Weekly Crypto Wrap: 12th October 2023

TLDR

• Bitcoin’s dominance hits a 3-month high at 51%.
• JPMorgan executes first blockchain settlement for BlackRock.
• US PPI surprise increase amid geopolitical uncertainties.
• Solana sees largest week of inflows since March 2022.
• Altcoins bear the brunt of de-risking sentiment.
• Ether-Bitcoin ratio drops to 15-month low.

CEOs Corner

The winds of change are coming for crypto.

Amid calm market waters, a profound shift is underway for the crypto and digital asset space. It's an era where investors are gaining insights, challenging past hubris and demanding rigorous frameworks.

Read the full blog from BTC Markets CEO, Caroline Bowler, here.

BTC Markets announcements

Representing crypto at the ASX Refinitiv 4th Markets Day for Charity.

Once again, BTC Markets is proud to represent the crypto industry in the ASX Refinitiv 4th Markets Day for Charity. Taking place on Tuesday 31st October, all trading profits from the day will be donated to charity. How to get involved? It’s easy! Just log in and trade on the day.

Join us and let’s raise a million dollars for those in need.

Read more about this event.

BTC Markets OTC desk empowering clients to optimise high volume trades.

Our OTC desk is dedicated to assisting clients in a variety of ways, from reposition their SMSF holdings, guiding them through EOFY or facilitating the release of additional capital during tax season.

We routinely help businesses engaged in crypto payments, collaborated with them to ensure they maximise the value of their frequent conversions to AUD.

Whether you're a seasoned trader seeking a discreet and efficient way to execute substantial positions or a business in need of a streamlined solution for managing your crypto portfolio, our OTC team is ready to assist you.

Schedule a call with our team of expert traders today.

BTC Markets sponsors Blockchain APAC Crypto Assembly.

BTC Markets is excited to announce its foundation sponsorship of the Blockchain APAC Crypto Assembly event on November 23rd and 24th in Sydney.

As an active participant in the crypto industry, we believe in contributing to its growth and development. This sponsorship reflects our commitment to educating industry stakeholders and users, fostering regulatory discourse, and helping shape legal frameworks that benefit everyone involved in this dynamic space.

Join us as the industry shares their experience, expertise, and passion for blockchain and cryptocurrencies.

Learn more about the event here.

Did you know that…There are new tax rules with airdrops? 

The Australian Taxation Office (ATO) has recently updated its guidance on airdrop taxation, affecting Australian crypto investors. A new section, 'initial allocation airdrops,' has been added to their staking rewards and airdrops page. This pertains to airdrops for tokens which are not yet traded on the market (i.e., not live). They state:

“If you receive tokens distributed in an initial airdrop you do not derive ordinary income or make a capital gain at the time you receive them.”

Instead, capital gains tax applies when you sell the airdropped tokens. Tokens received for free have a cost base of zero, while those acquired with payment establish the cost base.

This change should come as a relief to Australian investors, as it means they no longer must include non-established airdropped tokens as ordinary income. Instead, they only need to report capital gains when they eventually sell them.

For more information, check out the Crypto Tax Calculator blog page.

If you haven't filed your crypto taxes yet, we’ve partnered with Crypto Tax Calculator to offer you a 30% discount on all tax reports.

Simply sign up for an account here, import your exchanges and wallets then head to the reports page to checkout with the promo code: BTCMARKETS30.

Read more about Crypto Tax Calculator on our tax help page.

State of crypto

• Market conditions remain uncertain, due to geopolitical complexities.
• Bitcoin constitutes just under half of the US$1 trillion crypto market.
• Crypto market sentiment has dropped into the fear zone.

Amidst a tumultuous week on the global stage, the crypto markets experienced a widespread wave of liquidations on Monday, triggering a decline in cryptocurrency prices. This drop can be attributed to escalating geopolitical tensions in the Middle East, which left investors feeling apprehensive. Adding to the air of uncertainty, the US PPI numbers came in hotter than expected. The negative inflation report surprised the crypto markets which saw a further decline of 1.88% in Wednesday’s trading session.

