Weekly Crypto Wrap: 14th December 2023

TLDR

• Profit-taking & liquidations contribute to market correction.
• SEC casts a shadow over the market, sparking regulatory concerns.
• NFTs on the rise again as collectibles evolve beyond the hype.
• Fund flows stay strong as investors look past dip, eyeing the future.

BTC Markets announcements

So long, 2023! It’s a wrap!

As the year winds down, we're hitting pause on the ‘Weekly Crypto Wrap’ for a much-needed break. But before we sign off, we wanted to take a moment to express our deepest gratitude for your incredible support throughout 2023.

You've journeyed with us through market highs and lows, epic rallies and regulatory rumbles, and everything in between. Your passion for crypto and your unwavering engagement have fuelled our mission to keep you informed, inspired, and ready to take on the ever-evolving digital landscape.

So, from the bottom of our blockchain hearts, THANK YOU!

But fear not, we’ll be back on January 18, 2024, ready to dive headfirst into the new year with fresh insights, market analyses, and all the juicy crypto news you crave. Until then, enjoy a fabulous Christmas break filled with laughter, love, and maybe a little bit of blockchain brainstorming with your family and friends.

Wishing you all a joyous holiday season and a prosperous, crypto-filled New Year!

The BTC Markets Team

AUD Card deposits are now available!

We're excited to announce that you can now deposit AUD directly into your BTC Markets account using your Australian-issued Visa or Mastercard credit or debit card!

This new deposit method makes it even easier and faster to fund your account, all without leaving the exchange. Simply log in to your account and enter your card details. Your funds will be available in your account instantly, ready for you to start trading.

Here are some of the benefits of using AUD card deposits:

• Fast and convenient: Deposit funds instantly without having to leave the exchange.
• Flexible: Use your Visa or Mastercard credit or debit card.
• Secure: We use industry-leading security measures to protect your card information.

In addition to card deposits, we also offer a variety of other deposit methods, including:

• Osko (PayID)
• Direct deposit

We are committed to providing our customers with a convenient trading experience. We believe that adding AUD card deposits will make it even easier for Australians to access digital assets.

To learn more about AUD card deposits, please visit our Help Centre.

BTC Markets submission to Treasury.

BTC Markets submitted a comprehensive response to the Treasury's proposal paper for regulating digital asset platforms. This blog post outlines the content in our submission, reiterating our commitment to supporting the growth of digital finance in Australia and globally.

Read the full submission here.

The Bitcoin halving: its historical performance

Bitcoin's first halving took place in November 2012 when the reward for miners was reduced from 50 to 25 Bitcoins. The impact on the market was profound. In the year following the first halving, Bitcoin's price surged from around US$12 to over US$1,100, marking a staggering increase. This surge was attributed to a combination of reduced supply and increased demand as awareness of Bitcoin grew.

The second halving occurred in July 2016, reducing the block reward to 12.5 Bitcoins. Like the first halving, Bitcoin experienced a significant price rally in the following months, reaching an all-time high of nearly US$20,000 in December 2017. The pattern observed in the first two halving’s suggests a correlation between the reduction in block rewards and substantial price appreciation.

Read more here.

State of crypto

• Profit-taking & unwinding leverage contributes to correction.
• SEC casts a shadow over the market, sparking regulatory concerns.
• NFTs on the rise again as collectibles evolve beyond the hype.
• Fund flows stay strong as investors look past dip, eyeing the future.

The past week in crypto served as a technical textbook example of a market finding its balance. After almost two months of relentless upward price action, Bitcoin and Ethereum experienced a necessary pullback, testing the strength of support levels and shaking out leveraged longs. While the dip raised eyebrows, market participants are calling it a healthy correction within the broader bull run, with many believing that this is a technical breather before the next leg higher.

What caused the dip?

Profit-taking, unwinding leverage, and broader market jitters were the primary catalysts for the recent retracement. Indicators like the RSI on both Bitcoin and Ethereum had entered overbought territory, signalling a potential for a reversion. The dip tested key support levels on the 8hr chart, touching the 50-day moving average, but price ultimately held firm, indicating robust underlying demand at the US$40,500 range.

