In Markets
Bitcoin began to show signs of life a few days ago after futures markets suddenly began to reflect a 47% chance the US Federal Reserve will cut rates by 50 basis points. While cuts are usually a good thing for risk assets, there are concerns the cuts might indicate the Fed foresees trouble ahead. Senator Elizabeth Warren has even called on the Fed to make a 75 BPS cut to avoid a recession. Bitcoin reversed the week’s gains in the past day or so as macroeconomic worries came to the fore, including concerns about China’s slowdown. Bitcoin finished the week up 0% to trade around A$85,824 (US$58,122), while Ethereum finished 5% down on the same time last week to trade at A$3,370 (US$2,284) as bearishness about the L2 roadmap continues. Solana fell 5% (daily fees are now around A$216K/US$146K from a high of A$7.5M/US$5.1M in March), XRP gained 6%, Dogecoin fell 4.1% and Cardano (-4%). The Crypto Fear and Greed Index is at 33, or Fear.
From the IR OTC Desk
This week delivers the September meeting for the US Federal Open Market Committee (FOMC) (Thursday 04:00am AEST). Pricing has now flipped to a near 70% chance that the FOMC will reduce the federal funds rate by 50bp and a 30% chance that the FOMC will make a 25bp reduction. The term ‘jumbo’ has previously been used by FOMC Chair Jerome Powell for hikes of 50bps or more. It seems appropriate that a cut of 50bps would also correspond with this line of thought.
The relevance for the market is huge – a reduction to the federal funds rate would be the first since March 2020! And if a 50bps reduction were to occur, the federal funds target band would sit at 4.75%-5.00% (or 5.00%-5.25% for a 25bp reduction). What is striking nonetheless, is that the war on inflation is being called somewhat over by the Committee. Any delivery of a rate cut will cement the most recent Jackson Hole rhetoric that the current levels of labour market slack are not inflation producing. This can mean a structurally lower interest rate hurdle going forward.
Thursday’s decision will also be a critical event for risk assets and cryptocurrencies. With a lower borrowing rate, the cost of carrying risk assets is immediately reduced – which should benefit non-interest earning assets or lower interest earning assets. It will also give some immediate cash flow relief on variable rate loans, allowing for a small bump in aggregate demand and discretionary spending. For now, no other data really matters this week, so watch carefully!
In Australia (AEST)
- Thursday 11:30am AU Employment (August)
In the US (AEST)
- Tuesday 10:30pm US Retail Sales (August)
- Thursday 04:00am FOMC Interest Rate Decision
- Thursday 04:30am FOMC Press Conference
In New Zealand (AEST)
- Thursday 08:45am NZ GDP (Q2)
On the OTC desk, ETH/BTC is trading below 0.04, continuing its downtrend. While we have seen some activity to trade layer 2 tokens, the broader market remains in a state of wait and see. During these periods of contentment, the OTC desk volumes remain dominated by stable coin flow. Interestingly, we continue to track stable coins on ETH verse SOL. With SOL remaining a development platform of high utility projects and meme coins, could the next growth corridor be as a protocol for stable coins projects? The market seems to be pushing in this direction. Watch BTC around the FOMC decision.
For any further information, please feel free to reach out.
In Headlines
Biggest IR contingent at Token 2049 ever
The Independent Reserve team will be at Token 2049. Drop by our space at Marina Bay Sands, Level 5 Booth M23 or reach out to one of our friendly folks for a coffee chat or discuss potential partnership opportunities.
Lasanka Perera named thought leader for 2024 by Robb Report Singapore
Lasanka Perera, CEO of Independent Reserve Singapore, has been named a Thought Leader for 2024 by Robb Report Singapore, recognising his contributions to the cryptocurrency industry and positive impact on the community. This accolade places him among a group of visionaries driving progress in their fields, highlighting his leadership and commitment to meaningful industry dialogue.
Microstrategy buys another billion
Microstrategy has bought an additional 18,300 Bitcoin for US$1.1 billion (A$1.4B), taking its holdings to 244,800 Bitcoin worth US$14.6B (A$21.7B). The buys were made between August 6 and September 12 for an average price of US$60,408 (A$90K). The company has just announced that it is raising another US$700 million (A$1B) to pay down debt and buy even more BTC. As an aside, Elon Musk’s SpaceX still holds 8,285 Bitcoin worth half a billion dollars.
