be wrong

The number of ‘wholecoiners’ — addresses containing 1 Bitcoin or more – has topped 1 million for the first time. Lower prices following the November 2021 all-time high, made reaching the target a lot more affordable and large numbers of people took advantage of the opportunity. Around 93% of the entire supply is now held by the 1M addresses with 1 BTC or more, while the 46.5 million addresses with less than the magic figure control just 7% of the supply. 

You can go your own way

Bitcoin’s 30-day price correlation with Ether fell below 80% this week, for the first time since the all time high. It means the two largest cryptocurrencies no longer always move in lockstep and increasingly rise and fall independently. 

Freeze Ethereum

Ethereum suffered a couple of semi-outages this week when the network stopped finalising blocks twice, the second time for more than an hour. As blockchain researcher Eric Wall puts it “‘finalisation’ is like a big confirm, takes 13 min. small confirms work fine in the meantime.” So transactions still worked, but platforms like DYdX had to pause deposits temporarily. Updates and patches were released for Ethereum clients. Beacon Chain expert Superphiz.eth said “don’t worry too much… As bad as this looks, the chain keeps going and eventually finalises.”

Tether in rude good health

Stablecoin Tether’s books are looking pretty good according to its first quarter attestation by BDO Italia. Its market cap grew from US$66B to US$82B (A$98.5B to A$122B) and it pulled more than US$4.5 billion (A$6.7B), or 90% of its deposits, out of the banks to reduce counterparty risk. It also boosted  US Treasury bills to 64% of its reserves. USDT is now backed by 85% cash, cash equivalents and short-term deposits that can be sold quickly to deal with any bank run scenario.  Interestingly, Tether used some of its profits to buy Bitcoin – over 52,000 coins.

US banks and default

Depositors have pulled US$910 billion (A$1.36T) out of the US banking system since May last year according to stats compiled by the Federal Reserve. The Fed also reported that 700 American banks face  “significant safety and soundness risk” due to unrealized losses that exceed 50% of their capital. The central bank blamed its own interest rates hikes as the major cause. However legendary investor Paul Tudor Jones tips the Fed will not raise interest rates any higher this year. “I think they’re done. They could probably declare victory now because if you look at CPI it’s been declining 12 straight months, that’s never happened before in history.” In Australia, Financial Review columnist Christopher Joyce argues we are set to see more rate hikes given our rates are well below international peers while our inflation rate is just as high.

Bitcoin Cash upgrades

Bitcoin Cash has been upgraded to implement CashTokens, which are like ERC-20 tokens on Ethereum. They’re censorship resistant, low fee digital assets that anyone can issue that can represent anything from physical assets to currencies and securities. The underlying technology also enables more advanced on chain applications like DEXs and bridged sidechains.

Bull and bears fighting

Pseudonymous trader Capo thinks this year’s rise in the Bitcoin price was just a retracement which is now at an end and he warns of a “massive capitulation event.” He believes the hype around memecoins is a clear sign of a local top. “We are about to witness a massive capitulation event. Both technical and fundamental reasons are there. The main target for BTC remains $12,000 (A$17.9K)… ETH would reach $500-$700 (A$746-$1045). Altcoins would drop 60%-80% on average, some even more.” But Michaël van de Poppe, founder and CEO of trading firm Eight, says it’s onwards and upwards from here. “Bitcoin breaks upwards and tests $27,600 (A$41.2K). Good signs,” he said. “Weekly timeframe; Holding 200 MA and EMA. I think we’re continuing towards $38,000-$42,000 from here (A$56.7K-$62.7K).”

Ban Bitcoin spam

An influx of memecoins and NFTs has led to skyrocketing transaction fees and some Bitcoiners don’t like it. They’re debating everything from a ban on “spam transactions” (meaning Ordinals) to a potential rollback of the Taproot upgrade. Others meanwhile argue this has finally given a bit of life and purpose to Bitcoin. In the latest development a group of builders called ‘Trustless Computer’ claim to have forked Uniswap and created “smart contract” BRC-20 tokens and plan to build a DeFi ecosystem on top of Bitcoin. 

Bits and pieces

A Bloomberg survey suggests that in the event of a US default retail investors would favour Bitcoin over the dollar… but only slightly (11.3% to 10.2%). Gold was the preferred choice for 45.7%.  

Singaporean businessman Bernard Ong Hock Fong, who founded the Torque platform, is being sued by liquidators of Torque to recover hundreds of millions worth of crypto they say was lost under his management. 

Memecoins continue their crazy ways, with the Milady (LADYS) token, based on the anime avatar NFT collection, surging by more than 5,000% after Elon Musk tweeted a meme. 

Business Insider released a long “obituary” for The Metaverse, but influencer Udi Wertheimer says the release of Apple’s new mixed reality headset is likely to put a rocket under Metaverse tokens in three weeks.

Until next week, Happy Trading!