Bitcoin futures funding rates surged to their highest since 2021's bull run, pushing leveraged investors towards the exit. This triggered a cascade of selling, dubbed a "leverage adjustment" by experts. Profit-taking amplified the correction. As weeks of gains culminated, some investors cashed in, fuelling the selloff. Stabilised prices lured miners to do the same, locking in profits whilst, JPMorgan CEO Jamie Dimon's scepticism likely spooked some, adding fuel to the fire.

Defi and NFTs show resilience.

However, the market wasn't entirely risk-off. Niche sectors defied the dip as DeFi and NFTs held firm, with Avalanche (AVAX) gaining 2.42% and Immutable X (IMX) up an impressive 11.76% during Monday’s trading session. NFTs are moving beyond the hype phase of last year and have shown resurgent sales with rising floor prices, hinting at integration beyond collectibles.

Regulatory scrutiny in the US ramps up.

The regulatory landscape also threw a curveball, with the US Security and Exchange Commissions (SEC) increased scrutiny of Binance casting a shadow of potential headwinds. This could lead to further regulatory hurdles for the industry, with implications for market sentiment and trading volumes.

There is speculation about the SEC appealing the Programmatic Sales ruling in the Ripple case, potentially prolonging the legal battle. Senator Warren's efforts to push through the Digital Asset Anti-Money Laundering Act continue, drawing both support and criticism. While the legislation aims to improve AML/CFT compliance, some worry about its potential impact on innovation and access.

Fund inflows remain strong.

On a brighter note, the eleventh consecutive week of inflows into digital asset investment products provides a strong signal of sustained investor interest in crypto's long-term potential. Bitcoin and Ethereum, despite their temporary retreat, saw healthy inflows, highlighting their position as core assets within the ecosystem.

Assets under management (AuM) for globally listed crypto products rose US$43 million last week, marking the longest stretch of inflows since October 2021. Bitcoin leads the charge with US$20 million in inflows, bringing its year-to-date total to a healthy US$1.7 billion.

Short positions tell another story.

The rise in short positions on Bitcoin suggests that some market participants are sceptical about the rally's sustainability. While overall inflows were positive, a portion of the inflows went into short positions, particularly in Bitcoin (inflows of US$8.6 million). This suggests some investors believe the current rally may not be sustainable. Europe dominated inflows with US$43 million, while the US saw only US$14 million, half of which went short. This suggests a cautious approach from some American investors.

Bitcoin spot ETF approvals.

The upcoming approval of spot Bitcoin ETFs in January could be a major catalyst, injecting fresh liquidity and boosting investor confidence. Additionally, BlackRock and Bitwise's updated ETF applications signal further progress towards broader institutional adoption, potentially leading to a wave of approvals in the coming months.

A year in review: 2023 was a year of triumphs and tribulations.

2023 wasn't just a year, it was the year that crypto evolved into a force to be reckoned with. Legal victories like Ripple's against the SEC, and Grayscale's ETF case paved the way for mainstream adoption. Solana's face-melting gains showcased blockchain's resilience. Australia finally embraced regulation. But the biggest news? Institutional giants like BlackRock, Fidelity, and Goldman Sachs stepped into the arena, pushing crypto into the financial stratosphere. Buckle up, as we explore the top events that shaped this year of both triumph and progress.

XRP’s legal victories and price surge.

The long-awaited legal battle between Ripple and the U.S. SEC took a dramatic turn when a U.S. judge ruled the sale of XRP tokens on exchanges did not constitute investment contracts. This fuelled optimism and sent XRP's price soaring by almost 100% in a single day, marking a major milestone for the embattled cryptocurrency. A few months later, another win for Ripple Labs when the SEC voluntarily dismissed its civil case against Ripple’s senior executives.

Grayscale wins final round in spot Bitcoin ETF case.

In a major victory for the crypto industry, Grayscale's bid to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF has been granted approval by the D.C. Circuit Court of Appeals. The court deemed the SEC's previous rejection "arbitrary and capricious," forcing the agency to re-consider Grayscale's application. This victory for Grayscale removes a major hurdle to the potential approval of Bitcoin ETFs in the US, a potential catalyst for the entire market.

Solana outperforms the crypto market.

