Weekly Crypto Wrap: 1st February 2024

TLDR

• BTC Markets to list Immutable X (IMX) next Wednesday, February 7th.
• J.P. Morgan sees easing pressure from GBTC outflows.
• Australia’s inflation hits 4.1% as US Fed keeps interest rates steady.
• ETH's Dencun upgrade in Q1 2024 anticipates enhanced scalability.
• AVAX surges 10% as SOL's price surpasses US$100 again.
• Glassnode reports robust exchange activity, reaching $6.8 billion daily.

BTC Markets announcements

BTC Markets to list Immutable X (IMX) on Feb 7th.

We're excited to announce the addition of Immutable X (IMX) to our platform on Wednesday, February 7th. In preparation, deposits, withdrawals, and post-only orders for the IMX/AUD pair will be active on February 6th. Full market trading will commence on the following day.

Stay updated with the latest news on Immutable X by visiting our blog and following us on X (Twitter). Expect more email updates about this listing in the coming days.

State of crypto

• Bitcoin surges 7% in Friday's trading session.
• Institutional moves: Grayscale, Fidelity, and BlackRock milestones.
• Mixed sentiment and analyst perspectives on Bitcoin's future.
• J.P. Morgan sees easing pressure from GBTC outflows.

In last Friday’s trading session, Bitcoin witnessed a 7% price surge, followed by a period of consolidation over the weekend. On Monday’s open, we saw another push up in price with a 3.03% gain on the day, with attempts to breach resistance at US$44k. Unable to break through, price is currently trading in the US$42.6k, with some market participants showing scepticism towards the sustainability of Bitcoin's recent two-week highs amidst a drop in global liquidity.

Institutional movements played a significant role, as Grayscale outflows slowed, contributing to a stabilisation of Bitcoin. Concurrently, Fidelity's Bitcoin ETF garnered substantial attention by attracting US$208 million in daily inflows on January 29, surpassing the outflows from Grayscale Bitcoin Trust (GBTC). Notably, BlackRock's iShares Bitcoin ETF achieved a milestone by reaching US$2 billion in assets under management (AUM).

Market sentiment and analyst predictions presented a mixed outlook. While J.P. Morgan analysts suggested that the downward pressure caused by GBTC outflows might be easing, Chris Burniske, a former crypto lead at Ark Invest, voiced a perspective that Bitcoin could experience a correction to the mid-to-high US$20,000 range before potentially reaching a new all-time high.

Bitcoin whales made headlines as data indicated an accumulation of US$3 billion worth of Bitcoin in January, contrasting with the net inflows of US$820 million into Bitcoin ETFs. The intricate relationship between institutional movements and market dynamics continued to influence crypto trends.

Looking beyond Bitcoin, Ethereum (ETH) faced challenges from Solana, with decentralised exchanges on the latter briefly surpassing Ethereum's trading volume. Additionally, expectations arose regarding the approval of an Ethereum ETF by the US Securities and Exchange Commission (SEC) in May, following the regulatory pattern observed with Bitcoin ETF approvals.

The upcoming Ethereum Dencun upgrade, known as Cancun-Deneb, is set for completion in Q1 2024. Focused on boosting scalability and efficiency, the upgrade incorporates five Ethereum Improvement Proposals (EIPs). Anticipation surrounds the potential positive impact on the network's overall functionality and performance within the Ethereum community.

Innovations and developments within altcoins were also notable. Avalanche (AVAX) demonstrated strength with a surge of over 10%, attributed to the unveiling of the Vryx scaling solution, promising enhanced scalability for the network.

As per Glassnode, a prominent on-chain analytics firm, "Exchanges continue to serve as the central hub for trading, with noteworthy growth observed in daily deposit and withdrawal volumes, reaching a substantial $6.8 billion. The current volume rival’s peaks set during the 2021 bull market, with only 68 trading days (1.5%) recording a higher value." This suggests a robust and active trading environment, potentially indicating heightened market participation and interest.

Future of crypto

A window of opportunity for potential Bitcoin investors is highlighted by Rekt Capital, who suggests that a retrace in Bitcoin's price over the next two weeks could offer a last chance to acquire the cryptocurrency at favourable prices before a pre-halving rally in February. The analysis draws on historical patterns, emphasising the importance of the halving event in influencing Bitcoin's price trajectory.

In a broader context, the long-term investment case for Bitcoin is presented by Torbjørn Bull Jenssen, focusing on macro factors such as the U.S. dollar's potential decline, Bitcoin's role as a global reserve currency, and various triggers for future price appreciation. The narrative underscores Bitcoin's appeal as a trust-less and neutral alternative in an increasingly fragmented economic landscape.

