Market Update

27th September to 3rd October 2023

Welcome back to another crypto market update.

In markets

Markets appeared to turn a corner the very minute ‘Uptober’ began, with anticipation over the expected launch of Ether Futures ETFs in the US sending Bitcoin and Ethereum surging on our Australian Bitcoin exchange. The institutions-friendly ETF news saw Ether finish the week up 1.1% to trade around A$2,611 (US$1,661), and Bitcoin was up 1.2% on seven days ago to trade around A$43,233 (US$27,516). Yesterday, on our Bitcoin exchange, Bitcoin was actually trading above the US$28K mark for the first time since August 17. Other coins gained too, including Solana which surged 16.1% and Cardano (up 2%) but others fell after the pump such as XRP which was down 2% and Dogecoin (down 1.5%). In the US, the regular game of chicken that legislators play over raising the debt ceiling ended with a midnight deal that avoided a US Government shutdown on October 1. The Crypto Fear and Greed Index is at 50, or Neutral.

From the IR OTC Desk

Cryptocurrency volatility has started to increase; and in general, this has resulted in positive price action for the digital asset complex.  Sharp pricing movements have been observed this week during periods of low liquidity, and this is expected to continue.  The primary catalyst for the positive crypto market sentiment was the Securities and Exchange Commission (SEC)’s approval for three US asset managers (VanEck, Bitwise and ProShares) to provide a future based Ethereum ETF.

The story in the geopolitical and macro landscape has been less positive, however.  The US Congress has passed a stopgap funding bill to avoid government shutdown (until mid-November).  This is expected to be an ongoing headline.  US long-end bond yields have extended their path higher, with the US 10yr Treasury yield sitting near 4.70%.  This is almost 20bps higher than this time last week, peaking interest/concern from the global credit markets.

This week’s economic calendar features both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ)’s interest rates decisions (Tuesday 2:30am AEDT and Wednesday 12:00pm AEDT).  Additional data points include US ISM Manufacturing, and US ISM Services PMI (Tuesday 1:00am AEDT, and Thursday 1:00am AEDT) as well as the US employment series (Friday 11:30pm AEDT). 

In Australia, the RBA have met today for their October meeting, maintaining the current cash rate setting of 4.10%.  Today’s meeting is the first meeting run by new RBA Governor, Michele Bullock.  With the Statement: Monetary Policy Decision remaining similar to September, the RBA continue to highlight:

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.”

Historically, Melbourne Cup Day (the first Tuesday in November) has usually proved to be a live meeting for the Reserve Bank.  Time will tell for 2023.

On the OTC desk, layer 1s have awoken from their dormancy – and with some force!  Led by the ETH US future ETF announcement, blue chip layer 1s have generally outperformed this week.  On the desk, we have seen a particular interest to purchase both ETH and SOL.  In general, alt enquiry continues to pick up – this has been an ongoing theme for the last month.  The price to buy USDT is well and truly back to its 1:1 USD peg.  Historically, USDT trading over peg has been an indicator of DeFi inflow.  Expect the market to continue to show volatility around SEC announcements.

 For any further information, please feel free to reach out. 


In headlines

Everybody gets an Ether Futures ETF

Ethereum Futures ETFs from VanEck, ProShares and Bitwise have just launched in the US, with more set to join them from Valkyrie, Hashdex and Volatility Shares. Valkyrie actually jumped the gun and started buying ETH futures late last week until the SEC reportedly told it to stop. Unfortunately, the early signs don’t suggest the ETFs will herald the start of a new bull run, with just US$1.9M in volume (A$2.95M) in the opening hours, which Bloomberg ETF analyst Eric Balchunas described as “pretty meh” though he noted it was actually “about normal for a new ETF.” The Ethereum ETFs suffer by comparison to the first Bitcoin futures ETF BITO which did about US$200M (A$310M) in the first 15 minutes… albeit on a much bigger exchange and at the very top of a raging bull market. The ProShares Bitcoin Strategy ETF also did US$1 billion (A$1.5B) in its first day. As of yesterday, Direxion, Roundhill, and Grayscale were yet to submit updated filings to launch their ETFs. In a win for developers, VanEck announced it will donate 10% of the profits from the ETF for the first decade to Ethereum’s core development team. 