Solana surges, claiming the 2023 crypto crown, peaking at a 700% gain on the year. Listings like Phantom, a thriving DeFi/NFT ecosystem, and airdrop buzz fuelled by Jito, are supporting Solana’s current price action. Ark Invest CEO, Cathie Wood's appearance on CNBC, singing Solana’s praise added further fire to Solana’s market dominance of the altcoin market.

Australian crypto regulation takes shape.

Australia's Treasury Department has proposed comprehensive regulatory frameworks for crypto exchanges, aiming to address concerns about consumer protection, market integrity, and financial crime. This move signals a shift towards regulatory clarity and potential for wider adoption.

Institutional adoption expands beyond Bitcoin.

2023 saw a wave of major institutions embracing crypto beyond just Bitcoin. BlackRock & Fidelity ignited the Bitcoin ETF fire, while EDX, a new exchange backed by global tradfi giants, Fidelity Digital Assets, Charles Schwab, and Citadel Securities, launched, supporting trading in Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). To top it off, Goldman Sachs and friends-built Canton, a blockchain network for financial institutions, proving they're not just playing, they're building the future.

These events highlight the dynamic nature of the crypto landscape in 2023. While challenges remain, the year witnessed legal victories, technological advancements, and growing institutional adoption, all pointing towards a future where crypto continues to evolve and integrate into the global financial system.

The future of crypto

Top trends to watch in 2024.

Bitcoin's recent surge above $44k signals a potential shift in its long-term price trajectory, potentially thawing the recent crypto downturn. However, predicting a sustained bull run or another icy spell requires understanding the market's evolving dynamics.

Here are the top 5 crypto narratives to watch in 2024:

Artificial Intelligence (AI): its revolutionising various industries, and crypto is no exception. Look for projects that support AI operations like Akash (AKT) and Render (RNDR), which offer decentralised marketplaces for AI computing power. And develop AI solutions like Fetch.ai (FET) and Bittensor (TAO) create and sell autonomous AI software and services.

• Support AI operations: Like Akash (AKT) and Render (RNDR), which offer decentralised marketplaces for AI computing power.
• Develop AI solutions: Fetch.ai (FET) and Bittensor (TAO) create and sell autonomous AI software and services.
• Real World Asset Tokenisation (RWA): From real estate to carbon credits, tokenising real-world assets unlocks new investment opportunities and improves transparency.
• DePIN (Decentralised Physical Infrastructure Networks): These blockchain-powered networks build and manage physical infrastructure like data centres and wireless networks, offering open access to anyone. Filecoin (FIL), Render (RNDR), and Helium (HNT) are some key players.
• Restaking: This innovative approach to yield farming allows you to earn extra rewards on your already-staked tokens, like stETH and rETH. Lido (LDO) and Rocket Pool (RPL) are popular options.
• Data availability layers: As blockchains become more modular, these off-chain solutions store and verify transaction data, ensuring scalability and security. Celestia (TIA), NEAR (NEAR), and Injective (INJ) are leading the way.

Bonus trends to keep an eye on:

• Layer-2: Scaling solutions for congested blockchains like Ethereum.
• Blockchain gaming: Play-to-earn and metaverse games are gaining traction.
• Decentralised social (DeSo): Censorship-resistant social media platforms built on blockchain.

The weekly crypto close.

After eight weeks of nonstop green candles, the crypto market finally took a breather, with traders cashing out and leveraged positions getting liquidated. But don't mistake this for a bear market – some major coins still enjoyed double digit gains before the correction on Monday:

• Avalanche (AVAX): +69.28%
• Cardano (ADA): +50.62%
• Solana (SOL): +18.88%
• Bitcoin (BTC): +9.55%
• Ethereum (ETH): +7.27%
• Litecoin (LTC): +6.73%
• XRP (XRP): +6.23%
• Chainlink (LINK): +4.22%

This collective rally pushed the total market cap to US$1.603 trillion, a 9.38% increase. Bitcoin maintained its dominance, briefly reaching 55.26% before settling at 53.47%.

Meanwhile, the crypto market sentiment is maintaining its position in the Greed zone, currently at 72 on the Crypto Fear & Greed index, up from 65 yesterday.

Year-to-date in the crypto space.

