Weekly Crypto Wrap: 16th March 2023

TLDR

• BTC price surges amid banking contagion fears while Ethereum’s yearly gain hits 42.37%.
• USDC temporarily ‘depegs’ from the US dollar while crypto firms receive support from major banks.
• US inflation figures come in at expectations at 6% for February.
• Australian 'Big Four' bank launches a stablecoin on Ethereum.

CEO corner

Over the weekend, the cryptocurrency industry was impacted by a liquidity issue at Silicon Valley Bank (SVB). We are also closely monitoring the unfolding events related to Credit Suisse. The market reaction to the Tradfi instability caused the USDC stablecoin to temporarily depeg from the U.S. dollar. This has raised concerns about the stability of stablecoins and the potential impact on the wider crypto market.

As an Australian-based cryptocurrency exchange, BTC Markets wants to assure its clients that we have no exposure to SVB, Signature Bank, or any other affected institutions. We take a conservative approach to managing our business and client assets, prioritising the safety and security of our clients' funds.

We do not engage in risky practices such as lending client assets or holding debt in our business. We maintain complete segregation of client assets. Our business model is simple: no rehypothecation (a practice where entities use, for their own purposes, assets that have been posted as collateral by their clients), no debt, no co-mingled assets, and no proprietary trading (we never trade against our clients).

We understand the concerns raised by recent events and are committed to providing a safe and reliable platform for our clients to trade cryptocurrencies. We will continue to monitor the situation closely and take any necessary steps to ensure the security and stability of our platform.

Caroline Bowler, CEO BTC Markets

The week ahead

March 16th: Japan will release its Balance of Trade report and the USA will also release its Building Permits Preliminary report, which gauges the health of the housing market and the broader economy.

March 17th: the European Central Bank (ECB) will announce its Deposit Facility Rate, which can influence the cost of borrowing and level of lending in the Eurozone. The ECB will also make its Interest Rate Decision, impacting the value of the Euro.

March 18th: the USA will release its Michigan Consumer Sentiment Preliminary report, which measures consumer confidence, a significant driver of economic growth.

March 21st: the Reserve Bank of Australia (RBA) will release its Meeting Minutes, Germany will release its ZEW Economic Sentiment Index, and Canada will release its inflation rate report.

March 22nd: the UK will release its inflation rate year on year report, which can impact investment decisions, interest rates, and consumer spending.

March 23rd: the US Federal Reserve will announce its interest rate decision along with its latest economic projections. Fed Chair Jerome Powell will hold a press conference, where he is expected to provide further details on the Fed's decision-making process.

Economic Calendar (tradingeconomics.com)

Market reflections

Why did USDC depeg from the US dollar?

Over the weekend, the USDC stablecoin experienced a ‘depegging’ from the U.S. dollar, which was caused by the collapse of Silicon Valley Bank (SVB). Circle, the issuer of USDC, reported that approximately $3.3 billion of USDC reserves were trapped in SVB, the largest bank by deposits in Silicon Valley.

SVB had 89% of its $175 billion in deposits uninsured at the end of 2022, and the combination of large, uninsured deposits and unrealised US Government Bond losses, resulted in a liquidity crisis once SVB started selling to meet depositor demands for cash. When the bank was unable to meet depositor demands, it was closed by the California Department of Financial Protection and Innovation on Friday, to protect depositors. While the likelihood of any direct contagion effects on Australian banks is slim, the collapse of SVB could have an impact on the global technology sector, and its significance remains to be seen.

CoinGecko reported that the USDC stablecoin returned to its US$1.00 value after federal regulators announced on Sunday that all depositors with Silicon Valley Bank will have access to their funds and be fully compensated.

Australia

Consumer confidence has plunged to the lowest point in decades as indicated by the latest surveys from Westpac and National Australia Bank (NAB). The Westpac survey suggests that 74% of those polled are bracing for more rate hikes this year, following March's rate rise to 3.6%. Westpac is cautiously indicating that there could finally be a rate hike pause in April after ten consecutive rises.