Ethereum Pectra upgrade split in twain
The Ethereum all core devs call on September 12 debated splitting the Pectra hard fork into two, so they can ship the code changes ready by February next year. Ethereum improvement proposals that currently look good on testnet and are earmarked for the first of the hard forks include EIP 2537 (ZK cryptography), 2935 (enabling proofs of historical blocks to be generated from the state) and 7685 (coding, testing and implementing triggered requests). However, it’s EIP 7702 that’s likely to get all the attention. Proposed by Vitalik Buterin, this appears to be a one-click upgrade to transform users’ existing Ethereum accounts into smart accounts (aka account abstraction) making them a lot more powerful thanks to additional functionality.
2 years since The Merge
To celebrate the second anniversary of The Merge – which saw Ethereum reduce its power consumption by more than 99% by moving to Proof of Stake – the ETH/BTC ratio fell below 0.04 for the first time since April 2021.
Bridging assets is likely a CGT event in Australia
With tax time coming up, it’s worth highlighting that the Australian Tax Office guidance from November last year suggests that capital gains tax needs to be paid every time users send tokens via a bridge (and in various other scenarios). “Most tokens have different contract addresses on different blockchains, so bridging a crypto asset is likely to be viewed as swapping between two independent CGT assets,” said Marc Phillis, director of Cryptocate. There’s yet to be a public ruling on this guidance, so users with deep pockets and good lawyers may be able to challenge it.
Bhutan hodling
Arkham Intelligence claims to have identified the Royal Government of Bhutan’s wallet, which it says holds US$780 million (A$1.15B) worth of Bitcoin. Unlike other countries, which mainly hold Bitcoin seized from criminals, the Kindom’s investment arm, Druk Holdings, has been mining Bitcoin itself.
Polymarket the winner of the election
Pro-crypto US Presidential candidate Donald Trump’s odds of winning the election fell 3% on Polymarket during his debate with Kamala Harris. Polymarket is essentially a sentiment gauge, of course, but the crypto-based protocol has been the big winner this election cycle, with around US$900 million (A$1.34B) bet on the outcome so far. One user even won US$10K (A$14.9K) by betting that Trump would mention that cat-eating rumour. Trump briefly pulled ahead of Harris as news broke of a second assassination attempt, but both candidates are now on 49%! Meanwhile, the Commodities Futures Trading Commission is appealing its loss in a case to block another prediction market called Kalshi from offering election markets, saying they are vulnerable to manipulation.
UK government defines crypto
The new Labour government in the UK has introduced a bill touching on the legal status of crypto, NFTs, and tokenised real-world assets. The bill clarifies that digital assets are considered personal property under British law, giving lawyers guidelines to follow when there’s a dispute over ownership, such as during divorce proceedings. The bill also protects users and companies ripped off by fraud and scams.
SEC misspoke about ‘crypto assets securities’
The SEC has quietly retired the term ‘crypto asset securities.’ Buried in a footnote to its amended complaint against Binance, the SEC’s lawyers said it has never meant the tokens themselves were securities (despite saying that XRP was a security in the Ripple case). Still, it used the term holistically to refer to “the full set of contracts, expectations and understanding centred on the sale and distribution of the (token).” Crypto lawyer Jake Chervinsky called the assertion “gaslighting” while Coinbase legal officer Paul Grewal said, “the United States government misrepresenting themselves to a Court in this way is something I’ve never seen in 28 years in the law.” In the amended complaint, the SEC expanded its claims against Binance to include tokens like Axie Infinity, Filecoin and Cosmos being sold as securities.
Etoro settlement
Ironically the SEC used the term ‘crypto asset securities’ eight times in the eToro settlement order it issued on the same day that clarification came out. Etoro – which also trades shares and other assets – agreed to pay US$1.5 million (A$2.24M) to settle SEC charges over the trading of securities, and its US platform has been banned from trading anything except Bitcoin, Bitcoin Cash and Ethereum.
Bitcoin ETFs
The Bitcoin ETFs hauled in US$263.1 million (A$392.1M) in net inflows on Friday, the best single day in the two months since July 22. Over the week, the ETFs saw net inflows of US$403.9M (A$602M), mostly thanks to Fidelity, after flows to BlackRock’s IBIT almost dried up completely.
Until next week, happy trading!