Despite the year's twists and turns, the crypto market ends 2023 with a resounding message of resilience and growth. While some coins encountered turbulence, others soared like rockets, showcasing the industry's unwavering innovation and potential:

Solana (SOL) dominated the field, claiming the crown with a staggering 608% annual gain. Its blazing-fast transaction speeds and innovative consensus mechanism attracted developers and investors alike, fuelling its meteoric rise.

Avalanche (AVAX) proved its use case by handling high transaction volumes with ease. Its fast, low-fee blockchain and focus on cross-chain interoperability attracted users and developers, leading to a 257% climb.

Chainlink (LINK) cemented its position as the go-to solution for secure off-chain data in the blockchain world. Its growing integration with major DeFi protocols and continued development of its oracle network propelled LINK to a 165% surge.

Bitcoin (BTC) the OG of crypto, continues to defy the naysayers with a respectable 159% gain. Its continued institutional adoption and growing narrative as a store of value solidified its position as a top performer.

Ethereum (ETH) the undisputed leader for smart contracts, saw a steady 88% gain as developers and users continued to flock to its ecosystem.

XRP (XRP) despite ongoing legal battles, managed a commendable 85% rise, buoyed by its strong community and growing use cases in cross-border payments.

Other notable achievers throughout the year include Bitcoin Cash (BCH) up 154%, Cardano (ADA) sitting on a 70% gain, Compound (COMP) up 62% and finally Bitcoin SV (BSV) with a 20% annual gain.

As we look towards 2024, the crypto landscape remains dynamic and unpredictable. However, the successes of the top movers offer valuable lessons in innovation, adoption, and community building. By staying informed, managing risk, and focusing on long-term potential, we can all navigate the exciting world of crypto with confidence.

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

**Year-to-date performance as of Thursday, December 14th at 11:00 am AEDT, based on data from Tradingview in USD.

Crypto news

BlackRock’s bold move: Bitcoin ETF shifts risk, sparks hope for crypto markets.

Bitcoin is back in the spotlight, this time fuelled by a significant shift in BlackRock's proposed ETF. The asset management giant is making waves by transferring redemption risk from traditional banks to crypto market makers, potentially paving the way for a major influx of institutional capital into the digital asset space.

BlackRock's iShares Bitcoin Trust (IBTC) application has been under scrutiny by the SEC due to concerns about market manipulation. Instead of banks initiating the process, crypto market makers will now be responsible for providing cash up front, streamlining the process and mitigating risk for banks. This shift could attract more Wall Street players, increase liquidity, and boost overall market stability.

Invesco's recent capitulation to the SEC's cash creation demands and the listing of BitWise's ETF on the DTCC website further heighten anticipation of a potential green light.

BlackRock's Jeffrey Rosenberg, the firm's portfolio manager, sees recent Federal Reserve statements as a "green light for investors," suggesting a more dovish stance on interest rates could further fuel Bitcoin's rise.

While the SEC's decision on IBTC remains pending, BlackRock's bold move has ignited renewed optimism in the crypto community. It's a sign of growing institutional interest and a testament to the evolving regulatory landscape surrounding digital assets.

Buy Bitcoin on BTC Markets.

Ethereum dips, but eyes US$3k as data storage holds the key.

Ethereum's price dipped below US$2,200 this week, venturing into a crucial zone where millions of wallets hold their tokens. This confluence of support and recent price action has analysts buzzing about a potential rally towards US$3,000, though resistance lurks just above.

However, scaling Ethereum through rollups, a key technology for boosting transaction throughput, remains hampered by data storage limitations. Projects like Celestia are stepping up to address this bottleneck by building dedicated data availability layers, offering a potential lifeline for the burgeoning ecosystem.

Meanwhile, Ethereum core developers aren't sitting idle. The upcoming Dencun upgrade will introduce proto-danksharding, a clever technique for reducing transaction costs. While data availability and storage remain significant hurdles, Ethereum's robust development activity and the glimmer of a US$3,000 horizon suggest a promising path forward.

Ethereum is set to outperform Bitcoin in 2024, predicts JPMorgan, thanks to its upcoming EIP-4844 upgrade that boosts efficiency. This upgrade, while not a full sharding solution like Danksharding, offers temporary data storage for Layer 2 networks like Arbitrum and Optimism, increasing their throughput and lowering fees.

