In markets
Crypto has decoupled from stocks in the short term, with a tech stock wipeout midweek, and both the S&P 500 and Nasdaq hitting correction territory of 10% down from recent highs (though both recovered a bit on Monday). Bitcoin appears to have found a new home around the $A54K/US$34K mark and finishes the week up 5% to trade at A$54,350 (US$34,480). Ethereum was up 2.7% on seven days ago to trade around $2,853 (US$1,810). XRP gained 6%, Solana (10.1%), Cardano (9.3%) and Dogecoin (4.5%). Searches for “Buy Bitcoin” surged 826% in the UK in the past week, and billionaire Stanley Druckenmiller, who famously sold his BTC stack in 2022, now regrets the move, saying: “I don’t own any Bitcoin but I should.” The Crypto Fear and Greed Index is at 68, or Greed.
From the OTC desk
BTC volatility has materially accelerated this week, corresponding to a sharp move higher in the underlying price of BTC. Profiled as a near 4 standard deviations move in price (relative to the prior 3 months), the cryptocurrency complex has been buoyed by additional spot US ETF expectations, strong US data and higher forecasts for future US fiscal spending. The ideology of the USD becoming a weaker form of currency has been circling within the cryptocurrency community for a while now – and outsized US deficits continue to fuel speculation and investment into harder forms of currencies, like BTC.
For the cryptocurrency complex, BTC continues to be the dominant pricing leader. The core ETH/BTC ratio is down another 6% on the week to trade at 0.0522. This makes the ETH/BTC ratio 20% lower over the last 6 months and 27% lower year to date! A telling sign of BTC dominance.
In the past, movements in the cryptocurrency complex have broadly been identified in three stages. 1) BTC dominance; 2) ETH dominance (catch-up to BTC); and 3) Alt outperformance. At the current point in time, BTC is dominating the macroeconomic discussion, while advancements in the ETH ecosystem appear slightly muted for the time being.
On the economic front, this week is jam-packed, with both the US Federal Open Market Committee (FOMC) and the Bank of England (BoE) scheduled to opine on their respective monetary policy settings. The FOMC is scheduled to convene on Thursday at 5:00 am AEDT, while the BoE meets on Thursday at 11:00 pm AEDT. Both central banks are expected to maintain their current settings for monetary policy at 5.50% and 5.25%, respectively.
Additional data includes: US employment cost index (Q3), on Tuesday at 11:30 pm AEDT; US job openings (September), on Thursday at 1:00 am AEDT; US manufacturing PMI (October), on Thursday at 1:00 am AEDT; US employment (October) on Friday at 11:30 pm AEDT; US services PMI (October) on Saturday at 1:00 am AEDT.
Last week, the FOMC’s preferred measure for inflation, core PCE (YoY) (September) came in on expectation at 3.7%, versus an August reading of 3.7%. US GDP (Q3) surprised to the upside at 4.9% versus a consensus estimate of 4.3%.
On the OTC desk, things have finally started to stabilise. The last week was particularly chaotic, with a material pickup in Altcoin flow/pricing. For a number of weeks now, we have seen an increase in mid-market token enquiry as the investor gained more comfort in the pricing trajectory of the complex. This was certainly noticeable last week, with much of this inquiry being actioned. To open this calendar week however, Altcoin interest has returned to a much more normal state, with enquiry into BTC and ETH more prominent (for now at least). We continue to see high trading volumes in both USDT and USDC back to AUD – and this has only picked up with USDT/USD trading for a third week above parity.
Continue to watch out for any SEC or US spot ETF-related announcements, as well as any progression in the current Middle Eastern conflict. It is expected that these events can materially affect volatility in the short term.
For any further information, please feel free to reach out to the crypto OTC desk.
In headlines
Happy 15th Bitcoin
It’s the 15th anniversary of the release of the Bitcoin White Paper. Satoshi Nakamoto popped it onto the Cryptography Mailing List of metzdowd.com on Halloween in 2008, writing, “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” The Bitcoin network itself sprung to life on January 3, 2009. While various forms of digital money had been proposed before, Bitcoin was trustless, decentralised and solved the double spending problem while securing the network from attack using proof of work.
Price targets increase
Two weeks of green, and all of a sudden, analysts are getting bullish. Veteran analyst Peter Brandt says he believes “1. The $BTC bottom is in. 2. New ATHs not coming until Q3 2024. 3. Chop fest in the meanwhile.” IntoTheBlock noted that Bitcoin’s market-value-to-realized-value (MVRV) ratio suggests that “Bitcoin is in the early stages of a bull market“. It said bear markets tend to bottom when MVRV drops to 70%, and every time it returns above 100%, it has seen a new bull market form. “By this metric, Bitcoin’s bull market began in January of this year and could have further room to appreciate if it reaches the levels of 300%+ in MVRV seen towards the end of previous bull markets.” Analyst Michael van de Poppe tips that there might be some short term resistance “but most likely we’ll continue towards US$45-$50K (A$71K-A$78K) pre halving” in April next year.
