Weekly Crypto Wrap: 13th April 2023

TLDR

• Get ready to trade Cardano (ADA) next week on BTC Markets!
• CBA outlines the next step for Australian crypto.
• US CPI comes in lower-than-expected.
• Australian consumer confidence improves.
• Bitcoin breaks through US$30k as Solana's price skyrockets 130%.
• All eyes on Shanghai: Ethereum in the spotlight.

Trade Cardano (ADA) on BTC Markets next week.

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The week ahead

April 14th: US Retail Sales report due out, which reflects the total sales made by retail stores, an indicator of the overall health of the US economy.

April 15th: The University of Michigan Consumer Sentiment report for the US is released. This measures the level of confidence that consumers have in the US economy.

April 18th: A big day of economic data reports including the RBA Meeting Minutes, China's GDP Annual Growth Rate and Industrial Production, the United Kingdom's Unemployment Rate and Claimant Count Change, Germany's ZEW Economic Sentiment Index, Canada's Annual Inflation Rate, and the United States Building Permits.

April 19th: The Annual Inflation Rate in the UK to be released, an important economic indicator as inflation can affect consumer behaviour and influence central bank decisions on interest rates.

April 20th: Japan's Balance of Trade report to be released, an important indicator of the strength of the Japanese economy and can provide insights into global trade trends.

Economic Calendar (tradingeconomics.com)

CEO’s Corner

CBA outlines the next step for Australian crypto.

BTC Markets CEO Caroline Bowler was quoted by The Sydney Morning Herald discussing the renewed interest of retail investors in cryptocurrency assets. Bowler stated, “They’ve not come rushing back, but we can definitely see a return of interest last seen just before the trough of the bear market.”

Retail investors' interest in cryptocurrencies have been slowly returning since the bear market of 2022, with Australians continuing to invest in digital assets, according to data from the Commonwealth Bank (CBA). CBA's Managing Director of Blockchain and Digital Assets, Sophie Gilder, stated that despite the volatility experienced in the crypto markets last year, CBA's data showed ongoing customer interest in the sector. CBA supports the implementation of prompt regulation in the sector, given the level of retail investor interest.

The Australian Treasury is currently reviewing industry comments on how this will work in practice. The government aims to apply a technologically neutral approach, meaning that crypto and other digital assets will be analysed to identify those that behave similarly to financial products.

Gilder suggested that tweaking parts of the Corporations Act would be the most efficient and timely way to regulate crypto assets, which is also supported by the Australian Banking Association. This would apply the same regulation to financial and payments services, irrespective of the underlying technology.

In March, BTC Markets submitted our response to Treasury and expressed our support for the ‘Digital Assets Bill’ introduced by Senator Bragg, recognising it as a crucial first step in regulating Australia's crypto industry. Regulatory clarity has been a significant challenge for the crypto industry and the proposed bill will provide clear guidelines and regulatory frameworks, which will benefit the industry by attracting more institutional investors and driving innovation.

Market reflections

Australia

The Reserve Bank of Australia's (RBA) decision to pause interest rate hikes has had a positive effect on the Australian economy, with both consumer and business confidence showing signs of improvement.

The Westpac-Melbourne Institute Index of Consumer Sentiment saw a significant increase of 9.4% in April 2023, reaching its highest level since June last year. This upturn was driven by a pause in rate hikes by the RBA, leading to an increase in the measure for economic conditions in the next 12 months, and a surge in the gauge for family finances in the coming year. The sentiment towards purchasing major items also saw a boost, although, the unemployment expectations index fell. Despite improvements, Chief Economist Bill Evans of Westpac Group still characterised consumer sentiment as weak, predicting “lacklustre” consumer spending throughout 2023 and the first half of 2024.

The National Australia Bank (NAB) Business Confidence Index for Australian businesses saw a modest improvement in March 2023, surpassing market expectations. This was driven mainly by the manufacturing sector, while the mining and construction sectors experienced a slight decline. Confidence remained negative in the retail, wholesale, and finance, business, and property sectors, with positive readings in all other industries. Chief Economist Alan Oster of NAB noted that although confidence appeared to have stabilised, it remained below average. The poor confidence in the retail and wholesale sectors was likely due to concerns over how long consumer spending could be sustained.

Treasurer Jim Chalmers said that Australia could avoid a recession due to its low unemployment, strong wage growth and high commodity prices, but the global economy was facing headwinds. The budget would focus on building resilience against international shocks, and the tax offset for low- and middle-income earners would end.

Global

The US consumer price index (CPI) increased by a mere 0.1% month-over-month in March 2023, slowing from February's 0.4% rise and below market expectations of a 0.2% gain. The index for shelter made the most significant contribution, offsetting a sharp decline in energy costs. Meanwhile, the annual core consumer price inflation rate in the US (which excludes volatile items such as food and energy) ticked up to 5.6% in March, matching market estimates as the cost of rent increased further.

