In Markets
Bitcoin surged by almost 5% in a few hours on Saturday after the Federal Reserve’s Jerome Powell said “the time has come for policy to adjust.” US interest rates are now widely expected to fall in mid-September which is good news for risk assets. RFK Jr also dropped out of the race for the White House that day, potentially increasing the chances of a pro-crypto Donald Trump victory. Bitcoin is now back above the Short-Term Holder Realised Price, which is “bullish” news, according to analyst Philip Swift. It finishes the week up 3% to trade around A$93,005 (US$63,363). Ethereum also gained 1% over the past seven days to trade around A$3,972 (US$2,677). Solana was up 8% despite the memecoin craze cooling and daily transaction fees falling to levels last seen in May. XRP lost 3%, Dogecoin gained 1%, and Cardano surged by 7%. The Crypto Fear and Greed Index is at 55, or Greed.
From the IR OTC Desk
Chair Jerome Powell’s Jackson Hole Symposium outlines a clear change in the direction of US monetary policy.
“The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
In assessing the detail, the Federal Open Market Committee Governor outlines that ‘Inflation has declined significantly.’ and ‘The labour market is no longer overheated’. A direct reference to the shape of the labour market in the 2018-2019 pre-pandemic era – when the inflation rate was running at below 2%.
While the old trading desk ‘up by the elevator and down by the escalator’ likely remains true, the short-dated interest rate futures market is now profiling near 100bps of cuts to the federal funds rate by the end of the calendar year. With only three meetings remaining this year, which meeting will they deliver a 50bp adjustment lower?
Post announcement, risk assets have remained very well supported, including cryptocurrencies, which have lagged US equities and gold over the last few months. The standout performers for the cryptocurrency complex have been the L1/L2 tokens: AVAX, NEAR, SUI, and APT. This should profile nicely for ETH outperformance, although this remains to be seen. ETH/BTC continues its downward momentum to trade at 0.043 BTC.
In the economic calendar, key event data this week include the AU monthly CPI indicator for July as well as US PCE inflation for July. PCE inflation is the preferred inflation indicator for the FOMC. Looking forward, additional policy weighting must be given to the strength of the US labour market over the US inflation data. Think non-farm payrolls, job openings and jobless claims. For now, policy decisions appear to be about labour market slack rather than labour market-driven inflation – so US ECI (employment cost index) and AHE (average hourly earnings) may prove of lesser significance.
In Australia (AEST)
- Wednesday 11:30am AU Monthly CPI Indicator (July)
- Friday 11:30am AU Retail Sales (July)
In the US (AEST)
- Monday 10:30pm US Durable Goods Orders (July)
- Thursday 10:30pm US GDP (Q2 2nd estimate)
- Friday 10:30pm US PCE inflation (July)
In Singapore (AEST)
- Monday 3:00pm SG Industrial Production (July)
On the OTC desk this week, we had our biggest volume week ever last week! The appetite for trading cryptocurrencies is certainly increasing, and this is noted amongst corporates – which appear more comfortable in their use of stable coins. Despite the outperformance of the L1/L2 tokens (mentioned), we have not actively seen material interest in this token segment across the desk. This suggests that the move may have caught many by surprise, as is usually the case when the first significant market move presents. The question now is whether alts may also have a similar pricing change. Their performance has generally been lacklustre relative to the meaningful change in monetary policy expectations. We continue to watch this space carefully.
For any further information, please feel free to reach out.
In Headlines
Sony launching an Ethereum L2
Sony is launching a testnet for its new Ethereum L2 called Soneium this week. It’s focused on scalability and user friendliness and aims to bridge the gap between Web2 and Web3 for mainstream users. Soneium will employ zero-knowledge proofs using the Astar zkEVM and will live on the Optimism superchain. It’s a big deal: Japanese Prime Minister Fumio Kishida will speak at the launch. Sony Block Solutions Labs said the L2 could be used for digital rights management and for profit sharing between creators and fans. Sony’s involvement in gaming and its wide array of patents make this seem like metaverse-style infrastructure – though that term was not mentioned.
Stablecoins hit ATH
The total stablecoin market has reached a new all-time high of more than US$168.1 billion (A$248.2B), surpassing its previous peak in March 2022. Some see stablecoins as a proxy for new money entering the system. On Solana, Paypal’s PYUSD recently surpassed a US$1B (A$1.47B) market cap for the first time.
Bitcoin ETF inflows are very strong
The Bitcoin ETFs have just seen six days in a row of positive inflows and 10 out of the last 12. With US$543 million (A$802M) net inflows last week, they have now amassed cumulative inflows of 301K BTC. The Ethereum ETFs saw small outflows seven days in a row, and after a month of trading they have seen a net outflow of US$465M (A$687M) due to US$2.53B (A$3.74B) worth of funds fleeing Grayscale’s high-fee ETHE product. However, the iShares Ethereum Trust has now cracked the billion dollar mark (A$1.47B) in inflows, making it the seventh most successful ETF launch of the year already, with another billion between the other funds. Bitwise’s Head of Research, Ryan Rasmussen, said the Ether ETFs had seen “phenomenal” traction so far. “Is it as strong as Bitcoin? No,” he said. “But we never expected it to be.”