Top narratives to watch in 2024

How AI and DePIN will change Web3.

The convergence of Web3, decentralised physical infrastructure (DePIN), and artificial intelligence (AI) is reshaping the internet, introducing a world where robots play pivotal roles in crypto, AI, and fintech. Lex Sokolin, Founder of Generative Ventures, explores this transformative era, emphasising the nuanced interactions within the Web3 ecosystem. Sokolin delves into the dichotomy between on-chain and off-chain activities, envisioning AI entities operating off-chain but occasionally interacting with Web3. The prospect of incorporating crypto technologies, like ZK proofs, into machine learning models for verifiability is explored.

Additionally, the exploration of migrating the entire large language models (LLM) and neural network stack to decentralised infrastructure is discussed. The concept of DePIN, decentralised physical infrastructure, is introduced, highlighting its potential as a resource unlock for on-chain crypto-AI.

Sokolin emphasises onboarding machines into Web3 through DePIN and envisions decentralised fleets downloading self-driving models from DePIN AI networks. Frameworks for managing AI agents and concerns about centralised AI custody in contrast to Web3's self-custody are also explored, presenting a dynamic landscape for entrepreneurial exploration in this evolving intersection of crypto and AI in Web3.

Real world use case.

A use case for decentralised physical infrastructure (DePIN) involves leveraging coin-protocol incentives for participants to contribute hardware resources such as storage, compute power, GPU, or training data to a decentralised network. In this scenario, individuals or entities are rewarded for the work performed by their devices, like the proof-of-work mechanism in Bitcoin mining. DePIN aims to move away from traditional centralised cloud services and transition towards a decentralised model running on computational blockchains like Peaq, Solana, or an Ethereum Virtual Machine (EVM) rollup.

For example, a DePIN network could facilitate the sharing of computational resources for machine learning tasks. Nodes within the network contribute their processing power and data, creating a decentralised infrastructure that supports AI applications. This decentralised approach aims to unlock resources for on-chain crypto-AI, allowing for more efficient, scalable, and cost-effective solutions compared to centralised alternatives.

The weekly crypto close

Avalanche (AVAX) has emerged as the leading performer this week, exhibiting a notable gain of +7.01%. This positive momentum can be attributed to the introduction of the Vryx scaling solution, which holds the promise of augmenting scalability within the network.

In contrast, the overall cryptocurrency market concluded the week with a total capitalisation of US$1.573 trillion, experiencing a marginal decrease of -1.04%. Bitcoin's dominance, however, recorded a positive uptick, marking a 2.25% increase from the preceding week and stabilising at 52.40%.

Concurrently, the cryptocurrency market sentiment resides in the Greed zone, currently at 63 on the Crypto Fear & Greed index, up from 60 yesterday. Last week, sentiment dropped down to 52, into the Neutral zone.

Year-to-date in the crypto space

The year-to-date performance in the crypto space:

• Bitcoin (BTC) $42,474.95 -0.62%
• Ethereum (ETH) $2,283.59 -1.14%
• XRP (XRP) $0.5006 -19.46%
• Cardano (ADA) $0.4989 -17.58%.
• Solana (SOL) $97.33 -6.96%
• Avalanche (AVAX) $33.05 -15.54%
• Chainlink (LINK) $15.515 +2.07%
• Litecoin (LTC) $66.80 -9.14%

*The weekly trading stats as of Monday, January 29th at 11:00 am AEDT, based on data from Tradingview in USD.

**Year-to-date performance as of Thursday, February 1st at 11:00 am AEDT, based on data from Tradingview in USD.

Crypto news

Bitcoin Ordinals “Cord” becomes the first individual poem sale at Sotheby.

The poem “Cord”, by Ana Maria Caballero, was sold for 0.28 Bitcoin, or about US$11,430, in an online auction of Bitcoin ordinals inscriptions named Natively Digital, marking Sotheby’s first individual poem sale, excluding manuscripts and books. The purchaser of “Cord” will not only get the inscription, but also acquire a signed copy of the poem. Another Bitcoin art amid the same collection called the “Genesis Cat” by FAR reached a winning bidding of 6.31 Bitcoin, over US$250,000.

Anthony Scaramucci foresees Bitcoin surpassing US$170,000 post Halving.

