In Markets

Although Bitcoin managed to break above AU$60K (US$43K) a few times, at the time of writing it had pulled back to around AU$58,700 (US$42.3K) for a -2% finish to the week. Ethereum gained 1.5% this week and is up around AU$4,400 (US$3.2K) while Cardano surged on positive network metrics and announcements and is up significantly by 38%. XRP was flat, Polkadot (4.5%) and Dogecoin (17%) both saw more significant gains. The Crypto Fear and Greed Index is at 22, or Extreme Fear which is pretty much where it’s been stuck so far in 2022.


From the IR OTC Desk

As the holiday period in Australia draws towards an end, this week’s unemployment data (Thursday 20th Jan) as well as next week’s inflation data (Tuesday 25th January), will prove critical for the Reserve Bank of Australia’s next scheduled meeting on 1 February.  With ongoing labour market disruptions due to the high volume of domestic Omicron cases causing chaos to labour market supply, it is unclear whether this may affect the official labour market data for December – although it seems reasonable that labour market data may prove quite messy over the next few months.  Current market consensus for the Unemployment Rate (Dec) forecasts a reduction to 4.5% (from 4.6% previous).

In offshore markets, weak China Retail Sales YoY Dec of 1.7% (verse 3.9% previous) and China GDP Growth Rate YoY Q4 of 4.0% (verse 4.9% previous) saw the PBoC lower the interest rate on 1 year loans and 7 day reverse repo by 10bps (2.85% and 2.10% respectively).  While it is the 5 year prime loan rate in which mortgages are set, this is the first time since April 2020 that the PBoC has adjusted these front end rates.

In the US, speculation continues to grow, regarding the path for the Federal Open Market Committee and their policy approach to interest rates – scheduled to convene on the 25-26th January.  This week it was Jamie Dimon (JPMorgan Chase CEO) who mentioned that the Fed could hike more than four times this year while maintaining growth.  Any change in policy or guidance from the US Fed will continue to prove critical to cryptocurrencies and a key area to watch.

On the OTC desk, realised volatility in the majors continues to move lower as the market seeks pricing direction.  While we have seen an increase in trading activity on the week, flows have generally remained uncorrelated – although XRP, ETH and USDT stand out in terms of traded volumes.  Also, an acceleration in OTC interest through our Singapore office remains a notable theme on the enquiry front.  Keep a close eye on the relationship between US tech stock and cryptocurrencies.

For any trading needs, please don’t hesitate to get in touch.

In Headlines

Tonga Bitcoin

Apart from hitting the headlines due to a volcanic eruption and tsunami this week that knocked out the country’s sole internet cable, it emerged that Tonga may follow in the footsteps of El Salvador and make Bitcoin legal tender. Former MP Lord Fusitu has been talking up a bill that’s almost “identical” to El Salvador’s and which will be voted on in September. He’s also talking about using volcanos to power Bitcoin mining and has opened a wallet address for Bitcoin donations to help the country recover.

Jack gets busy

Former Twitter boss Jack Dorsey this week announced the creation of  “Bitcoin Legal Defense Fund” to help look after the legal costs of Bitcoin developers who get into legal issues connected to their work.  His company Block also revealed more details on its plans for a permissionless open-source mining solution. Long story short: they’re hoping to make Bitcoin mining more energy efficient and to develop ASIC miners that anybody can just plug in and use at home.

NFT no way

Wikipedia has been anti crypto for years, locking all the crypto articles and refusing to cite crypto publications as sources. This week it emerged that editors had voted against classifying digital art represented by NFTs as art and it looks like also voting to stop accepting crypto donations. Meanwhile NFTs continue to thrive with OpenSea surpassing the one million mark in active user wallets. The platform has just hit a new monthly high of US$3.5 billion (AU$4.85B), and is now valued at US$13.3B (AU$18.4B).

Stats all folks

Just 12.2% of the total Bitcoin supply is held on exchanges, the lowest percentage since Jan 2018. Around 30,000 BTC departed exchanges on Monday and 26,000 on Wednesday and ZY Crypto says the last time we saw those sorts of numbers was in September 2021, which was followed by a 66% price surge. Ethereum’s inflation rate has dropped below Bitcoin’s thanks to EIP-1599 which burns fees. Bitcoin’s three month annualised inflation rate is around 1.83% while Ethereum’s has dipped to 0.9%. A Visa survey of 2,250 small business owners across the world found that 24% plan to accept crypto payments this year.

ETH v BTC inflation rate

Source: Glassnode

DeFi stats

The market cap of all DeFi protocols grew seven and a half times in 2021 to US$150B (AU$208B), and it grew to account for 6.5% of the overall market. A new report has found that a large number of DeFi hacks occurred because the supposedly ‘decentralised’ finance protocols are actually quite centralised. Blockchain security firm CertiK found that 44 incidents, accounting for $1.3B ($1.8B) stolen, was a direct result of centralisation issues. DeFi projects often keep an admin key while building out the platform to reverse mistakes; sometimes these keys can fall into the wrong hands.

Pakistan ban

The State Bank of Pakistan wants to ban all crypto transactions in the country and make Bitcoin illegal. According to documents submitted to a provincial court, the bank wants the country to follow China’s lead and stamp out crypto.

Cardano is on fire

After a long period in purgatory, the Cardano network is finally taking off and briefly surpassed Ethereum in USD transaction volume this week. It did so with fees of just US 38 cents (AU 53c) per transaction, while Ethereum was running at an unsustainable US$26 (AU$36). The number of active addresses on the network has grown to 221,675 and the SundaeSwap DEX is due to launch later in the week (Jan 20). ADA increased in price by more than a third this week.

Solana to become the Visa of crypto

A Bank of America report suggests that Solana could become the “Visa of crypto“. The report noted Ethereum’s failure to scale and said Solana’s fast transactions were a better option for many use cases. “Solana prioritizes scalability, but a relatively less decentralized and secure blockchain has tradeoffs, illustrated by several network performance issues since inception.” Solana has suffered from DDoS attacks and numerous network slowdowns in recent months.

Countries will buy more Bitcoin

Investment giant Fidelity says countries should – and probably will – follow El Salvador’s lead and invest in Bitcoin. “There is very high stakes game theory at play here, whereby if Bitcoin adoption increases, the countries that secure some Bitcoin today will be better off competitively than their peers,” analysts Chris Kuiper and Jack Neureuter wrote. The pair said they “wouldn’t be surprised to see other sovereign nation states acquire Bitcoin in 2022 and perhaps even see a central bank make an acquisition.”

NFTs and blockchain games thrive

NFT sales and blockchain game usage has grown amidst recent market volatility. According to reports from DappRadar, money generated from NFT trading went from US$10.7B in Q3 2021 to US$11.9B in the first ten days of 2022. Developments in the NFT space, such as the launch of the LooksRare marketplace may be attributed to this growth. The report also stated that blockchain games now represent 52% of the industry’s usage. Impactful metaverse developments and play-to-earn models strengthen the case for continued growth in 2022.

Walmart moving into the metaverse

Retail giant, Walmart, gears up to enter the metaverse as it submits a total of seven patent filings. The application indicated plans to create and sell “virtual goods”, including the likes of electronics, toys, appliances, apparel, and home decor as well as a “digital currency”. In addition, a separate application suggested plans to trademark the Walmart brand name and logo in virtual reality (VR) and augmented reality (AR), with the possibility of introducing “physical fitness training services” in VR and AR.


Until next week, happy trading!