Crypto campaign financing
Watchdog group Public Citizen claims that the crypto industry has spent US$119M (A$176M) this US election cycle and US$129 million (A$190M) over the last three election cycles, putting it only behind the fossil fuel industry in terms of corporate election spending since 2010. “Big Crypto’s big spending strategy appears to be paying off,” Public Citizen said. Of 42 primary campaigns in which it donated, crypto-backed super PACs’ favoured candidates won 36 times.
Democrats on crypto
The Democrats are yet to “pivot” on crypto, but they are at least making some encouraging noises. Brian Nelson, a senior campaign adviser for the Harris campaign, was asked by Bloomberg about efforts to engage the crypto industry and replied: “She’s going to support policies that ensure that emerging technologies and that sort of industry can continue to grow,” he said. Nobody mentioned crypto on stage at the Democratic convention either, but Bitcoin Magazine spoke to pro-crypto Congressman Wiley Nickel, who claimed there was “a real sense of momentum amongst Democrats on the issue.” He also said reports that Harris was hiring a bunch of anti-crypto advisors had been “totally invented by folks who are trying to damage her campaign.”
Bitcoiner RFK JR drops out
Robert F. Kennedy Jr. dropped out of the race for the White House in key battleground states on the weekend and threw his support behind Donald Trump. Conservative media says this makes the crypto-friendly Trump more likely to win while left-leaning media says it’ll make no difference. RFK Jr. is an ardent Bitcoiner, and the move increases the chance he’ll get a job in the Trump Administration, where he can push his Bitcoin Reserve plan.
The Flippening is back
Billion-dollar crypto VC fund 1confirmation predicts ETH will flip Bitcoin within five years. It made the prediction in its second-quarter letter arguing that while Wall Street has bought Bitcoin’s digital gold narrative, “ETH is not well understood.” 1confirmation says Ethereum has the most talented developers, that they are building “the decentralised internet”, and that “ETH is digital oil” that powers the whole system. “ETH is scarce, yield-bearing and useful.” And because ETH’s market cap is smaller, “Wall Street is able to own more of it. They will and shill the ETH narrative aggressively to the world.”
Telegram CEO arrest
Pavel Durov, the CEO of crypto’s platform of choice Telegram, has been arrested in France. Some of the charges relate to offering cryptology tools and services, and appear to hold Durov responsible for money laundering and child pornography on the platform. Much of the crypto community including Ethereum founder Vitalik Buterin have expressed outrage at the arrest and the related TONCOIN project saw 25% of its value wiped this week.
Kraken securities case continues
A US District Judge says the SEC has an arguable case that Kraken facilitated investment contracts that qualify as securities and has allowed the case to proceed. The SEC says Kraken was operating as a broker-dealer and mishandling customer assets and information. Kraken’s chief legal officer, Marco Santori, argued the judge found the tokens themselves are not securities, but agreements around a token could be. That means: “It will need to prove, for every alleged transaction on Kraken, that the Howey Test factors are satisfied. They aren’t, and we look forward to proving this in discovery. ” Meanwhile, the Federal Court in Australia has ruled that Bit Trade, operator of Kraken Australia, failed to comply with regulations when offering a margin trading product.
Episode 13 of the IR Crypto & Bitcoin podcast feat GAMI & Nap Enjoyoor
In Episode 13 of the Independent Reserve Crypto & Bitcoin Podcast, host Lee Eaton is joined by two massive (yet semi-anonymous) names in the Web3 space.
GAMI is the enigmatic founder of GNARS DAO, a decentralised platform that promotes, accelerates and provides generous grants for community-based sports initiatives. This can mean anything from the sponsorship of skateboarders to the refurbishment of a skatepark in Brazil and the funding of a range of different creative endeavours within the extreme sports niche. To date, Gnars DAO has received more than $500,000 in grants from Nouns, an NFT project also created and owned by GAMI.
GAMI, along with our other guest, Nap Enjoyoor, runs the IMF (not the International Monetary Fund). They’ve created a Web3 platform called the International MEME Fund, on which users can effectively “stake” their meme tokens to earn a yield or secure additional funding.
In this 80-minute podcast, we discuss the evolution of meme coins, particularly $PEPE and $MOG, the launch of the International Meme Fund (IMF), and the unlikely comparison between memes and genetics. We also explore degen culture and what it means to fully immerse yourself in the weird side of Web3.
Catch the full episode on YouTube or Spotify.
Until next week, happy trading!