Market conditions remain uncertain, primarily due to geopolitical complexities that are impacting central banks and, subsequently, energy supplies and global supply chains. These uncertainties could potentially lead to a risk-off sell-off in the markets, resulting in a stronger US dollar, higher oil and gold prices, and potentially weakening equity markets.

In other news, the recent turbulent vote in which US lawmakers rejected House Speaker Kevin McCarthy has cast doubt and introduced the possibility of delays regarding the progress of cryptocurrency regulations in Congress. Whilst the ongoing FTX case continues to unfold as the founder of the firm, Sam Bankman-Fried, faces serious charges, including seven counts of fraud, embezzlement, and criminal conspiracy with up to 100-years of potential jail time.

Currently, Bitcoin constitutes just under half of the US$1 trillion cryptocurrency market. An increase in Bitcoin dominance means that Bitcoin's value relative to the rest of the cryptocurrency market is growing.

In Friday’s trading session, Bitcoin attempted to break above US$28,295 and surpass the 200-day moving average which has provided resistance to price action. However, it was unable to sustain this upward momentum. Over the weekend, price consolidated, and when the market opened on Monday, it dropped 1.17% before finding support at $27,400. Crypto market sentiment is currently in the fear zone, at 45 on the Crypto Fear & Greed index.

The weekly close.

In the last trading week, Bitcoin (BTC) closed at US$27,917.05, marking a marginal decrease of 0.27%, remaining relatively stable compared to the rest of the market.

Ethereum (ETH) experienced a notable decline of 5.82%, closing at US$1,632.84.

XRP closed at US$0.5174, reflecting a 1.28% decrease.

Litecoin (LTC) saw a loss of 4.18%, reaching US$65.34, while Cardano (ADA) was down 3.61% and closed at US$0.2563.

Solana (SOL) ended the week with a 2.72% loss, closing at US$23.22.

Bitcoin's market dominance increased by 1.62%, reaching 50.93% whilst the total crypto market cap lost 1.72% on the week closing at US$1.07 trillion.

Year-to-date in the crypto space.

In the year-to-date performance analysis of leading cryptocurrencies, Solana (SOL) emerges as the standout performer with an impressive gain of 119%.

Bitcoin (BTC) continues to assert its dominance, achieving a commendable 62% increase.

XRP (XRP) has displayed resilience and growth, registering a 43.05% gain.

Ethereum (ETH), the platform underpinning decentralized applications, has maintained its significance with a 30.47% increase.

Cardano (ADA) has shown modest growth at 0.24%, making it a project to watch for future developments.

Unfortunately, Litecoin (LTC) faced a decline of 13.15%, highlighting the challenges it has encountered in maintaining its market position.

*The weekly trading stats as of Monday, October 9th at 11:00 am AEST, based on data from Tradingview in USD.

**Year -to-date performance as of Thursday, October 12th at 11:00 am AEST, based on data from Tradingview in USD.

Crypto news

JPMorgan executes first blockchain-based collateral settlement for BlackRock.

JPMorgan has achieved a significant milestone with its tokenised collateral network (TCN). The banking giant recently announced that TCN successfully facilitated its first collateral settlement for a live client in an over the counter (OTC) derivative transaction. BlackRock and Barclays are now actively using TCN, an application integrated into JPMorgan's Onyx Digital Assets platform, which operates as a private blockchain designed for tokenised asset movements and collateral settlements.

In this development, BlackRock tokenised shares in a money market fund (MMF) through TCN. Utilising blockchain settlement technology to transfer ownership of MMF shares enhances the utility and resiliency of MMFs. JPMorgan's commitment to tokenising traditional finance is evident in this achievement, further demonstrating the potential for tokenised assets in the collateral market. It highlights the ability to mobilise MMFs more efficiently, unlocking new liquidity pools for margining.

Earlier this year, JPMorgan had announced its intention to tokenising traditional finance, processing approximately US$700 billion in short-term loan transactions via Onyx, a permissioned version of the Ethereum blockchain. The broader financial industry is increasingly embracing blockchain technology, recognising its potential for programmable transactions, transaction immutability, and efficient payments. This trend is reshaping the financial landscape and unlocking new possibilities.

