In markets
Back in the day, the merest rumour of a PayPal stablecoin would have ushered in a mini bull run, but in this era of SEC-induced uncertainty, it barely nudged the dial. Glassnode analyst Checkmate notes the spread between the upper and lower Bollinger Bands is just 2.9% — the third lowest volatility since 2015. Traders are so bored they’re pumping money into a meme coin called HarryPotterObamaSonic10Inu. Macro trends could be bad for Bitcoin, however, with Michael ‘The Big Short’ Burry opening his biggest leveraged short positions since his famous 2008 recession prediction. Bitcoin finishes the week flat at $45,410 (US$29,437), while Ethereum gained 1% to trade at $2,845 (US$1,844). Cardano was flat, while Ripple (1.6%), and Dogecoin (1.8%) moved a little, and Solana increased 9.4%. Tether has been trading a fraction below its $1 US peg for a few weeks now, which is slightly concerning. The Fear and Greed Index remains at 50 or neutral.
From the OTC desk
Short-term volatility in both BTC and ETH has continued to remain suppressed. For the last few weeks, we have highlighted ‘out sized’ mid-market BTC and ETH option trading activity – which began early last month.
There are two important aspects of this flow to consider: 1) Delta hedging of long call positions would likely cause BTC and ETH sell-side pressure, and 2) Any ongoing delay by the SEC in making a spot ETF decision (as is the current outcome of most recent ARK21 Shares submission), will naturally affect the perceived ‘value’ of open option maturities. This has an ability to ‘step’ volatility – keeping the market well anchored in the near term, while expectations for pricing changes may increase for mid-curve expiries. This is somewhat technical but an important aspect of the current market dynamic.
Last week’s US inflation report highlighted stubbornly high core inflation – which printed at 4.7% (YoY) (July), relative to 4.8% (YoY) (June). Headline inflation YoY picked up from 3% (YoY) (June) to 3.2% (YoY) (July). While market commentators generally asserted that the fall in US core inflation would see the Federal Open Market Committee (FOMC) remain on hold, the next meeting isn’t scheduled until the 20th of September. Before this date, we will receive US PCE inflation on the 31st of August and the August CPI print on the 13th of September.
In Australia, today has delivered the quarterly wage price index data (Q2), which printed below consensus at 3.6% Q2 (YoY) versus 3.7% in Q1. The quarterly wage price index data is one of the most significant data points for the Reserve Bank of Australia (RBA). The RBA has consistently referenced how they are monitoring the historically tight labour market and how the low unemployment rate will translate into domestic inflation pressure. Thursday the 17th August, at 11:30am delivers the July unemployment series – another key data point.
In FX markets, the AUD/USD continues to remain under pressure – currently trading at circa 0.6500 USD. This is near 1% lower on the week, and reflects the change in the tightening bias from the RBA (to now on hold), as well as softening inflation, growth and lending data in China. Today, the People’s Bank of China (PBoC) has cut the 1-year Medium Term Lending facility by 15bps, down to 2.50%. For the time being, this has buoyed AUD/USD due to the market’s expectation of further stimulus.
On the OTC desk, stable coin conversion back to AUD continues to increase. This is particularly evident in USDT/AUD, which remains the most actively traded pair across the desk. USDT/USD appears to now exhibit pricing driven by geography. It is quite common during the Asian session to see USDT/USD significantly closer to the 1:1 USD ‘peg’ than at the session’s end. We broadly wait for more clarification on the spot BTC ETF submissions – along with the rest of the market.
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In headlines
Bitcoin ETF decision delayed
As expected, the SEC has kicked the can down the road once again by delaying a decision on the ARK Invest Bitcoin ETF. It can delay until January, but if Grayscale’s appeal of the SEC’s refusal of its spot Bitcoin ETF application is successful, some pundits believe the SEC may approve all eight of the other Bitcoin ETF applications at once. Ruslan Lienkha, chief of markets at YouHodler told Cointelegraph that: “The SEC’s main concern about spot crypto ETFs is about the potential market manipulation by a big whale… if it decides to register all eight ETFs, it will sharply mitigate the probability of manipulation, because these firms will be able to trade with each other frequently, taking opposite sides.”
