In markets

The resurgence of confidence from BlackRock filing a Bitcoin ETF application is starting to level out, with Bitcoin mostly trading between US$30K and US$31K since June 24. It finishes the week down 2.4% at US$30.4K, while Ethereum is down 4% on this time last week at US$1,879. There weren’t many big moves: Ripple (-3%), Cardano (-2%) and Dogecoin (-4.2%), but Solana gained 10%, and Polygon increased 3.4%. The Crypto Fear and Greed Index is at 56, or Greed.

Crypto market update 20230711

From the OTC desk

The most critical data this week has been China’s inflation report for June, which highlighted a YoY inflation rate of 0% and a monthly reading of -0.2% for June. This begs the question for macroeconomic markets; have we reached a peak in underlying cash rates? For countries with an aggressive approach to monetary policy tightening, like New Zealand, this seems most likely the case. In places like Australia and the UK, perhaps more work must be done. Importing disinflation from China could be the next challenge for bond markets, which are forward-looking.

Last week we highlighted that the US 2yr versus 10yr US Treasury Bond spread had moved to a near historically wide (inversion) of -108bps. This week, we have seen this spread flatten back to circa -86bps. This has occurred while both the two-year and ten-year treasury yields both dropped on the week – to now trade at 4.86% (two-year) and 4.00% (ten-year). 

US labour market data has remained resilient, with the unemployment rate falling back to 3.6% in June, relative to 3.7% in May. Average hourly earnings surprised to the upside, printing a 4.4% increase YoY versus a market expectation of 4.1%. The most recent rhetoric from the Federal Open Market Committee (FOMC) has highlighted the ongoing challenge of returning price growth to the 2% target due to the strength of the labour market and the associated wage inflation. This data point validates the current FOMC communication.

This week we received US inflation data for June. Scheduled for release on Wednesday at 10:30 pm AEST, core inflation for June (YoY) is currently forecast to have risen 5% versus a prior reading in May of 5.3%. Assessment of the underlying details will prove key, with services inflation, excluding housing, food and energy (the super core measure), being given additional weighting by the FOMC. 

In Australia, there is yet to be an announcement for the Reserve Bank of Australia Governor’s role – This could hit the wires at any moment. This week we will hear from incumbent Governor Philip Lowe on Wednesday at 1:10 pm (AEST). It is expected that the Governor will address Australia’s current monetary policy landscape and may provide some additional market clarity or forward guidance on the expected path of the cash rate.

On the OTC desk, the cryptocurrency market has remained positive (the ‘BlackRock effect’), despite negative price action in the critical tokens of BCH, LTC, BTC and ETH. USDT and USDC trading volumes have remained light (relative to history), with interest levels in alts also being fairly limited. Generally, the theme of BTC buying has remained as the market continues to track the growing TradFi institutional adoption. 

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

In headlines

Larry Fink loves Bitcoin

BlackRock CEO Larry Fink’s long journey from Bitcoin hater to Bitcoin true-believer culminated in an appearance on Fox Business where he said Bitcoin is “digitizing gold”. Back in 2017, Fink thought Bitcoin was “an index of money laundering“, but now he says: “Bitcoin is an international asset… We do believe that if we can create more tokenisation of assets and securities – that’s what Bitcoin is – it could revolutionise finance.” He was unable to shed any light on the progress of BlackRock’s Bitcoin ETF application however: “We hope that, like in the past, we could be working with our regulators and get the filing approved one day, and I have no idea what that one day will be, but we’ll see how that all plays out.”

Love for Bitcoin

Bitcoin ETF no big deal?

