In Markets

Bitcoin has seen four red candles in a row on the weekly chart for the first time since June 2020. Traders seem unsure of how crypto markets will react to heavy losses in Asian stocks over lockdowns spreading in China and the US Federal Reserve signalling a half point rise in interest rates is likely at its next meeting to tame inflation. A looming death cross on the three-day chart could also send prices tumbling 40% according to CoinDesk — but on two previous occasions it notes that marked the end of bear markets and the start of bulls. Despite the gloom, HODLers keep HODLing, with the percentage of Bitcoin supply that hasn’t moved for more than a year crossing 64% for the first time ever. Bitcoin dipped again below US$40K (AU$55.7K) on the weekend and was as low as US$38.5K (AU$53.5K) earlier today but it finishes the week at US$40.5K (AU$56,450), which is down 1% on seven days ago. Ethereum is down 2% to trade around US$3K (AU$4.2K), XRP lost 9%, Cardano was down 5% but Dogecoin was up 10%. The Crypto Fear and Greed Index is stuck on Extreme Fear, at 23.


From the IR OTC Desk

Risk markets have traded cautiously on the back of 1) Covid-19 spreading through China, 2) an expected 50bp increase to the Federal Funds rate by the US Federal Open Market Committee (FOMC) on the 4th of May, and 3) a breakdown in Ukraine/Russia diplomacy talks.

US short term interest rate futures (as reflected by the eurodollar futures) are now expecting a terminal rate near 3.5% for June 2023. This continued sell-off in bond yields has seen the DXY (the USD FX trading basket) trade to yearly highs. In a discussion on upcoming monetary policy, Chair Jerome Powell confirmed that a 50bp increase will be ‘on the table’ for the May meeting. US economic data is scheduled to deliver detail on the path of US wages (Friday). As represented by the Employment Cost – Wages QoQ Q1, wages are expected to grow by 1.4% – which would see wages up 4.9% over the last 12 months. Watch this space.

In Australia, the Federal election is now less than four weeks away, and while this is of lesser significance to immediate market activity (for now), short term interest rate forecasters remain divided – as to whether the Reserve Bank of Australia (RBA) will consider moving the underlying cash rate during the election period. This week sees the all-important Australian Q1 inflation data (Wednesday at 1130am EST). The expectation for the Inflation Rate YoY Q1 is currently 4.6%, with the Trimmed Mean CPI YoY Q1 forecast at 3.4%. Most bank economists are forecasting the first increase (in more than 10 years!) to be at the June meeting and will likely be just 15bps. This week’s CPI release may change these current expectations – watch this space.

On the OTC desk – the dominant theme has been stable coin buying out of our Singapore office. With continued volatility in US tech stocks USDT, USDC, UST (terra) and DAI remain incredibly popular. We are seeing opportunistic buying in BTC and ETH, although volumes have remained light. The ETH/BTC cross-moved sideways for the third week in a row – another indication of caution in risk markets. Last week we mentioned that perhaps the correlation between cryptocurrencies, US equities and US bond market pricing may begin to break down, as a stock/flow pricing model begins to drive price action on low volumes. So far this has not eventuated and correlated price movement between risk assets remains in play.

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In Headlines

3 crypto ETFs in Australia

Australian crypto ETFs are like waiting for buses – you hang around for ages and then three come along at once. Cosmos Asset Management is listing a Bitcoin ETF this week, and 21 Shares is listing both Bitcoin and Ethereum ETFs. They’re all on CBOE Australia (ASX competitor exchange) and the Financial Review expects up to $1 billion to flow into the funds in short order.


Bitcoin Core 23.0

Bitcoin Core 23.0 – the latest version of the software originally created by Satoshi Nakamoto in 2009 – was worked on by 132 developers over seven months and has just been released. It brings improvements to Bitcoin Core’s wallet (including the ability to choose the new Taproot address type when creating a new wallet), peer to peer communications, fee estimation (that takes Replace By Fee transactions into account), and other cool stuff.