Anthony Scaramucci, the founder and managing partner of SkyBridge Capital anticipates Bitcoin’s price soaring to at least US$170,000 after the next halving event in April, based on historical patterns observed in previous Bitcoin halving cycles. He also projects that in the long run, Bitcoin could easily reach half of the market capitalisation of gold, potentially valuing one Bitcoin at around US$400,000.

Buy Bitcoin on BTC Markets.

Timeline of anticipated ETH ETF approval remains unseen.

The U.S. Securities and Exchange Commission (SEC) has delayed its decision on the Ethereum (ETH) Exchange Traded Fund (ETF) proposal, filed initially in November by Blackrock, claiming that it needs “sufficient time to consider the proposed rule change and the issues raised therein”.

Earlier in January, despite the hesitancy and concerns of potential market manipulation, the SEC approved Bitcoin (BTC) ETFs, which attracted global attention. Reflecting on the journey of BTC ETF approvals, similar challenges for ETH ETFs are not surprising. SEC Chairman Gary Gensler has expressed concerns about ETH, especially after its transition to a staking mechanism. However, the existence of ETH futures ETFs signals a positive outlook for eventual approval, the timeline for this remains uncertain.

Buy ETH on BTC Markets.

Solana sees multiple high records with price surpassing US$100 again.

Recently, Solana's signups have reached unprecedented levels, fuelled by the airdrop of the WEN token, a new meme coin distributed to over one million wallets. As the best-performing altcoin last year, Solana's monthly transaction volume for January (from January 1st to 30th) also hit a multi-year high of US$951.9 billion, a 30% increase from December's US$735.8 billion.

This surge in activity, significantly above 2023 and most of 2022 levels, was partly driven by WEN token pairs on decentralised exchanges. Solana's price also recovered, with SOL rising above US$100, partly influenced by trading activity involving stablecoin-SOL and stablecoin-WEN pairs.

Additionally, the recent uptick in Solana's price led to the liquidation of US$9.9 million in short positions across centralised exchanges. Jupiter, Solana’s biggest decentralised exchange aggregator plans on airdropping its own governance token JUP, first open to 955,000 eligible users whose swap volume surpassed $1,000 by the snapshot date in November 2023.

Buy SOL on BTC Markets.

The week ahead: economic events

February 1st: China Caixin Manufacturing PMI. Euro Area Inflation Rate. Italy Inflation Rate. United Kingdom Interest Rate.

February 2nd: United States ISM Purchasing Managers Index (PMI).

February 3rd: United States Non-Farm Payrolls and Unemployment Rate.

February 5th: Australia Balance of Trade. Germany Balance of Trade.

February 6th: United States ISM Services PMI. Germany Balance of Trade.

February 7th: The Ivey Purchasing Managers Index in Canada.

February 8th: Canada Balance of Trade.

Economic Calendar (tradingeconomics.com)

Market reflections

Overview

In Australia, Q4 2023 saw a decline in year-on-year inflation to 4.1%, the lowest since Q4 2021. December witnessed a notable retail sales downturn, influenced by shifted Black Friday spending. The Westpac-Melbourne Institute Leading Economic Index slightly dipped but remained positive. January showed stable housing credit, moderated inflation, consistent private sector credit growth, and potential manufacturing turnaround signals. In the US, the Fed maintained steady rates while considering cuts amidst concerns about inflation. December witnessed a robust surge in job openings, while the economy exceeded expectations, expanding by 3.3% in Q4 2023. Germany's business climate declined in January, and the European Central Bank maintained rates amid economic uncertainties. Germany's GfK Consumer Climate fell in February 2024, indicating a prolonged recovery challenge.

Australia

• Australia’s inflation rate hits 4.1%, below expected 4.3%.
• Retail sales slump 2.7% in December with YoY growth at 0.8%.
• The economy showing mixed economic signals.

In the latest economic update, Australia's inflation rate declined to 4.1% year-on-year in the fourth quarter of 2023, down from 5.4% recorded in the third quarter. This data reveals the lowest inflation level since the fourth quarter of 2021 and slightly deviates from market projections of 4.3%.

Over the historical context, the average inflation rate in Australia stands at 4.89% since 1951, with the highest peak observed at 23.90% in the fourth quarter of 1951 and the lowest point at -1.30% in the second quarter of 1962.

In December, Australian retail sales saw a significant 2.7% month-over-month decline, surpassing expectations. Various sectors, including household goods, clothing, and dining, were affected, attributed to a shift in consumer spending to November's Black Friday events. Year-on-year sales grew modestly by 0.8%.