JPMorgan has thrown cold water on speculation that a Bitcoin ETF approval would surge the Bitcoin price. Strategist Nikolaos Panigirtzoglou wrote that a Bitcoin ETF would only be a game changer as such products have existed in Canada and Europe for years with large inflows. In Australia, the fledgling crypto ETFs were shuttered around the time of the FTX collapse. Meanwhile, Grayscale has questioned the SEC’s recent approval of a leveraged Bitcoin futures ETF, stating it is “even riskier” than a normal Bitcoin Futures ETF product. Grayscale is challenging the SEC’s refusal to grant its application to turn its Bitcoin Trust (GBTC) into an ETF. The GBTC discount per share to its underlying Bitcoin assets has narrowed to 27.49%.

Bounty marketplace for onchain intel

Arkham Intelligence has started a controversial bounty marketplace to enable people to buy and sell crypto on-chain “intel”. The platform lets users post bounties for sought-after data, which blockchain sleuths can go off and find out to pick up the reward. Privacy advocates hate the idea.

DAO investigated

The SEC is reportedly investigating the Barnbridge DAO, according to project lawyer Douglas Park. He was unable to reveal further details as the investigation is ongoing, but all activity on the cross-platform defi project has had to stop.

Coinbase seeks to dismiss SEC lawsuit

Coinbase seeks to dismiss the SEC’s lawsuit against it for trading in unregistered securities by arguing “the subject matter falls outside the SEC’s authority”. Coinbase’s lawyers noted that SEC boss Gary Gensler testified to Congress back in 2021 that “there is not a market regulator around these crypto exchanges” and “only Congress” could confer authority to regulate crypto exchanges. The SEC meanwhile says Coinbase knew it was violating the law.

Crypto startups not starting

The monthly number of new crypto startups is down 98% since early 2022 and at the lowest level in a decade, according to a Brookings analysis of Crunchbase data. However, the Brookings report shows crypto job postings remain relatively high at around 2021 levels, so things aren’t as dire as some make out. TechCrunch reported this week that venture capital funding for crypto projects had dropped for the fifth consecutive quarter since 2022, with US$2.34 billion raised across 382 crypto deals in the first quarter of this year.

ETH creator praises Bitcoin builders

Ethereum creator Vitalik Buterin has revealed he’s a fan of Ordinals NFTs and tokens which he says brought a “return to builder culture” to Bitcoin and is a “real pushback to laser-eyed maximalism.” He also said that Bitcoin needs to embrace layer 2 scaling technology. If Bitcoiners want to expand beyond payments, he said, “It will need scaling options like Plasma or ZK Rollups.” 

bitcoin builders

Everybody claims everybody owes them billions

Remember the apparent slow-motion collapse of Digital Currency Group? Things settled down for a while, but now US exchange Gemini is suing DCG and its CEO Barry Silbert for US$1.5 billion, claiming “fraud against creditors.” Gemini’s Earn program was halted in November 2022, with DCG’s crypto lender Genesis owing US$900 million to the exchange’s customers. This week, Gemini co-founder Cameron Winklevoss wrote an open letter claiming that Silbert knew Genesis was “massively insolvent” while accepting new funds. DCG has labelled the claims defamatory.

Meanwhile, Three Arrows Capital’s liquidator is reportedly considering claiming back US$1.2 billion from DCG and crypto lender BlockFi. And if that wasn’t enough, the new management of FTX claims that Genesis owes it US$3.9 billion. DCG had around US$5B assets under management at the end of last year so any successful claim would have a huge impact. 

Bitcoin price predictions revised up

Standard Chartered, one of the world’s biggest banks, has revised up its already optimistic Bitcoin price prediction to US$50K by the end of the year and US$120K by the end of 2024 (previously it had tipped US$100K. It said miners have been selling 100% of coins of late but tipped they will reduce sales by two-thirds after Bitcoin crosses US$50K, which would spur the price to greater heights. Former Bitmex CEO Arthur Hayes is looking even further ahead, saying that as Bitcoin is “the logical currency choice for any AI”, the coming AI revolution will see a “peak of deranged growth investing” around 2025 to 2026 which could see the BTC price hit US$760,000 per coin.

Until next week, happy trading!