Weekly Crypto Wrap: 21st September 2023

TLDR

• Bitcoin surpasses key resistance line, market dominance hits 50%.
• Ethereum’s new Holešky testnet launch hits a speed bump.
• CitiGroup launches blockchain services for institutional clients.
• ANZ takes next step towards AUD stablecoin with Chainlink.
• UK House of Lords passes bill to seize crypto tied to crime.
• LINK soars, outperforming broader altcoin market.

BTC Markets in the news 

It’s a wrap: Key Insights from ‘Token2049’ in Singapore, the year's premier crypto event.

Last week, the annual Token2049 cryptocurrency and blockchain conference was held in Singapore, featuring industry leaders and experts discussing the latest trends and developments in the crypto space. Attracting a substantial crowd of 10,000 attendees and hosting 300 exhibitors, it brought together prominent figures from the cryptocurrency industry who were notably optimistic. Participants emphasised their commitment to "building through the bear market vibes" and projecting 2024 and 2025 as pivotal years for Bitcoin, Ethereum, and the overall crypto market's resurgence.

Caroline Bowler, CEO of BTC Markets, offered several key insights from Token 2049 in Singapore. Notably, there is a growing regulatory divide between the United States, which has taken a more adversarial stance towards cryptocurrencies, and Asia and the Middle East, which are more receptive. Australia, despite having a presence at the event, appeared to have a peripheral role in the global crypto scene. Decentralised Finance (DeFi) took the spotlight, focusing on accessibility, adoption, and security in Decentralised Applications (DApps) and cybersecurity against hacks.

The crypto industry is maturing, with fewer distractions like "scantily clad dancing girls" compared to previous years. Jenny Johnson, Global CEO and President of Franklin Templeton, viewed Bitcoin as a "distraction" and highlighted blockchain's potential for new investment opportunities and cost reduction in financial services. However, the interview with CZ, the head of Binance, was criticised for lacking depth in addressing issues related to Binance beyond NFTs and fiat on-ramps. Read Caroline's insights in full here.

Is Australia being left behind in crypto development?

Caroline Bowler, CEO of BTC Markets, shared her insights with Ausbiz, after attending the Token 2049 event. She highlighted key points:

• US regulatory hostility: Caroline noted that the US regulatory environment, particularly the SEC's stance on spot Bitcoin ETFs and legal actions against Ripple and Coinbase, was viewed as hostile by many in the crypto industry.
• Australia's lagging position: She expressed concern about Australia's position in the global crypto scene, despite having a significant presence at the event. She attributed this to regulatory uncertainties and warned against Australia becoming a regulatory adopter rather than an innovator.
• Call for global frameworks: Caroline emphasised the need for the Australian government to align its regulations with global frameworks. This, she argued, would help capture emerging opportunities domestically and prevent them from going to foreign markets.

In the interview, she highlighted the importance of Australia prioritising cryptocurrency regulation to avoid falling behind in a rapidly evolving industry. Caroline also emphasised that the crypto industry is not just about cryptocurrencies' daily price movements but a broader transformation of financial services and the adoption of blockchain technology. Watch the interview with Ausbiz here.

The Yarn with Senator Andrew Bragg: A Conversation with Caroline Bowler of BTC Markets.

Tune in to our CEO Caroline Bowler as she engages in a conversation with Senator Andrew Bragg on his podcast. Caroline discusses the daily intricacies of managing Australia’s most reputable cryptocurrency exchange, outlines the rigorous security protocols in place to protect both our platform and clients, and delves into our proactive approach in readiness for forthcoming regulatory changes. Listen to the episode.

State of crypto

• Bitcoin surpasses key resistance line, market dominance hits 50%.
• The US Federal Reserve pauses rate hikes, markets hold steady.
• Citibank announces the tokenisation of its assets, sparks price rally.

Bitcoin recently closed the trading week in the green, marking a significant turnaround following four consecutive weeks of negative price action. The reversal initiated on September 12th, as clarity emerged concerning the FTX court filing to sell-off its crypto holdings, alleviating the prevailing market fears. Bitcoin broke the downtrend gaining 2.6% on the day, the largest daily gain since Grayscale's legal victory against the SEC led to a one-day price surge of 6.11% on August 29th.

At the onset of the trading week on Monday, it appeared that markets might be trending downward, based on the weekend's trading activity. There was a sudden surge in liquidity during the Asian trading open. This surge pushed Bitcoin's price to retest the 50-day moving average, resulting in a daily high of US$27,409 and a low of US$26,377.