Uptober only

September lived up to its reputation as a terrible month for crypto with prices sliding during the month, however, things turned around almost instantly when Uptober arrived. The price of Bitcoin surged 3% in about 15 minutes on October 1, while Ethereum jumped 4.7% in a short space of time too. Uptober is so named because prices invariably rise during the month and have only fallen in October in two years since 2013. Analyst Michaël van de Poppe believes we could see Bitcoin hit US$40,000 (A$62K) by the end of the quarter “potentially fuelled by ETF approvals and the pre halving rally”. However, while a Bitcoin ETF is a live possibility, most pundits seem to think January next year is more likely. Trader DonAlt told his 53,400 YouTube subscribers the excitement in the lead up to the launch of Ether Futures ETFs was silly and said the rally could be short lived. He notes that the Bitcoin Futures ETF in 2017 “ended the bull market basically. It’s just generally not the best track record so I’m very confused.”

Bitcoin ETFs delayed

In case you thought the SEC is going soft on crypto, the regulator delayed approvals on Bitcoin ETF applications this week from BlackRock, Invesco, Bitwise and Valkyrie. SEC boss Gary Gensler was also called before the House Financial Services Committee on Sept. 27 where Republicans grilled him on his ties to TradFi and his anti-crypto stance. U.S. Representative Andy Barr accused him of “kneecapping” crypto, and memorably described him as the “Tonya Harding of securities regulations”. Under questioning Gensler reaffirmed that Bitcoin was not a security… but he was also reluctant to call it a commodity. 

The Metaverse lives!

The Metaverse narrative is seen by many as dead and buried, but Mark Zuckerberg showed this week there’s some life left in the concept. He demonstrated photorealistic VR avatar technology that enables interviews and meetings to be conducted in cyberspace but for the interaction to look and feel completely realistic. He showed it off during a podcast with Lex Fridman who wrote “This was one of the most incredible experiences of my life. It really felt like we were talking in-person, but we were miles apart.” While Facebook’s Metaverse is crypto free at this stage, its failure to attract any users weighed heavily on the price and reputation of blockchain based Metaverse projects like The Sandbox and Decentraland. 

Weird stuff and hacks

In one of those crazy stories you don’t normally see outside of Bitcoin bull runs, crypto influencer Ben ‘Bitboy’ Armstrong was arrested while livestreaming himself allegedly trying to steal his Lambo back from an associate. In other weird crypto news, Huobi Global changed its name two weeks ago to HTX — in an apparent reference to FTX — and was promptly hacked for US$7.9 million (A$12.26M). Hong Kong police arrested 15 people in connection with the collapsed exchange JPEX. With losses totalling around US$191 million (A$296M), it’s allegedly the largest Ponzi scheme in Hong Kong’s history. Another of last cycle’s villains, Su Zhu, the cofounder of Three Arrows Capital was arrested at Singapore’s Changi Airport this week while attempting to leave the city state. Singaporean courts placed a “committal order” against him according to 3AC’s liquidator Teneo. The US$10B (A$15.5B) hedge fund collapsed in 2022 following the implosion of the Terra ecosystem, due to the cofounders allegedly borrowing everything from everyone without collateral. 

SBF is looking at going to prison for a long, long time

FTX and Alameda founder Sam Bankman-Fried’s chances of avoiding life in prison will be decided in a court case that kicks off on October 4 and will last until at least November 9.  It’s been almost one year since FTX blew up and observers hope that the end of the trial will bring closure to a disaster that ruined the industry’s reputation and sparked the SEC’s war on crypto. Legal experts told Decrypt prosecutors seem very confident of securing a conviction, noting how fast the case was brought to trial, and the cooperation of key FTX figures who will testify against the former billionaire. “I think it’s going to be pretty overwhelming if it is brought to a jury in the same way that it was laid out in the indictment,” said Daniel C. Silva, a former federal prosecutor. 

Until next week happy trading!