Furthermore, the annual inflation rate in the US slowed for a ninth consecutive period to 5% in March, the lowest since May 2021, from 6% in February and below market forecasts of 5.2%. The drop in energy costs was a key factor, specifically gasoline and fuel oil, with used cars and trucks declining once again. On the other hand, inflation for shelter, which accounts for over 30% of the total CPI basket, continued to rise.

The Federal Open Market Committee (FOMC) members observed that inflation remained much too high, and the labour market remained tight, which may require additional policy firming to attain a sufficiently restrictive policy stance to return inflation to 2%. The Fed raised the fed funds rate by 25bps to 4.75%-5% in March, pushing borrowing costs to new highs not seen since 2007. The collapse of two regional banks may likely tip the economy into recession later this year, according to some FOMC members. While the labour market in the US is showing positive signs, the job growth rate has slowed down, possibly due to the normalisation of the economy.

The Bank of Canada held its overnight rate unchanged at 4.5% in April 2023, citing restrictive borrowing costs to bring inflation down to 2% and support slowing growth. Lower energy prices allowed inflation to fall to 5.2% in February after hitting a 39-year high in June 2022, and the central bank expects inflation to slow to 3% by mid-year before gradually reaching the target of 2% by the end of 2024. Canada's Ivey PMI indicates an increase in purchases, employment, and inventories, which is a positive sign. China’s lower-than-expected annual inflation rate suggests a slowing economy, while Japan's rising consumer confidence index indicates a continued recovery.

State of crypto

Bitcoin and Ethereum closed the week with gains, while XRP and Litecoin reported losses, providing mixed results for the crypto majors. Bitcoin rose by 0.54% to reach US$28,323.76, while Ethereum gained 3.59% to close the trading week at US$1,858.92. On the other hand, XRP and Litecoin suffered losses of 2.43% and 2.36%, respectively, with XRP closing the week at US$0.5054 and Litecoin at US$90.58.

Year-to-date, Bitcoin has been the best performer, with an impressive gain of 80.72%, surpassing the psychological US$30k barrier to reach a high of US$30,550 with current price consolidating at the $29,903. Ethereum follows Bitcoin with a gain of 60.58%, currently trading at US$1,919. XRP and Litecoin also performed well, with gains of 48.80% and 31.45%, respectively. XRP is currently trading at US$0.5043, and Litecoin is trading at US$92.17.

Bitcoin's market capitalisation lost 0.28% from the previous week, whilst its dominance is currently at 48.92% due to the recent price rally. The cryptocurrency market capitalisation increased by 0.84% last week and is currently valued at US$1.194 trillion, after reaching a temporary high of US$1.218T. (*source: Trading view, 10:00am AEST).

Alt action

Solana's price skyrockets 130% in 2023.

Solana (SOL) has been one of the top large market cap performers in 2023, surging over 130% since the beginning of the year. The positive sentiment surrounding Solana could be attributed to the upcoming launch of Saga, an Android smartphone powered by the Solana blockchain.

The Saga smartphone is expected to allow users to mint their own NFTs from anywhere and access the wider Solana-based ecosystem of apps and projects. According to the Solana Mobile website, this provides a premium mobile experience that enables users to trade tokens, mint NFTs, and have instant access to the decentralised apps (dApps), anywhere at any time, powered by Android.

Solana Mobile is a mobile wallet application that allows users to store, send, and receive Solana (SOL) cryptocurrency on their mobile devices. The app provides a convenient way for users to access their SOL tokens and manage their crypto assets on the go. It also supports other cryptocurrencies that are built on the Solana blockchain, such as Serum (SRM) and Raydium (RAY). Users can utilise the app to buy and sell these tokens, view their transaction history, and track the value of their holdings in real-time. The app provides secure features like biometric authentication and encrypted private keys to protect users' funds.

Solana is a high-performance blockchain designed to enable fast and low-cost transactions. It was launched in March 2020, and its architecture is based on a unique combination of technologies that allows it to process transactions at speeds of up to 65,000 transactions per second (TPS).

The native cryptocurrency of the Solana blockchain is called SOL, which is used to pay for transaction fees, participate in network governance, and reward validators who secure the network.

Trade SOL now on BTC Markets

The Big 3

Bitcoin breaks US$30k psychological barrier.

Bitcoin has rallied above the US$30k mark for the first time since June 2022, driven by the market forecasts of easier monetary policies and expectations that the banking crisis in the US will force the Federal Reserve to hit pause on rate increases.

The cryptocurrency's rapid ascent has made it the standout performer this year, rising 82% since December 31 and beating the Nasdaq 100's 19% gain. Gold, another investor favourite, has climbed about 10% this year.