Grayscale decision imminent?
A decision on Grayscale’s appeal could be imminent, according to finance lawyer Scott Johnsson who notes that more than 90% of comparable cases had decisions within 160 days of oral arguments and that we’ve just hit the 160-day mark. Bloomberg ETF analyst James Seyffart said his “educated guess” for a decision is August 15.
Support pours in
Half the crypto organisations in the world seem to have filed amicus (friend of the court) briefs in the SEC’s case against Coinbase for trading in unregistered securities. Senator Cynthia Lummis filed a brief stating that Congress has not given the SEC power to regulate crypto, and six securities law professors from Yale, the University of Chicago and elsewhere ripped into the SEC’s contention that tokens are “investment contracts.” Many of the briefs cited the recent Supreme Court “major questions doctrine” decision related to the EPA that prevents regulatory agencies from exceeding their mandate without Congressional approval. However, Terraform case Judge Jed Rakoff rejected that line of argument recently on the grounds the crypto industry isn’t significant enough to meet the precedent.
SBF behind bars
FTX and Alameda Research founder Sam Bankman-Fried is back behind bars after a judge revoked his bail for tampering with witnesses. The straw that broke the camel’s back was SBF providing the New York Times with the diaries of Alameda CEO and prosecution star witness Caroline Ellison. The DOJ has also just added a new indictment accusing him of using misappropriated client funds to donate US$100 million (A$154M) to candidates in the 2022 midterm elections.
SEC appeals Ripple decision
The SEC has filed an application for an interlocutory appeal against Judge Analisa Torres’s decision in the Ripple case that programmatic sales of XRP on exchanges are not securities. The SEC highlighted “substantial ground for differences of opinion as reflected by an intra-district split that has already developed”, referring to the judge in the Terraform case disagreeing with Torres’s reasoning.
Fed makes it harder for banks to use crypto
The US Federal Reserve is making it more difficult for banks to get involved with crypto firms, issuing guidelines under its new Novel Activities Supervision Program aimed at limiting crypto-related activities. It’s not an outright ban, and the Fed claims it wants to balance innovation with risk management to ensure the safety and soundness of the banking system.
Bullish ETH news
Placeholder VC Chris Burniske points out that Ethereum fees climbed 176% this year, while the price nudged up by just 53%. “The relationship between the two was instructive for the last bull market when fees outpaced price in 2020 after a two-year decline,” he said. Burniske also noted that active layer 2 addresses have jumped by 245% in the past 12 months and estimated that fees from L2s will account for 20% of Ethereum’s total fee haul within 12 months and 50% within three years.
Bullish cycle news
Delphi Digital cofounder Kevin Kelly argues we are in the early stages of a new Bitcoin cycle, on our way to a new all-time high in the fourth quarter of next year and a new cycle peak at the end of 2025. He says the Bitcoin halving will play a role, but also argued the relationship between the Bitcoin price and macro factors, including the ISM Manufacturing index, shows a new cycle is underway.
Bits and pieces
Controversial Libertarian Bitcoiner Javier Milei has become the favourite to win Argentina’s Presidency, having scored one-third of the vote in the primary this week. Visa’s blockchain team has unveiled a new way for users to pay for gas fees using a credit card rather than native tokens. Major crypto publication CoinDesk has laid off 45% of its editorial staff as it gears up for a reported sale. A US judge realised his previous decisions about 3AC founder Kyle Davies were wrong due to Davies renouncing his US citizenship and becoming a citizen of Singapore. Crypto sceptic and former President Donald Trump holds up to US$500,000 (A$771K) in Ethereum. Former SEC official John Reed Stark says a Republican victory in the 2024 election will see the war on crypto end. SEC boss Gary Gensler will be replaced by a more favourable candidate, such as Crypto Mom SEC Commissioner Hester Pierce.
Until next week, Happy Trading!
