In Markets
Crypto markets held a Black Friday sale when they tanked AU$280B (US$200B) late last week along with share markets on fears of a scary new variant from Omicron Persei 8. Crypto Twitter immediately flipped the switch to suicidal and the Crypto Fear and Greed Index plunged to Extreme Fear, even as an obscure ‘Omicron’ token gained 900% (before crashing of course). Markets have since recovered with Bitcoin finishing the week flat at just under AU$81,000 (US$57.8K). Ethereum’s up 5% on seven days ago to just above AU$6,200 (US$4.4K) but Cardano fell 12%, Ripple lost 7%. And it wouldn’t be a BTC price dip without news that Microstrategy had bought an additional 7,002 Bitcoin at an average price of AU$82,821 (US$59,187), bringing its total stash to 121,044 BTC. Quantum Economics founder Mati Greenspan warns the volatility likely isn’t over just yet: “The over-exuberant recovery Bitcoin experienced once that fear subsided is of little consolation, as we can now see that the digital currency is clearly vulnerable to a stock market panic.”
From the IR OTC Desk
Following on from the announcement that Jerome Powell (the Chair of the US Federal Reserve), will continue for another four-year term, economists are reviewing their prior tapering and interest rate forecasts. Of significance to the market, was last week’s release by Goldman Sachs Chief Economist Jan Hatzius, who mentioned Goldman are now expecting the Fed to announce at its December meeting that it is doubling the pace of asset purchase tapering to US$30bn per month, starting January: and that this increase in speed would allow the Fed to consider a rate hike as soon as March. Goldman has now brought forward an additional rate hike expectation into their calendar 2022 forecast, and are currently expecting three rate hikes in 2022, beginning June. These forecasts are always subject to market conditions.
The Reserve Bank of New Zealand (RBNZ) have continued to tighten monetary policy delivering their second 0.25% rate increase, to take the current cash rate to 0.75bps. Current cash rate projections from the RBNZ could see an additional seven rate increases from the Bank before the Reserve Bank of Australia forecast rate lift-off in 2024.
On the OTC desk this week, flows have been strongly skewed to the sell side. While the profit taking theme has generally continued in the majors, balancing flows have failed to eventuate this week. Interest in stable coins have also reduced, despite USDT maintaining a premium to USD for the majority of the week.
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In Headlines
Hip to be Square
Twitter CEO Jack Dorsey stepped down from his role today, handing the position over to CTO Parag Agrawal. Although Dorsey’s announcement made no mention of Bitcoin, he’ll now have more time to focus on payments company Square, which at AU$140B (US$100B) is worth more than twice as much as Twitter and is decidedly crypto-friendly. Dorsey has previously said that he doesn’t think “there is anything more important in my lifetime to work on” than Bitcoin and Square’s TBD last week released a white paper for a Bitcoin DEX. Interestingly there are unconfirmed rumours today that Twitter is experimenting with enabling Ethereum payments.
Bizarre Bitcoin case heads for judgement
The jury is on the verge of a verdict in the case between Australian Craig Wright and the Kleiman estate over potentially hundreds of billions of dollars’ worth of Bitcoin and Bitcoin related IP. Regardless of the outcome, none of the 25 questions the jury is considering relate to whether Wright really is Satoshi.
India to ban crypto again
India’s on-again off-again flirtation with banning crypto is back on, with ‘The Cryptocurrency and Regulation of Official Digital Currency Bill’ being introduced to Parliament this week. It proposes to outlaw all “private cryptocurrencies” in order to support the establishment of a CBDC. However Rohit Kundliwal, marketing manager at WazirX exchange downplayed fears of an outright ban in a LinkedIn post, noting the wording in the new bill “seems to be a copy-paste error from the last document” and that “Shri Narendra Modi, Nirmala Sitaraman, Finance Ministry and many prominent and sane politicians have told multiple times that there will not be a blanket ban on crypto.” Finance Minister Nirmala Sitharaman said on Monday the government does not plan to recognise Bitcoin as a currency.
Cardano gets the boot
Retail trading platform eToro announced this week it’s delisting Cardano and Tron by the end of the year citing regulatory concerns. While Tron doesn’t have the greatest reputation, ADA was a surprise because it hasn’t had issues like this before and has been working on improved compliance by partnering with blockchain analytics provider Confirm. Cardano has lost 50% since September but founder Charles Hoskinson blamed the FUD on Ethereum proponents who “are terrified because there doesn’t need to be some magical Cardano 2 to survive. It’s a future proof design.”
1 million Ether burned
Since the London hard fork went live, more than 1 million Ether has been burned, with NFT platform OpenSea and decentralised exchange Uniswap responsible for around 10% of the total each. Around 10,000 Ether is burned each day, and the asset is more than half of the way toward going deflationary. While burning so much Ether is good for the supply, the excessive gas fees that are responsible aren’t great for users of the network. Ethereum’s creator Vitalik Buterin this week proposed EIP-4488 which would set a new limit on the total transaction calldata in a block in a bid to rein in fees. BitMEX research summed it up memorably saying “Looks like Ethereum may soon effectively have a 1MB blocksize limit!”
DeFi grows and grows
The number of unique addresses that have ever interacted with a DeFi protocol has topped 4 million. The most popular protocol is Uniswap which has been used by 3 million unique addresses, while SushiSwap, Compound, Aave, Balancer, and MakerDAO have user bases around 300K. Total value locked in DeFi climbed to a new record high of US$276.92B on November 9. Separately, new data shows that 81% of Ethereum 2 Beacon Chain nodes are based in either North America or Europe.
Total volume traded on decentralized exchanges. Source: Token Terminal
Metaverse a trillion-dollar opportunity
Grayscale released a report on the Metaverse this week and the upshot is they’re extremely bullish and are predicting it’ll be worth US$1 trillion (AU$1.4T) within a few short years. They pointed to the 10X growth in active Metaverse wallets since the start of 2020 as evidence. Sure, there are still only 50,000 active users but “if current growth rates remain on their current trajectory, this emerging segment has the potential to become mainstream in the coming years.”
Digital pound CBDC comes closer to fruition
The Bank of England is exploring options to implement a digital pound CBDC for retail payments. A group behind the CBDC is looking at the potential use cases for distributing payrolls, pensions, etc utilising the technology. Deputy governor for financial stability, Sir Jon Cunliffe, stated that “we are starting to see programmable money being used in the crypto world. And I would expect we would see a similar revolution in the functionality of money driven by technology.” On the potential public use of this CBDC, Sir Cunliffe said, “we’ve modeled a very prudent assumption, which is that basically 20% of [household and corporate transactional] deposits based in the banking system could move out of the banking system and into central bank digital money.”
Aussie retirement fund eyes crypto
With $46.8 billion worth of assets under management and over 1.8 million members, Rest Super is set to become the first retirement fund in Australia to invest in cryptocurrency. “It’s still a very volatile investment, so any allocation exposure we make to cryptocurrencies is likely to be part of our diversified portfolio,” said Rest Super CIO Andrew Lill. During Rest Super’s annual general meeting, Lill also told members that the company sees digital assets as an “important part” of its portfolio moving forward and “in an era of inflation, it could be a potentially good place to invest,” he said. The firm is currently conducting extensive research into the asset class before making any decisions, considering both the security and regulation.
Until next week, happy trading!