The rally is partly due to the expectation that rate hikes are almost done, but some investors are also drawn to crypto because it's an asset outside of traditional banking and finance. Analysts also cited technical factors as a reason for the token's rally, as digital assets broke out of weeks of range-bound trading.

Market contrarians believe that persistently low liquidity distorts pricing and could cause a rapid reversal if central banks stand firm on battling inflation. Despite facing immense scrutiny, Bitcoin's rally has gained strength over the past month following the collapse of three US banks, which has revived the narrative among Bitcoin bulls that the token offers a more attractive alternative to traditional finance.

Investors will be keeping an eye on the March Consumer Price March Index (CPI) report for signs that inflation is continuing its downward trend. A continued slowdown in inflation could lead to central bankers scaling back their interest rate hikes.

Richard Mico, the CEO of Banxa, a payment-and-compliance infrastructure provider to the crypto industry, noted that Bitcoin is starting to be perceived as a risk-off asset, with a decreasing correlation to equity markets. However, Joe DiPasquale, the CEO of crypto fund manager BitBull Capital, was more cautious about the sustainability of Bitcoin’s recent surge. He suggested that the current move is a retest of the range high established in March, and that the price could drop to $25,000 or $23,000 if the test fails.

Trade BTC now on BTC Markets

Ethereum: All eyes on Shanghai!

On April 12, 2023, the Ethereum network is set to undergo a technical upgrade known as the Shapella upgrade. This upgrade will enable validators and users to withdraw their staked Ether and any accrued staking rewards, unlocking access to over 18 million staked Ether. While this is expected to cause some short-term market volatility, the long-term benefits are deemed to be substantial, making Ethereum the benchmark yield for crypto.

However, opinions on the impact of the Shapella upgrade on ether's price are divided. JPMorgan analysts predict that Ether will likely face "some selling pressure" as over US$1 million worth of Ether staking rewards become available to validators following the upgrade. They also expect ether to underperform Bitcoin over the coming weeks.

In contrast, Fidelity Digital Assets researchers see the impact of the upgrade as more nuanced. Fidelity believes that the visible impact on the price of Ether should be muted due to several factors. Firstly, most staked Ether positions were at a loss before the recent rally put about half in the money. Secondly, validators' operating expenses are much lower under proof-of-stake than in the energy-intensive proof-of-work system. Finally, liquid staking tokens and staking service providers allow one to participate in staking while also being able to use or sell them. A third of staked Ether is already liquid through these tokens, which means holders have been able to exit before the upgrade.

The popularity of staking leading to re-staking is expected to drive a muted impact on Ether's price. This will make large holders and institutions who had previously been holdouts more comfortable with staking. The Shapella upgrade will further solidify confidence in the Ethereum network. Ethereum developers have successfully tested the Shapella upgrade on public test networks for many months, and it is set to occur on 6:27 p.m. EST on April 12, 2023. Despite the mixed opinions on the impact of the upgrade on Ether's price, the long-term benefits are expected to be significant, with increased efficiency, security, and lower transaction costs.

The Shapella upgrade could potentially result in stepped-up regulatory scrutiny since the US Securities and Exchange Commission has indicated that certain services offering yields from staking cryptocurrencies amount to illegal securities offerings. However, this process of withdrawing staked Ether could take months, and there is a risk of technical problems and glitches as the Shapella upgrade goes live.

Trade ETH now on BTC Markets

XRP price rally stalls whilst Ripple pursues digital deal.

XRP's recent price rally has hit a bump in the road as the SEC vs. Ripple ruling drags on. XRP's value has surged as much as 55% this year, primarily due to investors' anticipation of Ripple winning the SEC lawsuit. However, there was no ruling by the end of March, and the Google search interest for "SEC vs. Ripple" has dropped from a perfect score of 100 in March to 56 in the week ending April 8.

On the other hand, Ripple and Montenegro have signed a deal to create a national digital currency strategy and pilot program for a central bank digital currency or stablecoin. Montenegro currently uses the euro as its currency, but the deal could create a national digital currency. RippleX's VP for Central Bank Engagements and CBDCs, James Wallis, revealed that more details would be disclosed later in the year, and the project would begin this month. The project will go through several stages, including a sandbox stage, to put the future digital currency into circulation under controlled conditions.

Wallis added that the project would identify the practical application of a digital currency or national stablecoin, and they would work closely with the central bank to determine use cases, key success factors, and timelines. Ripple has been expanding in the CBDC space for months, and the company has multiple CBDC projects ongoing worldwide, engaging with dozens of central banks globally.

Trade XRP now on BTC Markets!

Crypto news

Cardano's on-chain gaming enhanced.