The crypto market sentiment is currently neutral as the US Federal Reserve has chosen to hold rates steady. It has reaffirmed its commitment to achieving a soft landing with interest rates ranging from 5.25% to 5.5%, while also issuing a cautionary note regarding the possibility of a quarter-point rate adjustment later this year.

The market seems to be supported by Citigroup's recent announcement enabling institutions to convert deposits into digital tokens via their private blockchain. The Crypto Fear and Greed Index stands at 47, showing improvement from last month's low of 41, which indicated investor fear. Previously, we noted a bearish outlook if Bitcoin stayed below the 50-day moving average. However, breaking through this resistance level offers potential for further gains, particularly if Bitcoin can maintain its position above the 200-day moving average, potentially leading to a retest of the US$28.5k to US$29.5k range.

It's essential to keep historical trends in mind, particularly regarding September's performance in the cryptocurrency market. Historically, September has been a bearish month for all assets, including Bitcoin, often resulting in negative returns. This pattern has raised concerns among market participants. As Mark Twain wisely noted, "History never repeats itself, but it does often rhyme." In this context, understanding historical trends can provide valuable insights for navigating the current market conditions.

The weekly close.

Looking to the price performance of the last trading week, Bitcoin closed the trading week on Monday* at US$26,527.51, showing a 2.65% gain. Ethereum followed with a modest 0.31% increase, ending the week at US$1,622.48. XRP struggled to break through psychological resistance, closing at US$0.4925, down 0.89%. Litecoin, following the upward price movement sentiment, surged by 3.99% to finish the week at US$63.55, while Cardano experienced a 0.76% decline, closing at US$0.2471. In contrast, Solana made up lost ground closing at US$18.81, marking a 3.13% increase for the week.

Bitcoin's dominance maintained its positive trend with a 0.94% increase for the fourth consecutive week, sustaining a dominance rate of 49.99%. Overall, the broader cryptocurrency market gained 1.79%, leading to a total market capitalisation of US$1.035 trillion.

Year-to-date in the crypto space.

When examining the year-to-date** performance from a broader perspective, Bitcoin has sustained its dominant position with a substantial 63.98% increase. While XRP, once a strong contender, has seen a slight reduction in its lead, it still boasts a respectable gain of 52.91%. Ethereum closely follows with a 35.64% rise, while Cardano manages to stay in positive territory with a modest increase of 2.85%. In contrast, Litecoin continues to struggle, remaining in the negative zone with a 7.36% loss.

*The weekly trading stats as of Monday, September 18th at 10:00 am AEST, based on data from Tradingview in USD.

**Year -to-date performance as of Thursday September 21st at 10:00 am AEST, based on data from Tradingview in USD.

Crypto news

Bitcoin breaks through key resistance level beyond US$27,000.

Bitcoin broke through a key resistance level on Tuesday as the price of Bitcoin climbed beyond US$27,000. Bitcoin rallied to its highest price this month at US$27,475 and marks another attempt to push past the US$26,000 zone, around which Bitcoin has stagnated for more than a month amid historically low volatility and trading volumes.

The Federal Open Market Committee (FOMC) concluded its two-day policy meeting on Wednesday. The FOMC is held its benchmark fed funds rate steady at a range of 5.25%-5.50%, as market participants focused on the central bank’s updated economic projections and Chairman Jerome Powell’s post-meeting press conference in which he warned of potential future rate hikes if needed. The FOMC’s next meeting is at the start of November, and investors are currently pricing in a 70% chance of continued steady policy.

Bitcoin’s crypto market dominance rises above 50%.

Bitcoin’s price has remained almost static for the last 30 days, but its market dominance has been on the rise as altcoins and the wider crypto market counter resistance. Bitcoin’s market dominance rate, which tracks the largest cryptocurrency's share of the total digital asset market, rose to 50.2% earlier on Monday, its strongest level in a month and near a 26-month high of 52% reached at the end of June. 

Taking a broader view, Bitcoin’s market dominance was in a range between 39% and 49% for more than two years before it broke out to that 52% level in June after asset manager BlackRock’s filing for a spot BTC exchange-traded fund (ETF) spurred hopes about unleashing massive inflows into the asset. 

The cryptocurrency has often gained ground in bearish climates, but analysts suggest hopes for a spot Bitcoin ETF and the latest regulatory actions could prompt further gains for the world’s largest cryptocurrency. Despite the current upward trend, it is crucial to note that Bitcoin's market dominance remains far from its peak levels, down from both its June 2023 high of 52% and the bull market high of 73% reached in December 2020.

Buy Bitcoin on BTC Markets.

CitiGroup unveils plans to launch private blockchain services for institutional clients.