While Bitcoin's halving in 2024 might be a bullish factor, JPMorgan believes it's already priced into the current market value. Overall, Ethereum's technological advancements make it the likely winner in the crypto race next year, despite the bank's general caution towards the market.

Buy ETH on BTC Markets.

Solana (SOL) and Avalanche (AVAX) soar as Bitcoin maintains dominance.

While Bitcoin remains the king, altcoins Solana and Avalanche are stealing the spotlight. Last week, crypto funds saw US$43 million in inflows, with US$3 million and US$2 million specifically targeting Solana and Avalanche, respectively. This renewed interest stems from big names like J.P. Morgan and Visa venturing onto their blockchains.

Solana, boasts its ‘Proof of History’ consensus mechanism, enabling thousands of transactions per second. Its sharding technology further fuels this speed, dividing the network into smaller, faster-processing chunks. This makes Solana ideal for high-throughput applications like DeFi protocols and NFTs.

Meanwhile, Avalanche, employs a unique combination of consensus mechanisms, allowing it to adjust to different transaction needs with unparalleled flexibility. Its innovative subnet feature lets developers tailor mini ecosystems within the network, catering to specific requirements like gaming or enterprise applications.

Both Solana and Avalanche, with their distinct strengths, offer exciting avenues for building decentralised applications and pushing the boundaries of blockchain technology.

Buy SOL on BTC Markets.

Crypto takes a step toward mainstream with new accounting rules.

The US Financial Accounting Standards Board (FASB) has finalised new accounting guidelines for crypto assets. Starting in late 2024, these assets will be valued at their fair market value, potentially smoothing the way for broader adoption by institutions.

Previously, crypto was treated as an intangible asset, meaning its value could only decrease on company books, not increase. This wasn't ideal in a volatile market like crypto, where values can skyrocket and plummet quickly. The new rules change that, allowing companies to accurately reflect the market value of their crypto holdings in financial reports.

This move is significant for several reasons:

• Increased transparency: Fair value accounting provides a more accurate picture of a company's financial health, including its crypto holdings.
• Reduced risk for institutions: By accurately reflecting value, the new guidelines could make crypto more attractive to institutions, who previously faced uncertainty and risk due to the old accounting methods.
• Potential boost for adoption: With more accurate and transparent accounting, crypto could become more appealing to investors and businesses, potentially accelerating its overall adoption.

While the full impact of these changes remains to be seen, they represent a major step forward for the crypto industry. By providing a clearer and more realistic way to account for crypto assets, the FASB has opened the door for wider adoption and potential mainstream integration.

The week ahead: upcoming economic events

December 14th: Bank of England Interest Rate Decision. Euro Area ECB Interest Rate Decision & Press Conference. US Retail Sales.

December 15th: China's Industrial Production & Retail Sales. Germany's HCOB Manufacturing PMI.

December 18th: Germany's Ifo Business Climate.

December 19th: Reserve Bank of Australia's Meeting Minutes. Bank of Japan's Interest Rate Decision. Canada's Inflation Rate. US Building Permits.

December 20th: Japan's Balance of Trade. Germany's GfK Consumer Confidence.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

• RBA Governor Bullock calls for help with cost of cash.
• ‘Buy Now, Pay Later’ could see regulations to combat high fees.
• Consumers cautiously optimistic as business confidence tumbles.

The Reserve Bank of Australia (RBA) Governor Michele Bullock is urging banks and other cash users to share the burden of moving money, citing Armaguard's financial woes and declining cash usage. She suggests a "co-operative model" including contract changes, public utility funding, and possibly shared ownership of Armaguard.

Meanwhile, Bullock seeks to maintain rural ATM access, review ATM regulation, and potentially regulate ‘Buy Now, Pay Later’ (BNPL) providers like Afterpay to allow surcharges and reduce fees. A holistic review of retail payments systems, including mobile wallets, is planned for 2024, with Bullock potentially intervening to enforce "least-cost routing" for debit transactions to benefit small businesses.

Bullock is pushing for a collaborative solution to adapt to changing economic realities and ensure continued cash access, while also promoting fair practices for businesses and consumers.