Bitcoin’s market cap dominance hits a 3-month high amid altcoin sell off.

Bitcoin’s grip on the overall cryptocurrency market continues to rise. Earlier this week, Bitcoin’s market cap dominance hit 51.35%, marking its highest levels since mid-July. Meanwhile, traders are eyeing potential short opportunities as altcoins bear the brunt of de-risking sentiment among investors.

Bitcoin continues to see an increased ‘haven’ demand over other cryptocurrencies in the midst of an ongoing bearish outlook. The world’s largest cryptocurrency has gained 66% year to date, compared with the second largest cryptocurrency by market value, ETH, which has gained 32%. This week saw the ETH/BTC ratio drop to a fifteen-month low.

In the crypto market, Bitcoin is widely regarded as 'digital gold' due to a built-in characteristic that slows the rate at which its supply grows by 50% every four years, often referred to as the 'halving'. The fourth halving is scheduled to take place in April 2024.

According to multiple traders who talked with CoinDesk, the consequences of the Middle East conflict could ripple through to the cryptocurrency markets and may result in a temporary dip in crypto assets. Bitcoin fell as much as 7% in a single day in early 2022 due to military tensions between Russia and Ukraine, illustrating the influence of geopolitical conflicts on the asset class.

Buy Bitcoin on BTC Markets.

Solana investment products see largest week of inflows since March 2022.

Inflows into digital-asset investment products at asset managers including CoinShares, Grayscale, 21Shares, Bitwise and ProShares, have reached the highest level since July, with Bitcoin and Solana funds leading the way.

Solana continued to assert itself among altcoins last week as investment product inflows reached the highest level since March 2022, adding US$24 million, according to CoinShares’ latest report. Solana funds have recorded only four weeks of outflows so far in 2023.

CoinShares latest report also revealed that 90% of all crypto asset inflows originated in Europe, with the US and Canada receiving a combined US$9 million in inflows. As for the biggest countries contributing to inflows, Germany and Switzerland posted US$37.3 million and US$31.3 million, respectively, and accounted for 88% of all crypto asset product inflows last week.

The price of Solana has seen a double-digit recovery since September. Some of this price action could be contributed to recent upgrades focused on improving the efficiency, privacy and security of the Solana network. At the time of writing, the price of SOL stands at AU$34.80.

Buy SOL on BTC Markets.

ETH/BTC ratio drops to 15-month low as Ethereum Foundation converts 1,700 ETH to USDC.

The ETH-Bitcoin (ETH/BTC) ratio continues to decline as the price of ETH dropped further this week, amid slumping activity and muted investor interest for newly listed futures-based ETFs in the US.

The ETH/BTC ratio dropped to 0.05675 on Tuesday, reaching the lowest level since July 2022, according to data from TradingView. The ratio has declined by nearly 30% since Ethereum’s Merge upgrade in September of last year, and in a high interest rate environment, investors continue to favour Bitcoin over Ethereum.

Earlier this week, The Ethereum Foundation, a non-profit organisation responsible for developing and promoting Ethereum, converted 1,700 ETH worth US$2.76 million to USDC. Despite this being a relatively small amount compared to previous transfers, historical trends suggest a bearish outlook when the Ethereum Foundation moves ETH.

Ethereum has registered year-to-date outflows of over US$100 million, despite recent inflows of around US$10 million, as reported by CoinShares this week. The price of Ethereum continues its downward trend, currently standing at AU$2,442, down around 3.8% over the past 7 days.

Buy ETH on BTC Markets.

The week ahead: upcoming economic events

October 12th: US Inflation Rate MoM & YoY and UK Monthly GDP.

October 13th: China’s Inflation Rate YoY. China’s Balance of Trade.

October 14th: US Michigan Consumer Sentiment.

October 17th: Reserve Bank of Australia (RBA) Meeting Minutes. UK Unemployment Rate. Germany’s ZEW Economic Sentiment Index. Canada’s Inflation Rate YoY. US Retail Sales MoM.