The Westpac-Melbourne Institute Leading Economic Index slightly decreased in December, maintaining positive territory. In January, housing credit remained stable, CPI inflation moderated, private sector credit grew, and manufacturing PMI hinted at a potential turnaround. The economy exhibited signs of recovery, but challenges like weakened demand persisted.

Global

• US Fed keeps rates steady, eyes 2024 cuts amid inflation caution.
• Germany's business climate dips further in January.
• European Central Bank maintains steady rates amid economic uncertainties.
• France witnessed a downturn: consumer price inflation falls to 3.1% YoY.

US Fed keeps rates steady, eyes 2024 cuts amid inflation caution.

The US Federal Reserve (Fed) maintained the Fed funds rate at 5.25%-5.5%, a 23-year high, for the fourth consecutive meeting, aligning with expectations. Policymakers emphasised a reluctance to reduce rates until greater confidence in inflation reaching 2%. Chair Powell suggested a potential rate cut later in the year but dismissed a March cut.

The Fed removed references to further rate hikes, citing improved risk balance for employment and inflation goals. Despite acknowledging a recent moderation, the central bank highlighted persistent elevated inflation. This decision underscores the Fed's cautious, data-dependent stance, with an eye on evolving economic conditions, particularly inflation trends.

The number of job openings in the US experienced a robust surge, reaching 9.026 million in December 2023. This marks the highest level in three months, surpassing market expectations of 8.75 million.

In December 2023, Core PCE prices in the US rose by 0.2%, in line with expectations, while personal income increased by 0.3%. Personal spending saw a notable growth of 0.7%, reflecting increased spending on goods and services.

The US also experienced a stable consumer confidence index, indicating positive sentiment towards overall livelihood, durable goods purchases, employment, and income growth.

In December, new orders for manufactured durable goods in the United States showed virtually no change, following a significant rise in November. Excluding transportation, new orders increased by 0.6%, with primary metals driving the surge.

The US economy, however, exceeded expectations, expanding at an annualised rate of 3.3% in Q4 2023, surpassing forecasts of a 2% rise. While consumer spending slowed, exports accelerated, contributing to the overall growth.

Germany's business climate dips further in January.

Germany's Ifo Business Climate Index fell for the second consecutive month in January, dropping from the previous months. This decline, below the market consensus, reflects growing pessimism among companies about both future expectations and their current business situations. Notably, sentiment deteriorated in service providers, traders, and constructors but improved among manufacturers.

Germany's GfK Consumer Climate Indicator unexpectedly fell in February, indicating the lowest figure in 11 months. Declines in income expectations, the propensity to buy, and economic prospects contributed to this decline. Rising uncertainties from crises, wars, and persistent high inflation are hindering a swift recovery in consumer sentiment.

In January, Germany experienced a decrease in consumer price inflation, dropping to 2.9% year-on-year from the previous month's 3.7%. This figure fell below the market consensus of 3.0% and marked the lowest rate since June 2021. Core inflation, excluding volatile items, reached 3.4%, the lowest since June 2022. The EU-harmonised index also slowed to 3.1%, slightly below the expected 3.2%.

European Central Bank maintains steady rates amid economic uncertainties.

The European Central Bank (ECB) has decided to keep its key deposit facility rate at a record high of 4% during its January meeting. The ECB said it is committed to maintaining interest rates at sufficiently restrictive levels to address inflation concerns. Despite global economic uncertainties, the main refinancing operations rate remains at a 22-year high of 4.5%. ECB President Lagarde emphasised the premature nature of discussions regarding interest rate cuts during the press conference.

France witnessed a downturn: consumer price inflation falls to 3.1% YoY.

In January, France experienced a decline in consumer price inflation, dropping to 3.1% year-on-year from the previous month's 3.7%. This represents the lowest inflation rate since January 2022. Monthly consumer prices showed a 0.2% decrease. Looking forward, the harmonised Consumer Price Index (CPI) is expected to grow by 3.4% year-on-year with a 0.2% decline month-on-month, as reported by INSEE, France.

Regulation roundup

UK government pledges privacy and control in CBDC legislation amidst growing concerns.

In response to a consultation on a central bank digital currency (CBDC), the U.K. government has underscored its commitment to safeguarding privacy and maintaining control over money in future legislation concerning the digital pound.

The consultation, conducted by the finance ministry and the Bank of England, garnered over 50,000 responses, with privacy and control of money emerging as prominent concerns. The government, in collaboration with the Bank of England and the Treasury, is cautiously exploring the introduction of a digital pound, emphasising the importance of public trust.

