Weekly Crypto Wrap: 20th April 2024

TLDR

• Cardano (ADA) is now fully live and ready to trade on BTC Markets!
• The RBA hints at further action to mitigate inflation concerns.
• Ethereum's Shapella upgrade drives a market wide rally.
• Bitcoin outperformed traditional assets, gaining 72.4% in Q1.
• XRP records inflow of US$8.85b in market cap within a month.
• US SEC Chair Gary Gensler's crypto approach grilled.

Cardano (ADA) is now live and ready to trade.

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The week ahead

April 21st: United Kingdom Consumer Confidence and Retail Sales month-on-month report to be released alongside Japan’s Inflation Rate.

April 24th: Germany’s Ifo Business Climate Index report to be released.

April 26th: Australia’s annual Inflation Rate and monthly Consumer Price Index (CPI) will be published. Germany's GfK Consumer Climate Indicator report and the United States Durable Goods Orders report will also be published.

April 27th: United States GDP Growth Rate report will be released, which measures the percentage change in the country's gross domestic product and provides insight into the overall health of the US economy.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

The Reserve Bank of Australia (RBA) released its meeting minutes this week stating that tighter monetary policy is gradually impacting the real economy as the labour market remains tight, albeit to a lesser degree than a few months ago. While some indicators of job advertisements have shown modest increases this year, the Australian Bureau of Statistics measure of vacancies has continued to decline. Wage growth remains solid, and firms in the RBA's ‘Liaison Program’ expect annual wages growth in the private sector to level out at below 4%.

The recent volatility in global markets has had a minor impact on Australian financial markets, but overall, conditions have improved. Banks have resumed their issuance of securities, and the effect on banks' funding costs has been small, indicating high confidence in the creditworthiness of Australian banks. The recent monetary policy tightening has continued to flow through to household mortgage payments, with required mortgage payments projected to reach around 10 per cent of household disposable income late in 2024.

In the Bank's regular half-yearly assessment of financial stability risks, members noted that financial stability risks had increased globally. Although global banking systems had remained resilient, regulators and policymakers were considering lessons from recent events, including ensuring banks remain resilient to shocks in the digital era. Any further banking stresses could result in a marked tightening in global financial conditions, increasing borrowing costs and reducing credit supply, which could accelerate a downturn in the broader credit cycle.

The board has decided to maintain the cash rate at the current level, considering the latest economic data and forecasts. The board agreed that it would be best to pause at this meeting and reassess the need for further tightening at future meetings. The decision was made due to the slowing growth of consumer spending, as well as the financial stress faced by some households. Australia's banking system is strong and the structural differences in banks and adherence to more stringent regulatory arrangements would prevent bank failures according to the RBA.

Westpac chief economist Bill Evans believes that the case for a rate increase is much stronger in May than it was in April, with a stronger-than-expected jobs report and a resilient labour market helping to support the case for a rate increase.

Global

The US saw a month-on-month decline in producer prices in March 2023, primarily due to a decrease in prices for final demand goods, including gasoline. Producer prices increased by 2.7% year-on-year, the lowest since January 2021, and below expectations of 3%. The Producer Price Index (PPI) measures the average change in prices received by domestic producers of goods and services over time. It reflects the prices that businesses receive for their products and is a leading indicator of consumer inflation as it is often passed on to consumers through higher prices.

The Consumer Price Index (CPI) measures the average change in prices paid by consumers for a basket of goods and services over time. It reflects the prices that consumers pay for their purchases and is a widely used measure of inflation.

Monthly retail sales in the US fell whilst sales at non-store retailers rose. Building permits tumbled indicating subdued housing demand due to higher interest rates and rising consumer prices. Meanwhile, the University of Michigan consumer sentiment unexpectedly increased.

In Canada, the annual inflation rate fell to 4.3% in March of 2023, the lowest since August 2021, in line with market expectations and dropping from 5.2% in the previous month.

China's economy grew by 4.5% year-on-year in Q1 of 2023, marking the strongest pace of expansion since Q1 of 2022. Beijing's efforts to spur post-pandemic recovery led to a near two-year high in retail sales growth, a rise in industrial output, and a decrease in surveyed jobless rate. Exports from China also unexpectedly rebounded, leading to a larger-than-expected trade surplus. A complex global environment and insufficient domestic demand mean the foundation for the economy's rebound is not yet solid, according to market analysts. China set a modest growth target at around 5% for 2023, after missing the government's target of around 5.5% last year.

