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This Week in Crypto: 16th February 2023

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BTC Markets
This Week in Crypto: 16th February 2023

Bitcoin Fear & Greed Index

The Bitcoin Fear & Greed Index is currently at 62 in the Greed zone, up 7points from this time last week. The index reached a high of 62 on Thursday this week and a low of 48 on Tuesday this week. 

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TLDR

  • BTC Markets unveils the latest mobile app release: Portfolio enhancements, including tracking your portfolio over time!
  • Digital asset majors stall higher before pressing to new highs for 2023.
  • Stablecoins continue to provide incredible profits amidst the bear market.
  • Correlation between Fed policy and financial markets reminds markets, “don't fight the Fed."

Market outlook

Several high impact data releases are scheduled in the week ahead, including month-over-month producer price index (PPI) in the United States, and month-over-month retail sales in the United Kingdom. On Tuesday, 22nd February the RBA meeting minutes will be released in Australia, and on Wednesday, 23rd February Canada’s year-over-year inflation rate will be handed down. Leading into the end of next week, US Federal Open Market Committee (FOMC) meeting minutes will be released and year-over-year inflation rate in Japan will be announced.

Market reflections

The new week began to a soft start, with shares in Asia declining as investors positioned themselves for an action-packed week ahead, including the release of US consumer price data. The negative start to the week echoed across major indices in Asia, however, as the US markets kicked Monday’s session off with positive momentum, broader sentiment adjusted accordingly.

As the week progressed, all eyes shifted to US inflation data. For a seventh month in a row, inflation eased in January, with CPI inflation rate slowing to 6.4% and monthly inflation lifting slightly by 0.5%, both targets meeting market expectations.

While there weren’t necessarily any major surprises hidden in the data, there certainly was plenty of volatility to trade. Liz Young, Head of Investment Strategy for SoFi tweeted, “head on a swivel today with the S&P 500 having six swings of at least 0.6%. I'll call this discombobulation station.”

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Image 1.0: TradingView chart of the S&P 500 in 1-minute intervals on 15th February 2023.

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Image 2.0: TradingView chart of Bitcoin, Ethereum, total crypto market cap, and Bitcoin dominance in 15-second intervals on 15th February 2023.

Finance writer Genevieve Roch Decter shared her thoughts regarding the latest US CPI report and the soft-landing narrative, commenting that “CPI came in at +6.4% yearly, higher than expected. In today's numbers, nearly 50% of the increase was shelter, which is lagging and should be lower by now. Shelter accounts for about one-third of the index, so it weighs heavily on the numbers. Wage inflation for 30% of the U.S population was up 6.3%. This is good, but nowhere near keeping up with inflation over the last year. So, unless you got a 7-10% raise... you are down. The FED has to keep hiking. They aren't going back to 2-3% inflation without tightening the belts further. So...Buckle up! Because they are attempting a soft landing on a rocky surface.” 

In her usual tone, she added, “Uber has no cars. Airbnb has no real estate. FED has no idea where inflation is going. This is the new economy.”

Chief Market Strategist, Charlie Bilello shared his perspective, stating that “the Fed is not done yet. The market is currently pricing in a high probability of a 25-basis point rate hike in March (to 4.75%-5.00) another one in May (to 5.00-5.25%).”

Deutsche Bank chief US economist, Matthew Luzzetti, shared his thoughts that the Fed will most likely raise rates by 25 basis points at its next four meetings, reaching a peak upwards of 5.5% to 5.75% by July 2023.

Harvard Professor of Economic Policy, Jason Furman stated, “a funny thing has happened: the market now largely believes the Fed will raise rates to 5-5.25% and keep them there. But the financial conditions that matter for the economy have loosened considerably since October. Meanwhile inflation is way above target and does not show any sign of falling towards it. The Fed could wait for the monetary tightening it has done to kick in but it is possible a lot already has. If the Fed wants more tightening it may need to do it. Meanwhile inflation is way above target and does not show any sign of falling towards it. The Fed could wait for the monetary tightening it has done to kick in, but it is possible a lot already has. If the Fed wants more tightening it may need to do it.”

State of crypto

The digital asset majors consolidated higher before pressing to new 2023 highs. Following a slight pullback and a retest of range lows around US$21,500 for Bitcoin and US$1,500 for Ethereum, the majors caught bids and proceeded in an impulsive move to the upside. After breaking out of local range highs, BTC reached a new 2023 high ofUS$24,900 and ETH hit a weekly high of US$1,712.

At the time of writing, Bitcoin was up 49.67% at US$24,747 and Ethereum was up 41.76% at US$1,693 in 2023.

Bitcoin dominance by market capitalisation was up 5.78% in 2023, positioning Bitcoin at 44.50% dominance. As expected from price action in 2023 thus far, total crypto market cap was up 41.66%, leaving US$1.07 trillion in the crypto markets.

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Image 3.0: TradingView chart of Bitcoin, Ethereum, total crypto market cap, and Bitcoin dominance in 1-hour intervals from 1st January 2023 to 16th February 2023.

Crypto news

The big business of stablecoins.

Stablecoins have emerged as incredibly profitable amidst the bear market, according to the latest report by Tether, issuer of the largest stablecoin by circulating supply. Tether generated more than US$7.5 million in profit every day in the last quarter and more than US$700 million in profit in the last quarter alone. The company's assets, almost all of which were related to backing USDT, amounted to more than US$67 billion, with its consolidated liabilities representing USDT's supply being US$66 billion. The excess reserves amounted to at least US$960 million, which would mean USDT was fully backed at the particular moment the snapshot was taken. However, it is important to note that attestations like these are not the same as audits.