Australian consumer sentiment saw a glimmer of hope in December, rising slightly after a tumultuous year. While still historically low, the Westpac-Melbourne Institute index reflects cautious optimism, fuelled by the RBA's pause on interest rate hikes. However, inflation and the potential for further rate rises in 2024 remain key concerns, weighing heavily on household finances.

Meanwhile, the picture from businesses is less rosy. The NAB's confidence index plunged to its lowest since 2012, indicating widespread pessimism despite continued activity. Sales, profits, and forward orders declined, with mining, transport, and construction sectors particularly affected. While employment remained steady, rising price pressures and softening demand paint a picture of a resilient but hesitant economy.

The conflicting signals from consumers and businesses highlight the delicate dance Australia faces in 2024. While the central bank's pause offers temporary relief, taming inflation without stifling growth will be crucial. Consumer confidence remains fragile, and further rate hikes could further dampen spending.

Businesses, though cautious, retain production capacity, suggesting potential for future growth if sentiment improves. Ultimately, the coming months will be decisive in determining the trajectory of the Australian economy and its impact on everyday lives.

Global

• Mixed global economy as some grow, and others struggle.
• US Fed holds rates steady with dovish outlook, hints at future cuts.
• Job growth vs. inflation as the US Fed walks a tightrope.
• China's surprise: inflation plummets, optimism blooms.
• Japan's manufacturers chirping, spending plans soar.
• UK expands cautiously, eyes on lower rates.

Overview

The global economic landscape remains a mixed bag, with individual countries exhibiting unique dynamics. While the US continues to grapple with balancing job growth and inflation control, China's surprise inflation dip and Japan's manufacturing optimism offer contrasting narratives. Meanwhile, the UK's modest expansion and Germany's shift in sentiment towards lower interest rates paint a picture of cautious optimism. As central banks continue to navigate the delicate dance between economic growth and inflation control, the coming months will reveal the trajectory of the global economy.

United States

The US Federal Reserve's (Fed) December meeting delivered a surprise dovish twist, holding rates steady but hinting at a change in 2024. Gone are the days of aggressive hikes, replaced with the prospect of three rate cuts in 2024, exceeding forecasts and sending markets on an upwards trajectory. While some within the committee remain hawkish, the focus has shifted towards a soft landing, not recession, buoyed by upgraded GDP and lowered inflation projections.

Chair Powell acknowledged progress on inflation but cautioned against victory laps, reminding everyone it's "far too early" to celebrate. The data will hold the reins on future cuts, with the first potentially arriving as early as March 2024. This policy shift marks a turning point for the US economy, leaving investors cautiously optimistic about the road ahead.

On the inflation front, November offered a mixed bag. Headline numbers dipped slightly to 3.1%, but stubborn core inflation remained steady at 4%. Analysts expressed concern about achieving the Fed's 2% target, highlighting the cautious approach policymakers are taking.

But amidst the inflationary worries, resilience shines through. November saw robust job growth, exceeding expectations, and unemployment unexpectedly dropped to a 3.7% low, defying recent trends. This robust labour market, coupled with surging consumer confidence fuelled by falling inflation expectations, paints a picture of an economy weathering the storm.

As we move forward, the US economy presents a mixed bag. Inflation remains a hurdle, and the Fed will tread cautiously. However, positive indicators like job growth and consumer confidence offer hope for a soft landing. The coming months will be crucial in determining the trajectory of inflation and the Fed's response, but one thing is certain: the US economy is at a turning point, and cautious optimism is in the air.

China

Chinese consumers enjoyed a price break in November, with consumer prices unexpectedly plummeting 0.5% year-over-year, the fastest drop since 2020. Cheaper food and moderating non-food inflation fuelled the decline, while core CPI remained stable at 0.6%.

Their trade surplus surprised analysts, expanding in November, exceeding market forecasts. Exports unexpectedly rose by 0.5%, defying expectations of a 1.1% drop, while imports fell 0.6%, missing predictions of a 3.3% gain.

United Kingdom

The UK unemployment rate held steady at 4.2% in October, while regular pay growth eased and job vacancies fell for the 17th consecutive month, raising concerns about a potential slowdown. Whilst the UK economy managed a modest 0.2% MoM expansion in September, driven by services output, offering a glimmer of hope amidst the broader gloom.