CitiGroup has developed a permissioned blockchain for institutional customers to interact with digital assets. The new product, Citi Token Services, intends to provide clients access to tokenised deposits, cross-border payments, and automated trade finance solutions 24 hours a day.

Citi’s head of global services Shahmir Khaliq said this development advances the goals of the Regulated Liability Network, a whitepaper published in November 2022 professing the desire to get the world’s financial system to a place where on-chain, 24/7 programmable, final settlement in sovereign currencies is possible.

“Digital asset technologies have the potential to upgrade the regulated financial system,” Khaliq said. “The development of Citi Token Services is part of our journey to deliver real-time, always-on, next generation transaction banking services to our institutional clients.”

Maersk partnered with Citi Treasury and Trade Solutions (CTTS) for Citi’s digital asset trading service, which would serve the same purpose as “bank guarantees and letters of credit” in traditional finance, according to a press release. Both companies reported that the pilot program was able to provide instantaneous payments to service providers via smart contracts, something that would be beneficial to companies with many vendors. 

CitiGroup appear to be one step ahead of JPMorgan, as the largest bank in the US by assets is still in the “early stages” of exploring a similar private blockchain service, according to Bloomberg.

Ethereum’s Holešky testnet launch hits speed bump.

Ethereum’s Goerli testnet will soon come to an end following the launch of a new testnet, dubbed Holešky. The Holešky testnet was meant to go live on September 15th, marking the one-year anniversary of Ethereum’s historic ‘merge’ upgrade from proof-of-work (PoW) to proof-of-stake (PoS). However, the network failed to launch due to a misconfiguration and will require a relaunch.

Testnets are essentially copies of blockchains and exist for developers to test their protocols and smart contracts before deploying them onto the main blockchain. Today, there are two main Ethereum testnets: Sepolia, a network designed for blockchain application development, and Goerli, used to test for validating and staking.

Ethereum announced the launch of its Holešky testnet in July 2023. The new Holešky testnet is said to be able to handle a client size three times larger than that of Ethereum mainnet. Holešky will replace the Goerli testnet, a process in the tech industry often referred to as ‘sunsetting’. Sunsetting a blockchain is not as unusual as it sounds as, over time, they become difficult to maintain and run nodes on due to their growing state and transaction history.

Holešky is designed to be much larger than Goerli, allowing validators to test in a more realistic on-chain environment and resolve Goerli’s goETH supply issues, which have caused headaches for developers. 

Developers testing on Goerli can receive goETH from a faucet, the token isn’t meant to have real-world value and exists so that developers can pay gas fees when testing their products. Goerli goETH supply is capped at 115 million, meaning there can be no more than 115 million goETH circulating on the network. However, with its limited supply, individual wallets began hoarding the token. This has made it more difficult for developers to test their applications on the testnet.

Following last week’s launch failure, Ethereum foundation DevOps engineer Parithosh Jayanthi posted on X (formerly known as Twitter):

“We're waiting on a decision, but it's extremely likely that we relaunch the network with new genesis files and have the network up ~two weeks from now.”

Buy ETH on BTC Markets.

Aussie bank ANZ takes next step to stablecoin with Chainlink test as LINK price soars.

Australia and New Zealand Banking Group (ANZ) is one step closer to launching its bank-issued stablecoin A$DC after the bank successfully executed a test transaction on Chainlink’s Cross-Chain Interoperability Protocol (CCIP).

ANZ’s Banking Services Lead Nigel Dobson said in a statement last week that the transaction was a “milestone” moment for the bank:

“The bank’s work with its A$DC stablecoin and the tokenisation of real-world assets has already provided us with valuable lessons as we continue to investigate enterprise-grade use cases. Based on market activity, we expect the continued adoption of digital assets will result in the proliferation of multiple assets across many blockchain networks.”

The development showcased the bank’s capability to transfer funds across both open and private blockchain networks, furthering experiments being conducted to test the efficiency and security of deploying real-world assets on-chain.

ANZ minted the first A$DC stablecoin in March 2022, becoming the first Australian bank to do so. National Australia Bank became the second a year later with its AUDN stablecoin on Ethereum.

Chainlink, the decentralised oracle network built on Ethereum, saw its LINK token climb to US$6.83 on Monday, rising more than 10% in 24 hours, amid news of further partnerships with traditional financial institutions.

LINK is currently trading at AU$10.56 +10% on the week.

The week ahead: upcoming economic events

September 21st: Bank of England Interest Rate Decision.

September 22nd: Japan’s Inflation Rate YoY. Bank of Japan Interest Rate Decision. UK Retail Sales MoM.

September 23rd: Germany’s HCOB Manufacturing PMI Flash.

September 25th: Germany’s Ifo Business Climate.

