In Markets
After a big surge yesterday, and another one this morning, Bitcoin is officially in all-time high territory again against USD, AUD, SGD, and NZD. The price is up 7% in 24 hours, and 9.5% on the week. Analyst Rekt Capital has just posted a chart suggesting a blistering end to the year: “One final resistance left before #BTC enters its parabolic phase of the cycle.” Ethereum cruised on through to hit a new all-time high of AU$6,503 (US$4,822) a few hours ago and is currently trading up 8% on the same time last week at AU$6,480 (US$4,800). Cardano was up 6%, XRP gained 14%, Polkadot (4%). The Crypto Fear and Greed Index is at 75 or Greed.
From the IR OTC Desk
In an incredibly busy week for central bank activity, the Reserve Bank of Australia (RBA) moved away from their specific language that the first interest rate increase would be in Q1 2024 – replacing this forecast with a statement concluding that ‘it is now also plausible that a lift in the cash rate could be appropriate in 2023’, subject to developments in the labour market, wage growth and inflation. They have maintained their bond purchase program until at least February 2022, however, have dropped the specific bond yield target for the April 2024 expiry. Live pricing continues to have between 75bps and 85bps of hikes priced in for calendar 2022, reduced from circa 100bps of hikes pre-meeting. This pricing seems to have been maintained, largely due to a 0.50% increase to the RBA’s 2022 core inflation forecast. AUD/USD has tracked almost 1c lower on the week to settle towards 0.7415 at the time of writing. Domestic event risk includes the September unemployment print due Thursday.
At their 3rd November meeting, the US Federal Open Market Committee confirmed that they will be tapering their bond purchase program, reducing Treasury purchases by $10bn and MBS by $5bn, beginning late November. In the first instance, this will reduce QE from $120bn per month to $105bn per month, before stepping down again in December. On the employment front, US non-farm payrolls increased 531k in October, taking the unemployment rate to 4.6%. Additional positive revisions for September (+312k) were also positively received by the market. Expect the market to pay close attention to the US CPI release mid-week.
On the OTC desk this week, the bullish sentiment has continued to drive a high volume of inquiries. In general, we continue to see structural buying interest in ETH, and opportunistic profit taking in BTC. Last week we mentioned that the broad sentiment felt like a holding pattern, as the market seeks its next directional move. As we now make new all-time highs, we continue to monitor the ETH/BTC chart for any clues on relative asset direction and strength.
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In Headlines
Bigger than Facebook
The total market cap of all cryptocurrencies is around US$2.9 trillion / AU$3.9T. Bitcoin’s latest surge has pushed its market cap to US$1.25T/AU$1.7T, which makes it the sixth most valuable asset by market capitalisation, ahead of Tesla and Facebook and catching up fast to Amazon. Ethereum has been racing up the ranks this year too, and is now at number 12, ahead of JPMorgan, Visa and Tencent, and just behind Taiwan Semiconductor Manufacturing and Berkshire Hathaway.
Source: Assetdash.com
Another massive week for adoption in Australia
The Commonwealth Bank is rolling out crypto trading to the 6.5 million Australians who use its app. The service is starting as a trial in the next few weeks, but eventually anyone who banks with CBA will be able to buy and sell 10 different cryptocurrencies. The move is a partnership between CBA, US exchange Gemini and Chainalysis, who have just opened an Australian office.
Other banks to follow
Blockchain Australia CEO Steve Vallas told Cointelegraph that CBA’s move means that it’s only a matter of time before the other major Australian banks offer crypto trading too. “It is inevitable that the other banks will follow suit,” he said. Speaking at the Singapore Fintech Festival, former Citigroup CEO Vikram Pandit also hinted that most large banks will consider offering crypto trading services in the next one to three years.
Crypto ETFs shatter records
The first crypto company ETF on the Australian Securities Exchange shattered records within minutes of launching last week. Betashare’s CRYP broke the previous debut volume record of $8 million within the first 15 minutes, and went on to take $42 million by the end of the day. The ETF invests in companies with significant crypto exposure like Microstrategy, Coinbase and Riot Blockchain. Interestingly, Grayscale has just filed for a similarly themed ‘Future of Finance ETF’ in the US. Over on ASX-competitor Chi-X a crypto mining company ETF, Cosmos Asset Management’s DIGA, saw the best five-day performance of any ETF across all exchanges on its debut, with a 25% return on a listed price of $5. Spot Bitcoin and Ethereum ETFs are expected to launch on the ASX soon.
Infrastructure Bill passes
The US$1.2 trillion Infrastructure Bill has passed the US House of Reps. The bill still contains a vague definition that could mean software devs and miners are considered brokers and need to comply with strict reporting requirements – although there is scope for Treasury to narrow the interpretation down a bit. The bill also changes the definition of “cash” to include crypto, meaning that any transaction over US$10K (AU$13.5K) must be reported on threat of criminal penalties. Coincenter’s Jerry Brito says that may be unconstitutional and if left unamended, they will challenge it in court. The good news is the crypto provisions don’t take effect until Jan 1 2024 meaning there is time to pass amendments.
Bits and pieces
Square’s Cash App Bitcoin profits in quarter 3 fell by 23%, although revenue and profit were up year on year. Bitcoin revenue reached US$1.82 billion (AU$2.45B), while gross profits on Bitcoin hit $42 million (AU$56.6M), representing 11% and 29% year-over-year increases. Cash App is now throwing open its doors to teenagers over 13. New York’s new Mayor Eric Adams loves crypto: he has announced he will take his first three pay cheques entirely in Bitcoin and called on local schools to teach kids about the subject. According to an analysis of halving cycles by Ecoinmetrics the BTC price has already grown 7.3 times since the May 2020 halving and if history repeats the price action won’t stop until it’s 30 times higher. That means the next peak could be as high as US$254K (AU$342K) for Bitcoin and $22K (AU$30K) for Ether. If a crash repeated itself like last cycle, Bitcoin would bottom out around $42K (AU$56.6K) and Ether would crash to $1,347 (AU$1,814K).
“The path of most pain”
Former Goldman Sachs hedge fund manager and Real Vision founder Raoul Pal believes that the market cycle won’t find its finish line at the end of the year as per previous cycles. Yet, an extended cycle to at least March or June, with a sell-off sometime in between. His reasoning? Because “markets tend to take the path of most pain”.
Throughout 2021, Pal has openly described Ether as “the greatest trade”. The upcoming launch of Ethereum 2.0 and an ETH ETF in possibly the first half of 2022, could be the catalyst needed for this extended rally. This will likely bring on the extra interests of large institutions, noting that “institutions tend to make asset allocation decisions by quarters” leading to this “huge inflow”. Pal also refers to the current ETH 2.0 staking, low 11% exchange supply which cumulatively is causing this “incredible supply and demand imbalance”.
Until next week, happy trading!