Germany

The ZEW Indicator of Economic Sentiment climbed in December, the highest since March, suggesting a potential shift in expectations towards lower interest rates, buoyed by improving economic assessments and expectations.

Japan

Large manufacturers' sentiment rose in Q4, the highest since Q1 2022, driven by optimism across various sectors. Firms also plan to increase capital expenditure by 13.5% in the current fiscal year, exceeding forecasts.

Regulation roundup

MiCA makes its mark: crypto fraud plunges 51% as regulations bite.

A new report by AU10TIX reveals a dramatic shift in the landscape of identity fraud. While cryptocurrencies, traditionally a hotbed for fraudsters, witnessed a surprising 51% decline, the payments sector saw a staggering 56% surge. This trend is attributed to the upcoming EU MiCA regulations, which are tightening the screws on crypto activity.

Organised crime rings, anticipating stricter KYC procedures, are migrating their efforts towards the less regulated area of payments. This is evident in the report's findings, with the payments sector becoming the most targeted industry for fraud, accounting for a whopping 51% of all attacks. North America and APAC, with their complex digital transaction environments, emerged as the prime targets.

However, the report also highlights the effectiveness of robust verification methods like selfie capture, which fraudsters find difficult to bypass. This reinforces Gartner's recommendation of facial image capture as a must-have for identity verification vendors.

AU10TIX CEO Dan Yerushalmi warns that publicly available fraud statistics only reflect what traditional IDV solutions can detect. He estimates the actual fraud rate to be significantly higher due to sophisticated AI-powered attacks using deepfakes and other advanced techniques.

The report underscores the urgent need for stricter regulations in the payments sector, particularly in the US and APAC. Businesses, in the absence of such regulations, must proactively strengthen their KYC practices to combat this evolving threat.

Compliance conversations

The looming wave of AI-powered misinformation and deepfakes.

Deepfakes, those hyper-realistic AI-powered manipulations of videos and audio, have gone from science-fiction stories to a potent tool in the age of digital misinformation. In the blink of an eye, anyone's voice and likeness can be morphed, creating a manufactured reality.

Recognising these digital fakes has become an essential skill in the modern world, and the tips provided from MIT Media Lab offer a valuable roadmap for navigating this increasingly complex landscape.

Shining a light on the cracks

Uncover eight telltale signs to spot deepfakes instantly:

• The face is ground zero of deepfakes: Facial manipulation remains the hallmark of high-end deepfakes. Look for uncanny smoothness or exaggerated wrinkles, inconsistencies between skin tone and hair/eye age, and unnatural facial expressions.
• Unmasking the physics: Real-life obeys the laws of physics. Look for inconsistencies in shadows, glare (especially on glasses), and the way light interacts with objects as the person moves. Deepfakes often get these details wrong.
• The eyebrows and eyes are the windows to the soul: Deepfakes can struggle with natural eye movements and blinking patterns. Pay attention to unnatural blink rates, misplaced shadows, and movements that feel robotic.
• Facial hair: Adding or removing facial hair can expose deepfakes. Analyse the realism of the hair texture, its interaction with light, and whether it moves naturally with the face.
• Moles and marks: Just like fingerprints, moles and other unique features can be a dead giveaway. Look for unnatural shape, placement, or colour of moles in a deepfake.
• Blinking: Humans blink at a specific rate and rhythm. Deepfakes can struggle to replicate this natural rhythm, so look for unnatural blinking patterns or excessive blinking.
• Lip movements: Deepfakes often rely on lip-syncing technology. Watch for mismatched lip movements compared to the audio, especially during subtle expressions or consonant sounds.
• Practice makes perfect: Develop your deepfake-detection intuition by testing your skills. The more you practice, the better you'll become at spotting the subtle tells that betray a manufactured reality.

Recognising deepfakes is just the first step.

We need to collectively combat the spread of misinformation. Deepfakes are a complex issue, but by educating ourselves and acting, we can build a more resilient information ecosystem.

Remember, in the face of this digital tsunami, vigilance and scepticism are our strongest weapons.

Test your deepfake-spotting skills with MIT Media Lab's interactive quiz, 'Is this a DeepFake?' Can you tell the real from the reel?

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

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Prices are accurate as of 11:00 AM AEST on 12/14/2023.

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