October 18th: China’s YoY Growth Rate, Industrial Production and Retail Sales. UK Inflation Rate YoY. US Building Permits.

October 19th: Japan’s Balance of Trade.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

• Consumer and business sentiment rising despite economic pressures.
• Retail sales recorded a modest month-on-month increase.
• Consumer inflation expectations climb from 4.60% to 4.80%.

Following a turbulent week in the broader markets which were impacted by global uncertainties, the consumer sentiment index saw an increase, reaching the highest point in the past six months, yet it remains deeply pessimistic, signalling a persistent decline in spending since late 2022.

Despite some optimism regarding family finances and job prospects, concerns about high inflation and potential interest rate hikes loom large, with the Reserve Bank of Australia's rate pause having limited impact on consumer sentiment.

The outlook paints a mixed picture, with family finances showing slight improvement but still under pressure, and near-term economic expectations remaining pessimistic. On a more positive note, stable labour market conditions provide support.

Meanwhile, the National Australia Bank’s (NAB) business confidence index held steady for a third consecutive month, although business conditions saw a minor dip in August, indicating overall economic resilience.Alan Oster, NAB's chief economist, highlighted signs of potential relief from key cost pressures, offering hope for the broader inflation outlook. Although, according to the Melbourne Institute, the latest inflation expectations witnessed a rise, climbing from 4.60% in September to 4.80%.

Finally, in August, retail sales recorded a modest month-on-month increase, consistent with the initial flash reading and July's 0.5% gain, reflecting consumers' cautious spending habits amid sustained high interest rates.

Global

• US PPI data indicates a concerning trend of rising inflation.
• Jobs data out of US surges, surpassing market expectations.
• Unemployment rate in the US holds steady at 3.8%.
• Germany's trade surplus expanded, surpassing expectations.
• Canada's unemployment rate holds steady for third time in a row.

US

The US financial markets displayed resilience in light of escalating geopolitical tensions in the Middle East. Consequently, the conflict has led to a surge in oil prices, amplifying market volatility and causing investor concerns.

In September, the Producer Price Index (PPI) rose by 0.5%, surpassing market expectations of a 0.3% increase. There was a substantial 0.9% rise in final demand goods primarily driven by gas prices surging by 5.4%. Deposit service costs at commercial banks rose by 13.9% in one month, possibly indicating challenges, especially for smaller regional banks.

This inflation data reveals a 2.2% year-over-year increase in the PPI, surpassing the expected 1.6%, and Core PPI outperformed with a rise to 2.7%, against the anticipated 2.2%. This suggests that the Federal Reserve may continue hiking interest rates or maintain them at elevated levels for an extended period.

While there are differing opinions among Federal Reserve officials regarding additional rate increases, there is consensus that rates should stay elevated until inflation convincingly returns to the 2% target. The market shows reduced expectations for future rate hikes, reflecting changing sentiment.

Concerns linger about potential economic risks, including the temporary impact of the autoworkers' strike, consumer spending, tighter credit conditions, reduced fiscal stimulus, and the resumption of student loan payments.

The upcoming Consumer Price Index report is highly anticipated for further insights into inflation trends, while the CNN Fear and Greed Index indicates a shift from extreme fear to fear in market sentiment. 

Unexpectedly high jobs data out of the US suggests the labour market is gradually adjusting, displaying resilience despite the Federal Reserve's ongoing tightening measures. The US nonfarm payrolls surged by 336k, surpassing market expectations of 170k. The remarkable growth in jobs represents the strongest gain in employment over the past eight months. Many analysts have noted that the job additions were prominent in the leisure and hospitality sector. 

Whilst the unemployment rate in the United States held steady at 3.8%, remaining unchanged from the previous month's level, this data reaffirms that the labour market continues to be historically tight, granting the Federal Reserve room to maintain borrowing costs at restrictive levels for an extended duration.

Germany

In August, Germany's trade surplus expanded, surpassing expectations, while exports decreased to the lowest since March 2022. Imports unexpectedly declined, hitting their lowest point since January the previous year.