Decentralised stablecoins such as MakerDAO's DAI are transparent and non-custodial, meaning anyone can see exactly which assets back the token at all times. On the other hand, centralised stablecoins like Tether and USDC are collateralised off-chain, making tracking asset backing difficult and reliant on third parties. While Tether has repeatedly promised an audit, one has never eventuated, and no traditional audit has been completed on any stablecoin, including Tether.

Don’t mess with the Fed.

After testing local highs in the first week of February, Bitcoin, Ethereum, and the digital asset majors seemed to lose steam. According to comments from Arcane Research’s Senior Analyst, Vetle Lunde, “The market is overly optimistic regarding a swift Fed pivot. A combination of slowing momentum, strong technical resistance, and expectations of a hawkish FOMC leads me to expect a poor February in the market.”

Arcane research analysed Bitcoin's minute-by-minute volatility relating to recent central bank activity and found that the market may be overly optimistic about a swift Fed pivot. Lunde suggested that a combination of slowing momentum, strong technical resistance, and hawkish FOMC expectations may mean increased volatility in February for the market. The age-old adage of "don't fight the Fed” points to the strong correlation between Fed policy and financial markets.

In the short-term, Lunde believes that January’s crypto rally was overextended across multiple metrics, resulting in a short squeeze which wiped out significant leverage. Despite a strong start to the year in cryptos, most assets have remained extremely undervalued relative to where they were trading in the bull market highs of 2021's when bitcoin surpassed $US69,000.

Deposit Tokens on DeFi.

According to a recent study by JPMorgan and consulting firm Oliver Wyman, tokenised fiat deposits, known as "deposit tokens," could be a safer and more secure option for transferring value across blockchains than stablecoins. While stablecoins have been the primary solution for blockchain-based "cash equivalents," deposit tokens could better meet the needs of regulated banking institutions.

Deposit tokens operate similarly to traditional bank deposits, but on a blockchain. They are seen as a "stable form of money" and can be supported by the issuing bank's regulatory framework, capital and liquidity requirements, contingency funding access, and consumer protection policies. According to JPMorgan, deposit tokens would not cause a pricing disparity, unlike stablecoin liquidity pools.

JPMorgan has been involved in blockchain development and implementation for at least six years and is currently focused on its tokenisation platform Onyx, a permissioned interbank protocol settled in its USD-backed stablecoin JPM Coin.

BTC Markets updates

Mobile app portfolio enhancements.

Our design and development teams have taken your feedback into consideration and made several enhancements to the portfolio feature in the mobile app. The result is a more streamlined user interface and an elevated overall customer experience. You can now easily:

  • View your current total equity in AUD;
  • Investigate how your total equity has change over time via our new interactive portfolio charts, with the total change across the selected timeframe summarised in AUD and as a percentage;
  • View a summary of your portfolio diversification, highlighting what assets you hold, what percentage of your portfolio they account for, and the current value of your holdings in the base currency and in AUD;
  • Dive further into specific assets and review how your holdings of an asset have changed over time using our interactive portfolio charts; and
  • Easily access deposit options for assets, directly from the asset portfolio screen.

This feature has been developed on both iOS and Android with accessibility in mind. Visually impaired users can zoom the screen and increase text size with minimal degradation to the interface, and screen reader functionality has been included on both platforms.

This enhancement also provides the foundation to offer portfolio P&L data in the not-too-distant future.

Other updates included in this latest release:

  • Bug fix to ‘Spend All/Sell All’ feature to calculate based on ‘Price’ input rather than only ‘Best Buy/Best Sell’ price
  • UX and UI improvements
  • Performance enhancements
  • Minor bug fixes

What's coming next?

  • Dark mode (expected early March 2023)
  • Withdrawals

Please note: Our new app releases to the App Store no longer support iOS 14. Only iPhone users running iOS 15 or later will be able to download this latest release. Update your version or download the app now from the App Store (iOS) and Google Play Store (Android).

Scam Watch!

We would like to bring to your attention to an increase in scams targeting BTC Markets clients. Our Customer Support Team will never cold call you to request personal information, transfer funds, share passwords, or to gain remote computer access. We advise all clients to be hyper vigilant regarding fake websites, phony social media accounts, scam social media posts and fraudulent callers posing as BTC Markets representatives. Do not provide personal or credit card information through email or social media. There has also been an increase in scammers utilising celebrity profiles and their content to endorse their investment scams.

For your protection, we have an Online Safety page on our website and encourage you to read it. Additionally, the Australian government's 'Scam Watch' website provides updated information on recognising, avoiding, and reporting scams. If you have any concerns, please submit a support ticket through our platform or read our online safety article for more information.

Disclaimer: The information provided in this email is for general purposes only. It should not be construed as professional financial advice from BTC Markets Pty Ltd. BTC Markets is not a financial adviser, and you should consider seeking independent legal, financial, taxation or other advice to ensure that the information relates to your unique circumstances. BTC Markets is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this information contained within this email. Past performance is not an indicator of future performance. We note that we may, at any time, change the characteristics of the product. The information provided is intended for recipients in Australia. This information is not to be reproduced without permission.

Prices are accurate as of 11:00 AM AEDT, on 16/02/2023.

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