Bitcoin ETF news
The news that BlackRock’s spot Bitcoin ETF had been added to the Depository Trust & Clearing Corp’s website was taken as a sign of imminent approval last week and Bitcoin surged in response. Less well reported was the fact the DTCC later pointed out the ticker has been on the website since August. A subsequent burst of excitement by big accounts like Mike Alfred and Wolf of All Streets that Ark Invest’s Bitcoin ETF has also been added to the list, turned out to be fake news, as they’d confused the Futures ETF ticker with the Spot ETF ticker. However, the other part of the Black Rock story that held up was its amendment to its SEC ETF filing, which said it plans to seed the fund this month. In other ETF news, both VanEck and Valkyrie have amended their applications in light of SEC comments.
Excitement builds
Bloomberg ETF analyst Eric Balchunas noted the (futures product) ProShares Bitcoin Strategy ETF (BITO) traded US$1.7 billion (A$2.7B) in volume last week, the second biggest week since its debut. Grayscales GBTC did $800M (A$1.25B). “That’s $2.5B [A$3.9B] (top 1% among ETFs) into two less desirable methods (vs spot) for exposure = while we think spot ETFs [are] unlikely to set records on DAY ONE, clearly there’s an audience,” he said. In a later exchange, however, he agreed there was still an outside chance the moves toward a Bitcoin ETF could turn out to be a giant rug pull by SEC boss Gary Gensler.
Solana will be worth a lot or a little: Report
VanEck has released a report suggesting that in its base case scenario SOL would be worth US$334.70 (A$525) by 2030 if it grabs 30% market share. However, it could be worth as much as US$3,211.28 (A$5,043) in its bull case scenario if it takes Ethereum’s 70% market share. VanEck suggests this is a possibility due to the planned Firedancer upgrade, which 10Xs capacity and will allow the blockchain to process 1,250 MB/s and potentially host an app with 100M users. VanEck’s bear case for SOL, though, is that it tanks to US$10 (A$15.70), a third of the current price.
Bitcoin Layer 2s event Melbourne
You may have heard of the Lightning Network, Liquid Network, Rootstock and Stacks, but there are many more layer 2’s in Bitcoin’s pipeline of development that you may not have heard of. Register to learn: what are the trade-offs? Who is driving the development? Where are the opportunities for VCs and capital investors? And more.
When: Wed, 8 Nov 5:30 pm – 7:30 pm AEDT.
Where: RMIT Blockchain Innovation Hub. Building 97 Level 2, 106 Victoria Street, Carlton, VIC.
SBF defends himself in court
Sam Bankman Fried took the stand in the fraud case over FTX’s collapse. He argued that FTX’s terms of use covered transactions between Alameda and the exchange and that he’d asked Alameda CEO Caroline Ellison for additional hedging strategies for Alameda in 2021 and 2022 but these had never been implemented. He acknowledged he made “big mistakes” during the exchange’s rapid growth and claimed that he’d only learned Alameda was in the hole for US$8 billion (A$12.6B) in September 2022, having naively believed it was US$10B (A$15.7B) in profit. His attempts to paint himself as a naive victim of circumstance appeared to play well with the jury, according to CoinDesk and certainly impressed the court artist. However, things quickly fell apart under cross-examination by lead prosecutor Danielle Sassoon, who presented him with tweets, emails and interviews in which he claimed FTX was totally safe and solvent … and he said he didn’t recall any of them. In some potentially good news, FTX’s investment in AI company Anthropic has now grown to be worth around US$4 billion (A$6.3B), leading hedge fund manager Travis Kling to speculate FTX now may have assets to pay back customers in full.
Grudging WSJ apology
The Wall Street Journal finally, grudgingly gave in and added a partial correction to its fake news story about Palestinian Islamic Jihad raising US$93 million (A$146M) in crypto and Hamas US$41M (A$64M), when the actual amount was a fraction of that figure. Senator Elizabeth Warren used the incorrect report as the basis of a letter signed by 100 lawmakers calling for a crackdown on crypto financing terrorism. She showed no signs of backing down despite the data being wrong: “Crypto lobbyists are trying to minimize the role of crypto-financed terrorism,” she said.
Charting a course to victory
Two interesting charts started doing the rounds on Crypto X this week. In the first, shared by Miles Deutscher and others, Bitcoin’s price action since 2021 maps almost exactly onto the famous “Psychology of a market cycle” chart, suggesting we are in the “Disbelief” stage right now ahead of a bull run. In the other, Real Vision founder Raoul Pal showcased how Bitcoin has risen and fallen since 2013 alongside the global M2 money supply — and it’s rising right now.
Until next week, Happy Trading!