APRA’s 3 year plan

The Australian Prudential Regulation Authority (APRA) has laid out its preliminary risk management expectations for regulated entities dealing with crypto, and a regulatory roadmap for the next three years. The watchdog will carry out consultations during 2022 and 2023, following which it will gradually introduce regulatory standards in 2024 and 2025. Chairman Wayne Byres stressed the need for risk assessments and due diligence. AUSTRAC also released two guides this week to help businesses spot the difference between legitimate and illegitimate crypto use, but thoughtfully stressed the need to avoid debanking people or businesses merely due on suspicion.

Musk now ruling Crypto Twitter

Honorary Dogecoin CEO Elon Musk has stitched up a US$44 billion ($61.3B) deal to buy Twitter, which saw a 26% jump in the Doge price and may benefit Bitcoin given Tesla is the second biggest corporate holder. Musk has vowed to open source the algorithm, and clean up the spam bots that scam people for crypto by authenticating “all humans”. “If I had a Dogecoin for every crypto scam I saw, I would have a hundred billion Dogecoin,” Musk said. Block CEO and Bitcoin maxi Jack Dorsey will also get US$974 million (AU$1.35B) from the deal, leading to speculation he’ll spend it on something Bitcoin-related.


Africa embraces crypto

Forbes reported that the National Assembly of Central African Republic has adopted a bill that will make Bitcoin legal tender in the country. No one else seems to have confirmed the story and other reports simply suggest the country passed a bill creating a legal framework for cryptocurrency regulation in the country.

FOI for PoW

Documents released under Freedom of Information laws show that the Swedish financial regulators and the EU’s European Commission discussed banning not only Bitcoin’s Proof of Work mining process on environmental grounds but also banning Bitcoin trading itself to support Proof of Stake coins. “We need to ‘protect’ other crypto coins that are sustainable,” minutes of the meeting showed. The PoW mining ban was narrowly defeated, but the debate will no doubt resurface. In fact, New York state legislators are due to vote this week on a proposal to ban PoW mining in the state for two years. IPO?

The $14B crypto exchange looks set to follow Coinbase and list on the stock exchange. Bloomberg reported that the exchange is holding talks with banks regarding a possible Initial Public Offering this year. Binance US has also raised the possibility of a listing in the past.

German banking giant gets into crypto

German banking giant Commerzerbank has confirmed it applied for a crypto license in the first quarter of this year. The custody and trading services would be aimed at its 70,000 institutional clients.

Up only?

Fidelity executive Jurrien Timmer has told his 100K followers that Bitcoin’s boom and bust days are behind it as institutional investors adopt the cryptocurrency and smooth out the crazy sentiment driven spikes and crashes. He also thinks Metcalfe’s Law (which relates to network growth) is now driving the price and not the supply side of thing (as exemplified by the stock to flow model). He tweeted a chart, noting: “In recent months the price of Bitcoin has stopped tracking the S2F model and has instead hugged the pink line (demand model). That makes sense to me.”

BTC Supply demand models

Source: Jurrien Timmer (Twitter)

BTC and ETH to break all time highs in 2022 – Celsius CEO

Sharing his insights at the Paris Blockchain Summit last week, Celsius Network CEO Alex Mashinsky commented on several topics, including Bitcoin and Ether’s markets. According to Mashinksy, the strong Bitcoin support of the US$30-33K region is important to note. He believes that Terra’s recent purchases of BTC has played a significant role in supporting BTC’s price along with other institutions entering the market. Although, Mashinsky did state some hurdles, such as Russia’s attacks on Ukraine having an effect on public markets, and the actions from the United States Federal Reserve, which may also lead to a negative turnout. With that said, “I still expect us to break that $60,000 this year on Bitcoin, break the $4,500 on Ethereum”, he stated.

Until next week, happy trading!