Canada

Canada's unemployment rate held steady for the third consecutive period, slightly below expectations, whilst the Ivey Purchasing Managers' Index (PMI) decreased slightly, but exceeded market expectations, which had predicted a lower reading, suggesting moderate economic expansion, although at a slower pace.

Regulation roundup

Cyprus to tighten crypto regulations in accordance with FATF.

Cyprus, one of the most crypto-friendly nations in Europe, may be about to tighten its regulations governing the sector, as it seeks to align with international standards for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) set by the Financial Action Task Force (FATF).

According to an October 10th report by the Cyprus Mail, the Cypriot Ministry of Finance intends to amend the existing Prevention and Suppression of Money Laundering and Terrorist Financing Law and has presented its amendments package to the House of Representatives Standing Committee on Legal Affairs, Justice and Public Order.

In the amendments outlined, every service provider working with crypto assets must register with the financial regulator, the Cyprus Securities and Exchange Commission (CySEC). Penalties for noncompliance could vary from fines of up to €350,000 (over half a million Australian Dollars) to imprisonment of up to five years. These penalties would be among the most severe worldwide for regulatory violations involving digital asset companies.

The Cyprus Bar Association has expressed concerns about the amendments, particularly with relation to the requirement that crypto service providers who hold acting licenses from other European nations must register with CySEC, who maintain that localised compliance processes are necessary for sufficient oversight and safeguarding.

As of now, crypto businesses have not encountered major issues when registering in Cyprus. Bybit was granted a crypto asset service provider registration by the CySEC in June, while crypto-friendly brokerage business eToro obtained the same license last month. Whether this will change under the amended regulation is yet to be seen.

Compliance conversations

What is a fake ‘Initial Coin Offering’ (ICO)?

A fake Initial Coin Offering (ICO) scam is a fraudulent scheme in which individuals or entities create a fake cryptocurrency project and promote it as a legitimate investment opportunity.

Here's how it typically works:

• Creation of a fake project: Scammers create a fictitious cryptocurrency project with a website, whitepaper, and social media presence. They often use convincing branding and logos to make the project appear legitimate.
• Promotion: The scammers promote the fake ICO through various channels, including social media, email marketing, online forums, and even paid advertisements. They may use fake endorsements from celebrities or industry experts to build trust.
• False promises: To lure investors, scammers make enticing promises, such as guaranteed high returns on investment (ROI), revolutionary technology, or exclusive early access to the cryptocurrency. They may also claim that the ICO is backed by a reputable team or company.
• Token sale: During the ICO, scammers encourage investors to purchase the fake tokens using cryptocurrencies like Bitcoin or Ethereum. They may create a sense of urgency by claiming that the ICO has a limited time offer or a "once-in-a-lifetime" opportunity.
• Disappearance: Once they have collected a significant amount of cryptocurrency from unsuspecting investors, the scammers disappear. They shut down the website, delete social media accounts, and vanish from the internet.
• Losses for investors: Investors who participated in the fake ICO lose their invested cryptocurrencies, as the tokens they purchased are worthless and have no real value. Recovering lost funds in such scams can be extremely difficult, if not impossible.

To protect yourself from fake ICO scams, it's crucial to exercise caution and conduct thorough due diligence before investing in any cryptocurrency project. Scrutinise the team's credentials, evaluate the project's practical use, and assess its overall credibility.

Be cautious of projects that make unrealistic promises of guaranteed high returns with minimal risk. If it seems too good to be true, it probably is. Don't solely rely on endorsements or recommendations from celebrities or online influencers, as they can also fall victim to scams or be incentivised to promote a project.

When investing in an ICO, use reputable and well-known cryptocurrency exchanges, avoiding unfamiliar platforms. Staying informed about the latest cryptocurrency developments is crucial, as scammers often exploit rapidly changing trends.

If you encounter a suspected fake ICO or cryptocurrency scam, promptly report it to the relevant authorities or regulatory bodies. Remember, exercising caution and due diligence is key to protecting your investments and assets in the cryptocurrency space.

ASIC provides a checklist of common scams and ways to avoid them. To learn more, visit ASIC’s website.

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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 AEST, on 12/10/2023.