For now, three of the big four banks expect Australia to reach a peak cash rate of 4.10%, with the Commonwealth Bank calling a peak of 3.85%. This week, Australian shares sank to a 10-week low, but safe-haven assets such as Australian Government Bonds, gold, and Bitcoin rallied as investors sheltered from worries about the banking crisis in the US.

Westpac's Chief Economist, Bill Evans, has highlighted RBA Governor Philip Lowe's recent remarks as a clear signal for potential rate hikes soon. However, after the December quarter's weak prints for wages growth and economic activity, along with a soft January inflation report, Governor Lowe has hinted at a possible pause in April. Mr Evans notes that upcoming data on employment, inflation, spending, and confidence will determine whether this pause eventuates.

Betashares' Chief Economist, David Bassanese, predicts that the recent chaos in the US may have a temporary upside for Australian homeowners, and the fallout in the next few days could encourage the RBA to pause at the April meeting.

USA

The latest US inflation figures have garnered close attention from the global financial sector, with the consumer price index (CPI) recording a year-on-year (YoY) increase of 6% in February. This figure, though marginally lower than the 6.4% YoY in January, continues to exert substantial pressure on the Federal Reserve's forthcoming interest rate policy decision, given the persistently high costs of food, shelter, and services that continue to keep inflation far above the central bank's 2% target.

Economists are divided on the future course of Fed interest rates, with some banks cautioning against potential rate cuts. On the other hand, Fed Chairman Jerome Powell maintains that the economy's cooling has partly reversed, as evidenced by recent data on jobs, consumer spending, production, and inflation.

Morgan Stanley's US economist Ellen Zentner believes that services inflation remains too high for the central bank to lower rates. Nevertheless, investor sentiment has improved, as evidenced by the positive performance of global shares, primarily led by US bank shares. The latest inflation figures, in line with expectations, have further boosted investor sentiment.

While some market participants believe that the ‘Fed Put’ is back, the rising inflation scenario complicates matters. Goldman Sachs also revised its expectations, stating that it no longer expects the Fed to raise rates this month.

State of crypto

The digital asset majors experienced a third consecutive week of negative performance, with Bitcoin declining to a low of US$19,549 on Friday. Despite this setback, Bitcoin recovered a significant portion of its losses and closed the week with a 1.93% loss. On the other hand, Ethereum demonstrated resilience by shrugging off Bitcoin's price performance, delivering a 7.78% gain, while XRP recorded a modest increase of 0.89%.

In terms of yearly gains, Bitcoin remains up by 10.53% and is currently trading at US$24,791. Ethereum, on the other hand, has exhibited significant growth with a yearly gain of 42.37% and is presently trading at US$1,702. XRP has a yearly gain of 10.56% and currently trading at US$0.3746.

Bitcoin's market capitalisation has declined by 0.29% on the weekly close, but its current dominance has surged to 45.13% following the recent price rally. The overall cryptocurrency market capitalisation incurred a slight loss of 0.55% last week. Nonetheless, the total market capitalisation has exceeded the trillion-dollar threshold once again, currently valued at US$1.066 trillion.

Alt action

Flare (FLR) launches a new feature.

Flare has recently launched a new feature that allows for automatic claiming of Flare (FLR) tokens, referred to as "autoclaiming", for FTSO Delegation Rewards and FlareDrop Distributions without the need for user input. This function entails assigning an executor to claim rewards on behalf of the user, with a nominal fee charged for the service rendered.

Presently, two executors are available on Flare, developed by Bifrost Wallet and Flare Oracle, respectively. Each executor charges a fee of 0.4 FLR for every claim made. This functionality can be managed natively through their respective decentralised applications (dApps) or via the Flare Portal. Further, additional executors are expected to become available shortly.

It is crucial to note that this feature is exclusively available on Flare, with technical details provided in the Flare Technical Documentation.

