Market Update

In markets

The S&P 500 is trading near its all-time high after the US Federal Reserve paused interest rate hikes and suggested cuts were on the cards. Economist Peter St Onge says the Fed’s move doesn’t make a lot of sense. “With core inflation running at double the Fed’s target, that means the Fed just gave up,” he said. There is also an underlying wariness from some that overinflated prices could turn into a bubble. Crypto prices took a dive on the weekend, with IntoTheBLock noting US$860M (A$1.3T) of Bitcoin had been sent to exchanges in a week, suggesting profit taking. Bitcoin recovered ground, though and finished the week up 2.8% on seven days ago to trade at around A$63,740 (US$42,729), while Ethereum was flat and is trading at A$3,308 (US$2,218). XRP fell 1%, Solana gained 4%, Cardano rose 9%, and Dogecoin fell 3%. The Crypto Fear and Greed Index is at 73 or Greed.

From the IR OTC desk

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For any further information, please feel free to reach out to our crypto OTC desk.

In markets

Bitwise releases a spot Bitcoin ETF ad

Bitwise has yet to even wait for approval, and today, they released the first spot Bitcoin ETF ad. It plays on “The Most Interesting Man in the World” advertising campaign for Dos Equis beer with the tagline: “You know what’s interesting these days? Bitcoin.”  Meanwhile, Grayscale’s CEO Michael Sonnenshein told CNBC that a spot Bitcoin ETF would “unlock” Bitcoin for about “US$30 trillion (A$45T) worth of advised wealth.” However, that figure is currently three times the value of all the funds in all the ETFs.

Other Bitcoin ETF news

Gary Gensler admitted on CNBC that the Grayscale court decision had forced the SEC to take a “new look” at between “eight and a dozen filings” for Bitcoin ETFs. Reports that the SEC is pushing for “cash creation” ETF models to hobble Grayscale’s ETF are incorrect, according to the company. Ark Invest, BlackRock and WisdomTree have refiled their applications as “cash creations” rather than in-kind. Bloomberg ETF analyst Eric Balchunas stated he knows “for a fact ARK/21Shares did NOT want to do cash creations… if they are surrendering, that tells you SEC not budging, the debate is over, which is prob good if you are looking for Jan approval.”

Inscriptions frenzy jacks up gas fees, takes down blockchains

Not content with jacking up fees to US$37 (A$55) on Bitcoin this week, Ordinals or “inscriptions” have now spread to other blockchains and layer 2s, sending gas prices surging to 200 gwei on Ethereum. Users are spending a record US$10M (A$15M) on gas fees per day to mint inscriptions (mainly fungible tokens rather than NFTs) according to Dune. Analyst Eric Wall suggests inscriptions are a speculative gold rush by retail users who are unable to get access to any money-making opportunities other than meme coins. “Degeneracy, uh, finds a way,” he wrote. Inscriptions have slowed down or even stopped chains, including TON, Arbitrum (knocked out for two hours), Avalanche, Cronos, ZKsync and Celestia.

Ethereum will definitely rise… or fall

Ethereum has been losing value against Bitcoin for most of the year, but JPMorgan analysts predict it will outperform in 2024. They expect it will recover market share thanks to the EPI-4844 ‘protodanksharding’ upgrade in the first half of the year, making layer 2 networks more efficient and able to scale up. They also believe the Bitcoin ETF news and halving has already been priced in. However, veteran analyst Peter Brandt has shorted Ethereum, betting that a “classical chart pattern” could see ETH fall by 70%. The SEC has delayed decisions on various Ethereum ETFs, including Hashdex, Grayscale, VanEck, and Ark.

New Ethereum standard

The Ethereum community has approved the ERC-3643 standard for compliant tokenisation of real-world assets like securities, payment systems and loyalty programs. It verifies eligibility for a token via a self-sovereign identity (SSI) framework, which provides anonymous yet verifiable credentials. Former Ethereum upgrades are bearing fruit, too, with the 2021 adoption of EIP-1559 to burn part of the fees, seeing Ethereum’s supply falling under the hard cap of around 120M proposed by cofounder Vitalik Buterin back in 2018, which was rejected by the community.

Ledger vulnerability

Disturbing news this week for Ledger owners. An attacker used a phishing exploit to compromise the computer of a former Ledger employee and uploaded a malicious update to Ledger Connect’s GitHub repo. When DApps upgraded to the new version, they were compromised by the vulnerability. Around US$484,000 (A$722K) was stolen as a result of the upgrade, but Metamask deployed a fix within two hours for users who connect through it.

SEC rejects Coinbase petition

The SEC has rejected Coinbase’s 2022 petition, attempting to force it to create a system of tailored rules for crypto. “The existing securities regime appropriately governs crypto asset securities,” said SEC boss Gary Gensler in a statement. Crypto-friendly SEC commissioners Hester Peirce and Mark Uyeda opposed the SEC’s denial. Coinbase today filed an appeal against the denial, calling it “arbitrary and capricious.”

Bits and pieces

It’s been a decade since the infamous drunken BitcoinTalk forum post where a user inadvertently created a meme by accidentally posting ‘I AM HODLING’. A memecoin frenzy over BONK saw unpopular Solana phones selling out and reselling for US$5,000 (A$7.4K) on eBay as they come with a 30M BONK airdrop each. Tether has confirmed it recently onboarded the US Secret Service to its platform and “is in the process of doing the same with the Federal Bureau of Investigation (FBI).” Bitwise predicts that Bitcoin will hit US$80,000 (A$119K) by the end of 2024 and that stablecoins will be used to settle more volume than Visa. A new accounting rule change in the US means companies can now report when their crypto assets go up in price instead of only being able to record impairments. The change will make it easier for companies to add Bitcoin to their balance sheets.

Until next week, happy trading!