The consumer price inflation rate in the United Kingdom experienced a slight decrease to 10.1% year-on-year in March 2023, compared to 10.4% in February, disappointing market expectations of 9.8%. The rate has remained above the Bank of England's 2% target for almost two years and has remained above the 10% mark for a seventh consecutive period. This suggests that policymakers may continue to increase borrowing costs. The UK’s unexpected jump in wage growth has fuelled concerns over inflation, especially in a tight labour market, which is a concern for the Bank of England.

The ZEW Indicator of Economic Sentiment for Germany declined for a second month, the lowest so far this year, pointing to an unchanged economic situation for the next six months.

In Japan, the trade deficit rose but was lower than market consensus. This marks the 20th consecutive month of a trade shortfall, the longest stretch since 2015. Imports continued to rise, while exports grew at a slower rate. The trade deficit has been primarily driven by a surge in imports amid high commodity prices and the slump in yen, resulting in the second straight annual deficit and the largest since 1979.

State of crypto

Bitcoin experienced a sudden drop of over 3% in just 15 minutes on Wednesday, taking it below the US$30,000 mark. The decline continued, reaching as low as US$28,520, which resulted in the liquidation of more than US$25 million in Bitcoin futures.

While there was no immediate fundamental reason for the sell-off, although according to Coindesk, an unusually large sell order on Binance, along with an unexpectedly high U.K. March inflation figure of over 10%, may have impacted market sentiment. Additionally, a long squeeze occurred (longs, or bets on rising prices), made up 98% of the positions.

Looking to the last trading week, the market saw significant gains, with Ethereum's Shapella upgrade driving a rally across the board. Bitcoin rose by 6.99%, closing at US$30,304, while Ethereum gained 13.97%, ending the week at US$2,118. XRP also increased by 3.07% to US$0.5209 whilst our newest addition, Cardano gained 15.90% closing at $0.4513 and Litecoin joined the rally with a gain of 10.41%, closing at US$100.01.

Year-to-date, Cardano has been the best performer in 2023 with a yearly gain of 77.99%, currently trading at US$0.4374 followed closely by Bitcoin at 74.97%, trading at US$28,943. Ethereum not far behind with a gain of 62.89% on the year, trading at US$1,948. XRP is holding strong, up 46.12% on the year, currently trading at US$0.4952, and Litecoin up 29.28% trading at US$90.67.

Bitcoin's market capitalisation decreased by 0.93% last trading week; the loss attributed to Ethereum’s price rally. Current Bitcoin dominance is 47.56%. The cryptocurrency market capitalisation increased by an impressive 8.06% last week, currently valued at US$1.178 trillion, after reaching a temporary high of US$1.26 trillion (*source: Trading view, as of 20/04/2023 10:00am AEST).

Alt action

Ava Labs unveils Avalanche 'Evergreen' for institutional blockchain.

Ava Labs has recently launched Avalanche Evergreen Subnets, a suite of institutional blockchain deployments, customisations, and tooling designed for financial services institutions to meet their specific requirements.

These subnets combine the benefits of public network development with the features only possible in enterprise solutions, offering a synthesis of public and private blockchain strengths. With Evergreen Subnets, institutions can launch their own subnets for either research and development or production-ready use cases.

Evergreen Subnets allow institutions to communicate and interoperate with other subnets through Avalanche's native communication protocol called Avalanche Warp Messaging (AWM). AWM provides a messaging layer that allows for seamless on-chain asset swapping, data transfer, confirmations, and other types of intra- and inter-institutional communications without relying on third party intermediaries or bridges.

The unique subnet architecture of Avalanche empowers individual builders, teams, institutions, and government agencies to launch custom blockchains optimised for their specific use case. Subnets are interoperable with the broader Avalanche network, but isolate traffic to dedicated infrastructure securing the chain, enabling Avalanche to scale limitlessly.

Currently, the Avalanche network already has several EVM-based subnet deployments on Mainnet and Testnet across industries and use cases such as DeFi, Gaming, NFTs, enterprises, and institutions. Examples include the Intain Subnet, a tokenised Asset Backed Securities (ABS) administration application and marketplace; the Dexalot Subnet, an on-chain central limit order book; and the Deloitte Subnet, a platform for more efficient FEMA fund disbursements.

AVAX is currently trading at US$19.10 up 75.32% on the year.