While the proposed digital pound design received positive feedback, a final decision on its issuance is anticipated between 2025 and 2026, contingent on parliamentary legislation. The Treasury Select Committee recommended a lower holding limit, like a 3,000-euro cap, although the Bank of England currently maintains a 10,000-20,000 British pound cap on holdings.

The central bank also expressed its intent to conduct experiments with companies to assess the real-world viability of a digital pound, pledging further public consultation before introducing legislation.

Meanwhile, the Financial Stability Oversight Council (FSOC), established after the 2008 financial crisis, holds the potential to label stablecoin issuers, including Circle, as systemic risks to the broader financial system. Comprising heads from the U.S. Department of the Treasury, Federal Reserve, Securities and Exchange Commission, and other agencies, the FSOC can impose significant restrictions on designated companies. Though there is no current indication of such action, the FSOC has voiced concerns about the impact of stablecoins on financial stability.

Congressional Republicans have raised queries about the FSOC's intentions in a subcommittee hearing, emphasising the necessity of legislative efforts to regulate digital assets and stablecoins. The FSOC's annual report reiterated its preparedness to take steps if comprehensive legislation is not promptly enacted, prompting industry participants to advocate for careful consideration due to the high bar for FSOC designations and the lack of evidence supporting the systemic risk posed by the crypto sector. Questions surrounding the FSOC's historical effectiveness, and the intricate multi-stage process required for designation further highlight concerns about its potential impact on the crypto industry.

Compliance conversations

Wire Trippin': Navigating the landscape of wire fraud in financial transactions.

In the intricate web of financial transactions, wire fraud stands out as a potent threat that can alter the intended course of a transfer, leading to severe consequences for both individuals and organisations.

Understanding wire fraud: A shapeshifting menace.

Wire fraud involves the use of electronic communication, such as emails or phone calls, to deceive individuals into transferring funds to fraudulent accounts. In the context of wire transfers, cybercriminals exploit vulnerabilities in communication channels to manipulate transaction details. One common technique is phishing, where fraudsters pose as legitimate entities to trick individuals into disclosing sensitive information, such as account details or login credentials.

The shapeshifting nature of wire fraud is particularly dangerous. Criminals often intercept legitimate transaction requests, altering the intended recipient's information. This subtle modification can redirect funds to fraudulent accounts, leading to financial losses and legal complications.

Real-life implications of wire fraud.

Consider a scenario where a business is in the process of making a substantial international payment to a supplier. A cybercriminal, through sophisticated phishing techniques, gains access to the communication channels. Subtly altering the supplier's bank details, the criminal diverts the funds to an account under their control.

The consequences of such an act can be devastating. The business loses a significant sum, the supplier faces delayed payments, and the reputational damage can be irreparable. Unravelling the intricate web of wire fraud is a challenging task, often requiring extensive legal and investigative efforts.

Safeguarding wire transactions: Key steps for security.

• Implement Two-Factor Authentication (2FA): To mitigate the risk of unauthorised access to sensitive information, implement robust 2FA measures. This adds an extra layer of security, requiring individuals to provide additional verification beyond passwords.
• Verify Transaction Details: Before executing a wire transfer, meticulously verify all transaction details. Confirm recipient information through multiple channels, such as phone calls or in-person communication. Cybercriminals often exploit email vulnerabilities, making it crucial to cross-verify instructions outside of electronic communication.
• Educate employees and stakeholders: Human error is a significant contributor to wire fraud. Conduct regular training sessions to educate employees and stakeholders about the latest phishing techniques and the importance of validating transaction details. Awareness can be a powerful deterrent.
• Establish secure communication channels: Utilise secure communication channels for transmitting sensitive information related to wire transfers. Encrypted emails, secure messaging platforms, and dedicated communication channels can add an extra layer of protection against interception.
• Conduct regular security audits: Periodically assess and audit security protocols and systems to identify potential vulnerabilities. Regular penetration testing and security assessments can help uncover and address weaknesses before they are exploited.
• Collaborate with financial institutions: Foster close collaboration with financial institutions involved in wire transfers. Establish secure channels for communication and implement additional verification steps with the bank to confirm the legitimacy of high-value transactions.

In conclusion, wire fraud represents a dynamic and evolving threat within the financial landscape. Understanding its potential consequences and adopting proactive measures are essential for safeguarding wire transactions.

By implementing robust security protocols, educating stakeholders, and fostering collaboration with financial institutions, individuals and organisations can fortify themselves against the ever-present menace of wire fraud. Stay vigilant, stay secure.

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

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Weekly prices are accurate as of 11:00 AM AEST on 01/02/2024.

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