Flare (FLR) is a utility token for the Flare Network, a smart contract platform that utilises the Federated Byzantine Agreement (FBA) consensus algorithm to allow for interoperability with the Ethereum network. This feature permits the execution of dApps and smart contracts, with the Flare Network seeking to make these features more accessible to the broader public by simplifying the technical aspects of the Ethereum network.

Trade Flare now on BTC Markets

The Big 3

Bitcoin price surges on banking woes.

Bitcoin has experienced a substantial surge amid growing banking chaos across the global financial system. According to Tradingview, Bitcoin hit a high of USD$26,386 on Tuesday, marking a significant price increase during the trading week. The digital token has soared in price since the start of the year, reaching a nine-month high before consolidating at the US$24,300 level.

The banking chaos has prompted federal regulators to intervene in a bid to avoid a massive bank run, which has resulted in three banks failing within a week. As a result, people have become sceptical of traditional banking, which could be leading to a surge in Bitcoin's price. Bitcoin's rally is occurring as banks with cryptocurrency ties face tremendous pressure, and there is a looming risk of further bank failures.

OANDA Senior Market Analyst Edward Moya stated that Bitcoin's surge is the biggest one-day rise since the FTX turmoil, indicating that some investors believe DeFi solutions support the case for holding cryptocurrencies. Moving money into crypto offers root ownership and protection from bank failures.

Trade BTC now on BTC Markets!

Australian 'Big Four' bank launches a stablecoin on Ethereum.

National Australia Bank (NAB), one of Australia’s ‘Big Four’ banks, has recently completed its first intra-bank cross-border transaction using its own stablecoin via Ethereum. The transaction is part of a pilot program for an Australian dollar (AUD)-backed stablecoin, which has showcased the potential to shorten cross-border transactions from days to minutes. This pilot program involved deploying stablecoin smart contracts for seven major global currencies and NAB intends to issue its stablecoin under the ticker “AUDN.”

The stablecoin will be managed as a liability on its books, and the firm plans to enable transactions for the Australian, New Zealand, Singapore, and US dollars, as well as the euro, yen, and pound sterling. Digital asset infrastructure provider Fireblocks and fintech platform Blockfold have assisted NAB with the smart contracts, direct custody of the tokens (alongside minting and burning), and the stablecoin was issued as an ERC-20 token.

NAB’s stablecoin transaction is a milestone for the bank, as it claims to be the world’s first major financial institution to process a cross-border stablecoin transaction via a public Layer-1 blockchain.

Although ANZ, another ‘big four’ Australian bank, became the first institution in the country to issue and conduct payment of a stablecoin linked to the nation’s dollar last year, also via Ethereum, it wasn’t cross-border. JPMorgan, alongside Singapore’s DBS Bank and others, executed foreign exchange transactions using tokenised deposits, a slightly different concept to stablecoins, as part of a 2022 pilot. The group used Ethereum Layer-2 network Polygon for the trades.

NAB believes that elements of the future of finance will be blockchain-enabled, and it expects to support “select corporate and institutional clients” in transacting with digital assets by the end of the year. As the world of finance continues to evolve rapidly, NAB’s stablecoin pilot program is an important development for the Australian banking sector, which could lead to faster, more efficient, and secure cross-border transactions.

Trade ETH now on BTC Markets!

Ripples modernisation of cross border payments using XRP.

Cross-border payments using blockchain technology involve the use of a distributed ledger to facilitate transactions between parties in different countries. It allows for a secure and transparent record of transactions that can be accessed by all parties involved in the payment process.

Here are the steps involved in a typical cross-border payment using blockchain technology:

• The sender initiates the payment: The sender initiates a payment using a cryptocurrency, such as XRP, and sends it to the recipient's wallet address.
  
• The transaction is validated: The transaction is validated by a network of nodes that confirm the sender has sufficient funds to complete the transaction.
  
• The transaction is recorded on the blockchain: Once the transaction is validated, it is recorded on the blockchain, which serves as a ledger of all transactions.
  