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The Big 3

Bitcoin outperformed traditional assets, gaining 72.4% in 2023.

According to a recent report from Coingecko, the crypto market had a strong start in 2023 and ended Q1 with a total market cap of US$1.2 trillion, "a gain of 48.90%" from the previous year. During this period, Bitcoin outperformed traditional assets and gained 72.4% in Q1 of 2023, while Ethereum was priced around US $1,800. Stablecoins such as USDC and BUSD lost 4.5%, but Tether gained ground. The DeFi ecosystem saw a 65.2% rise, with the liquid staking sector experiencing a 210.9% increase. The report provides a comprehensive analysis of the crypto market landscape, including the performance of decentralised and centralised exchanges, non-fungible tokens, and decentralised finance ecosystems.

After Bitcoin surged past US$30,000, some market participants are suggesting that the crypto boom may be returning, while others suggest that a lot of damage has been done from the scandals of last year's downturn. While the crypto industry's sentiment has improved, many believe that it is too early to pretend that the ‘past never happened’. Furthermore, there have been high-profile prosecutions in the US, which has drawn regulatory scrutiny and many retail investors have been burnt, so many have not taken on new risks.

According to Dr. Tarik Sammour, a surgeon at the Royal Adelaide Hospital, doctors should consider investing in Bitcoin as a hedge against the rapidly rising cost of essential medical services. He argues that inflation, worsened by pandemic-era money printing, has reduced the purchasing power of fiat currencies for scarce and essential services, such as medical care and equipment, making cryptocurrency a viable alternative. Dr. Sammour sees Bitcoin as a solution to fixing the way money is issued in society and an alternative option to store wealth without raising house prices for those who cannot afford it.

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Ethereum price surges as its co-founder issues bullish prediction.

Ethereum (ETH) has surged past $2,000 per ether. The rally is attributed to several factors, including the eagerly anticipated Shanghai upgrade of Ethereum. Vitalik Buterin, co-founder of Ethereum, discusses that scaling issues must be addressed to avoid users being charged exorbitant transaction fees.

The recently launched Shapella upgrade is an essential component of Ethereum's proof-of-stake transition (PoS). Staked ETH withdrawals have been activated in a significant upgrade to Ethereum's network. Chen Zhuling, founder, and CEO of RockX, a PoS collective, says the upgrade has introduced crucial functionalities that will position Ethereum for sustained growth and success.

The Shapella upgrade has been fiercely debated by the crypto community, with some predicting that it could lead to a flood of ETH being dumped on the open market. A post-Shapella staker exodus is unlikely, as many believe that most validators will choose to re-stake their rewards to accumulate more rewards. Superphiz, an organiser for the EthStaker community, believes that staking is bound to increase after Shapella, and institutional investors could experiment in the process. Ethereum's developers have placed a limit on the number of validators that can withdraw each day, equating to 57,600 ETH or less than 0.05% of Ether's supply, according to Glassnode.

Despite concerns that the looming withdrawals could lead to pressure on the Ethereum price, it has surged almost 14% in the last trading week, reaching its highest point since August 2022. Mona El Isa, CEO of Avantgarde Finance, believes that the Shanghai upgrade could be a "game-changer" and could lead to digital assets becoming mainstream in most funds. The newfound liquidity would be seen as a move towards de-risking digital asset allocations, which could prove bullish for the price of Ethereum in the long term.

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Why XRP is absent from the Liquidity Hub?

Stuart Alderoty, Ripple's top lawyer, recently shed light on why XRP is absent from the company's new enterprise-level product, the Liquidity Hub. The Liquidity Hub was designed to provide access to a range of cryptocurrency liquidity, not just XRP. Ripple's target customers for the platform are primarily U.S. institutions seeking access to a variety of tokens, such as Bitcoin (BTC), Ethereum (ETH), and stablecoins.

One of the primary reasons for the exclusion of XRP from the Liquidity Hub is due to the lack of regulatory clarity in the United States. This uncertainty about the token's status poses a risk for enterprise customers who require certainty to minimise risk. Ripple's ongoing legal battle with the U.S. Securities and Exchange Commission (SEC) over whether XRP is a security or not has created uncertainty about the token's regulatory status. As a result, Ripple is waiting for clarity before including XRP in the Liquidity Hub.