Cardano’s blockchain has received a gaming boost as Paima Studios, a layer 2 independent network, has released a feature that allows users to connect and play any on-chain game using ADA tokens directly from their wallets. The cross-chain network integration allows Cardano users to play on-chain games using ADA tokens without needing to bridge tokens to another network. Additionally, Paima supports the migration of games built on other networks to Cardano, enabling users of other networks to play Cardano-based games without having to move assets. All games on the Paima network are non-custodial, which means that funds remain in the user's wallets, thereby mitigating security risks. The release of this feature is part of a series of network improvements and features for the Cardano blockchain that may ultimately add value to its ADA tokens.

Last week, Milkomeda, another layer 2 network, released a feature that will allow Cardano blockchain users to gain access to Ethereum Virtual Machine (EVM) smart contracts with any ADA wallet. An Ethereum Virtual Machine is where all Ethereum accounts and smart contracts live, serving as a virtual computer used by developers to create decentralised applications, or dApps. This new feature will allow Ethereum application developers to build on Cardano’s network using Solidity – the computer language used to code Ethereum – without the need to install new toolkits or learn a new computer language.

Bridging, which refers to transferring tokens between different blockchains, carries major security risks and was at the centre of some of the biggest exploits in 2022. However, Paima’s non-custodial feature mitigates these risks as funds remain in the user's wallets. The integration of Paima’s feature with Cardano’s blockchain will likely attract more users to the network, as they can easily and securely play on-chain games using ADA tokens directly from their wallets. The feature allows developers to migrate their games to Cardano and increase their game's user base.

Singaporeans likely to invest in crypto, even if they can't explain it.

A recent survey conducted by consulting firm CT Group found that most Singaporeans are interested in investing in cryptocurrency despite having limited knowledge about crypto and blockchain technology.

The survey, titled "What Singaporeans Think About Cryptocurrency," surveyed 1,057 Singaporeans aged 18 and above and found that 61% of those surveyed were "likely" to invest in cryptocurrency in the next few years. The survey also revealed that 55% of respondents currently or previously owned cryptocurrency.

While Singaporeans are keen on investing in cryptocurrency, the survey showed that they lack understanding about blockchain technology and cryptocurrency. Nearly half of those surveyed (47%) admitted to being "not very confident" or "not at all confident" in explaining blockchain technology, while 42% were not confident and only 25% of those surveyed said they could "very confidently" explain cryptocurrencies.

The report also found that Singaporeans are in favour of cryptocurrency regulation, with respondents agreeing that regulations are needed to protect investors, reduce fraud, and maintain Singapore's reputation for financial management. While some respondents (46%) believe that regulation of cryptocurrency could kill an important part of Singapore’s economic future, the majority agree that regulation is needed.

The Monetary Authority of Singapore (MAS) has been promoting Singapore as a FinTech hub and has been taking measures to restrict retail access to cryptocurrencies. The MAS has also introduced strict licensing processes for firms carrying out crypto-related services in Singapore.

Despite the lack of understanding, Singaporeans are still interested in investing in cryptocurrencies, with a belief that it can help them get ahead and make them financially stable.

Scam watch

ASIC’s top 10 signs of a potential crypto scam.

Each week, we go over ASIC's top 10 signs of a possible crypto scam. In the previous week, we discussed scams where more money is needed to access your funds. This week, we explore the age-old adage of "if it's too good to be true, it probably is."

One common scam involves promises of guaranteed returns or free money. The allure of such promises can be hard to resist, but it’s important to remember that scammers use these types of promises to attract individuals and convince them to invest in fraudulent schemes.

For example, a scammer may create a fake cryptocurrency exchange and promise guaranteed returns on investments. They may also offer free cryptocurrency to anyone who signs up for their platform. However, once an individual invests their money or provides their personal information, the scammer disappears, leaving the victim with nothing.

Another common scam is the Ponzi scheme. The scammer promises high returns on investments and encourages victims to recruit others to invest as well. The returns are not actually generated through legitimate investments but rather by using funds from new investors to pay earlier investors. Eventually, the scheme falls apart, and many individuals lose their money.

To avoid falling victim to crypto scams, it’s important to do your due diligence. Research any investment opportunity thoroughly before investing your money or providing personal information. Be wary of promises of guaranteed returns or free money, and never invest more than you can afford to lose.

You should also be cautious of unsolicited investment opportunities. Scammers may contact you via email, social media, or even through a phone call claiming to have a great investment opportunity. Don't be swayed by high-pressure tactics, and always verify the legitimacy of the investment opportunity before investing any money.

Another important step is to use a reputable cryptocurrency exchange when buying or selling cryptocurrencies. While crypto can be a great investment option, it’s important to be cautious of crypto scams. Remember, if something sounds too good to be true, it probably is.

To learn more, visit ASIC’s website.

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Prices are accurate as of 10:00 AM AEDT, on 13/04/2023.