• The recipient receives the payment: The recipient's wallet address is credited with the cryptocurrency, which can then be converted into local currency if desired.
  
• The transaction is settled: The transaction is settled almost instantly, and the funds are available to the recipient without the need for intermediaries.

Cross-border payments using blockchain technology can provide faster settlement times, lower transaction costs, increased security, and transparency. They also have the potential to improve financial inclusion by providing access to financial services to individuals and businesses in underserved regions.

Ripple is a payments network operating worldwide that boasts a customer base of major banks and financial service providers. Within the Ripple ecosystem, XRP serves as a cryptocurrency designed to enable speedy exchange of diverse currencies.

Trade XRP now on BTC Markets!

Crypto news

Crypto firms continue to receive support from major banks.

Several of the biggest banks backing the crypto scene have recently collapsed, raising concerns about the fate of United States-based crypto firms. While it has been said that there is “nobody left to bank crypto companies,” there are still many options available.

Banks that have crypto clients include BNY Mellon, JPMorgan, Cross River, BCB Group, Customers Bank, DBS, OCBC, Mercury Bank, and Axos Bank.

BNY Mellon launched its digital custody platform for institutional clients in October 2022, and Circle (USDC) chose BNY Mellon as one of its custodians for its USD Coin reserves.

JPMorgan has processed over $430 billion in transactions through its Onyx Digital Assets platform, and it is exploring “deposit tokens” as an alternative to privately issued stablecoins and central bank digital currencies.

Cross River offers crypto solutions to fintech companies, and it has served clients both inside and outside of the crypto space.

BCB Group offers a custody solution for BTC and ETH wallets, and Customers Bank offers instant payments for business-to-business transactions and instant settlement for cryptocurrency trading firms.

DBS and OCBC offer their own custody platforms, and Mercury Bank offers banking services for Web3 startups, decentralised autonomous organisations, and funds.

Axos Bank offers access to multiple crypto-related exchange-traded funds (ETFs) and its digital payments alternative, TassatPay, which has processed over US$400 billion in transactions to date.

The situation surrounding banks, crypto and stablecoins is fluid, but there remain mainstream options for those working in the space.

Scam Watch

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

Each week, we walk through ASIC's list of top 10 signs of a potential crypto scam. Last week we focused on receiving an amazing ‘offer out of the blue’. This week we will be talking about scammers pressuring people into transferring crypto from their current exchange or wallet to another website.

With the rise in popularity of cryptocurrencies, scammers are getting more creative and ruthless in their attempts to steal them. One of the most common tactics used by scammers is to pressure clients into transferring their crypto from their current exchange or wallet to another website. In this blog post, we will discuss this type of scam and how to protect yourself online.

The scam usually starts with an unsolicited message or phone call from someone posing as a representative of a reputable exchange or wallet service. They may claim that your account has been compromised, or that they need to verify your identity or update your security settings. They will then ask you to transfer your crypto to another website or exchange for safekeeping.

However, once you transfer your crypto, it will be gone forever. The scammers will disappear with your hard-earned money, leaving you with no recourse.

So, how can you protect yourself from this type of scam? Here are some tips:

• Be cautious of unsolicited messages or phone calls. Do not provide any personal information or transfer your crypto to anyone you do not trust.
• Verify the identity of the person or organisation contacting you. Check their website and social media profiles for legitimacy.
• Keep your crypto in a secure wallet or exchange. Choose a reputable provider with strong security measures.
• Enable two-factor authentication (2FA) on your accounts. This adds an extra layer of security to your login process.
• Stay up to date on the latest scams and security threats. Follow reputable news sources and blogs for updates.
• BTC Markets will never cold call you or solicit the transfer of funds. We do not contact our clients unless they have an open support ticket via our platform.

Scammers are constantly looking for new ways to steal your crypto. By being vigilant and following the tips above, you can protect yourself from this type of scam and keep your crypto safe.

To learn more, visit ASIC's website.

Feedback

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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 AEDT, on 16/03/2023.