XRP has recently emerged as one of the top-performing cryptocurrencies, recording an inflow of about US$8.85 billion in market capitalisation within a month. This has resulted in a growth of about 49% from the US$18.07 billion recorded on March 17, according to CoinMarketCap data. The consistent buying pressure has propelled XRP to finally break the elusive US$0.50 resistance position that had remained unbroken for most of 2023. XRP is currently trading at US$0.4952 marking a notable 46.12% growth this year.

Investor interest in XRP has been partly driven by the ongoing legal battle between Ripple and the SEC. The verdict of the case is anticipated to be revealed in the first half of 2023, and this speculation may be contributing to the recent boost in XRP's performance.

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Crypto news

US SEC Chair Gary Gensler's crypto approach grilled.

SEC Chair Gary Gensler's approach to crypto companies has come under fire from Congressional Republicans on the House Financial Services Committee ahead of a hearing. The letter signed by Republicans on the committee stated that Gensler's approach to digital assets was not "compatible" with existing law. They argued that National Securities Exchange (NSE) regulations were not suited to digital assets due to their noninvestment purposes. They also accused Gensler of "wilful misrepresentation" of his agency's framework by repeatedly stating to the industry to "come in and register."

The letter highlighted that NSEs can only list securities that have been offered in compliance with securities laws, and the current NSE framework is ill-suited for digital asset trading platforms due to the inability to register. The lack of clarity provided by the SEC on what digital assets are considered securities also limits what an NSE can list.

Despite the criticism, Gensler has repeatedly stated that his agency has the authority it needs to oversee crypto and that all crypto exchanges should register with the regulator. Recent enforcement actions against companies Beaxy and Bittrex suggest that Gensler believes exchanges should register as a national securities exchange, broker, and clearinghouse.

In his prepared remarks published on Monday, Gensler reiterated his view that "most crypto tokens are securities," and that this is why he believes intermediaries, such as exchanges, should register with the regulator. He believes that crypto investors should benefit from compliance with the same laws laid out to protect against fraud, manipulation, front-running, wash trading, and other misconduct, as Congress intended when enacting the securities laws.

Scam watch

Unknown tokens suddenly appear in your digital wallet.

The Australian Securities and Investments Commission (ASIC) has published a list of the top ten signs that indicate a possible cryptocurrency scam. In our previous article, we talked about offers that guaranteed returns or free money. This week, we want to draw your attention to a common scam where unknown tokens suddenly appear in your digital wallet.

This type of scam is a phishing attempt, which involves bad actors depositing fake tokens (attempting to look like a real token such as USDT, but with no real value) to your digital wallet and then mimicking your real transactions by using similar addresses. The goal is to trick you into accidentally copying one of these similar addresses for a repeat transaction, leading you into sending your real tokens to an address belonging to the scammer.

Due to the setup of these fake-token contracts, it is possible for the scammer to make it appear as though your digital wallet has also made withdrawals of these fake tokens without gaining access to your wallet. You may see that you have sent USDT somewhere and that it is immediately followed by a second transaction, for the same amount, to a slightly different address. It is important to note that these fake transactions are completely harmless to you if ignored, much like the spam in your email.

In a similar vein, outgoing transactions for 0 USDT or other token amounts are typically fake and harmless, as they are sent to poison a user's transaction history with scammer addresses. To combat these specific phishing attempts, Etherscan has implemented a feature to hide these 0 value token transactions which can be toggled in the site settings (currently in beta).

Users often lose their crypto by inadvertently giving away their wallet keys/phrase or interacting with a malicious contract. Users must be extremely vigilant when it comes to random tokens or NFTs deposited to their wallet, as these are often scam tokens. It is advised not to interact with them.

To avoid falling prey to this scam, it is essential to secure your digital wallet. This can be done by using a strong password, enabling two-factor authentication, and keeping your wallet’s private keys offline.

Additionally, it is important to exercise caution when investing in unknown cryptocurrencies or tokens. Conduct thorough research and only invest in assets with a proven track record, supported by reputable developers or companies. Avoid any asset that promises unrealistic returns or has no clear use case.

If you do notice strange cryptocurrencies or tokens in your digital wallet, contact our Customer Support team immediately and report the issue. Staying safe in the world of cryptocurrency requires vigilance and caution. By securing your digital wallet, researching potential investments, and reporting any suspicious activity, you can help protect yourself from scams and fraud.

To learn more, visit ASIC’s website.

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Prices are accurate as of 10:00 AM AEDT, on 20/04/2023.