September 27th: Germany’s GfK Consumer Confidence. United States Durable Goods Orders MoM.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

• RBA signals future rates will be driven by data-dependent decisions.
• Consumer inflation expectations decline to 4.6% in September.
• Australia's seasonally adjusted unemployment rate rose slightly.
• Total employment increased; highest gains seen in part-time work.

This week, the Reserve Bank of Australia (RBA) released their meeting minutes stating that they remained vigilant and acknowledged the possibility of further tightening measures if inflation persists beyond expectations. The minutes were released earlier this week following its decision to maintain its cash rate target at 4.1%, citing alignment with recent data that supports the anticipation of inflation returning to target levels within a reasonable timeframe.

The RBA stated in their meeting minutes that this decision reflects their commitment to a balanced monetary policy approach, aimed at addressing inflation concerns while carefully monitoring both domestic and international economic developments for potential adjustments.

In August 2023, Australian inflation expectations dropped to 5.4% annually for the next two years, down by 0.2% from July 2023 and in line with the year's average so far. Notably, these expectations further declined to 4.9% in mid-September, marking the lowest point in 18 months. This reduction aligns with the Reserve Bank's decision to keep interest rates unchanged for three consecutive months.

In July, Australia's unemployment rate rose slightly to 3.7%, aligning with market expectations and underscoring the Reserve Bank's view of a labour market nearing a turning point, with the economy shedding a net 14,600 jobs, primarily in the full-time employment sector, while part-time employment increased. This may influence the Reserve Bank's decision to extend its interest rate pause as they predict a rise in the unemployment rate to 4.5% by the end of 2024. Despite this, the economy has added around 1 million jobs since the pandemic's depths, maintaining low jobless rates for nearly a year.

The Westpac-Melbourne Institute Leading Economic Index in Australia remained relatively flat in August, with the six-month annualised growth rate at -0.50%, indicating a protracted period of economic weakness. This extended downturn has persisted for 13 months, marking the longest such streak in seven years.

Global

• US Fed holds rates steady while they aim for a soft-landing.
• US consumer sentiment declined due to Fed’s tightening measures.
• Producer Prices in the US reach highest levels since June 2022.
• China's industrial production grew 4.5% YoY as government steps in.
• Japan's trade deficit significantly narrowed with decline in exports.
• ECB raised rates for the 10th time in a row to 22-year high of 4.5%.
• Canada's Inflation Rate surged to 4% while PPI decreases, CPI rises.

US

The Federal Reserve (Fed), in its Wednesday decision, chose to maintain the current interest rates, while also signalling its anticipation of one more rate hike by year-end and fewer reductions than initially projected for the following year. The Fed has maintained interest rates within the range of 5.25-5.5% as part of their strategy for a gradual economic transition, while emphasising a cautious approach. Although rates remain unchanged for now, central bankers have hinted at a possible quarter-point rate adjustment later in the year, aiming for a balanced economic trajectory.

In August, the United States witnessed a 0.7% increase in producer prices, exceeding market expectations. This surge was driven by a substantial 2% rise in goods prices, notably a 10.5% hike in energy costs. Service prices also edged up by 0.2%, primarily due to increased transportation and warehousing expenses, up 1.4%. Excluding volatile items, the producer price index rose by 0.2%. Annual producer price inflation reached a four-month high at 1.6%, while the core rate eased to 2.2%, its lowest level since January 2021.

Additionally, US retail sales in August showed resilience, rising by 0.6% month-on-month, with gains at gasoline stations due to a 10% increase in gasoline prices. This indicates strong consumer spending despite rising prices and borrowing costs.

The University of Michigan consumer sentiment index for the US dropped in September, reflecting decreased consumer optimism influenced by the Federal Reserve's actions and recent economic data. While current economic conditions declined sharply, future expectations improved due to the belief that elevated inflation will ease, with year-ahead inflation expectations falling to 3.1%, the lowest since March 2021.

China

China's industrial production surged by 4.5% year-on-year, exceeding the 3.9% expected, marking the strongest growth since April. This uptick is attributed to Beijing's supportive measures aimed at reviving the economy. In the first eight months of 2023, industrial output increased by 3.9%, reflecting sustained momentum in the sector. Simultaneously, China's retail sales showed a significant rise, growing by 4.6% year-on-year in August, surpassing the 3.0% market forecast. Over the initial eight months of the year, retail trade expanded by 7.0%, highlighting the enduring strength of consumer demand.

Japan

Japan's trade deficit significantly narrowed, showing a substantial improvement compared to the same month in the previous year, exceeding market expectations. The reduction in the trade deficit was primarily driven by a decline in exports, which fell by 0.8% year-on-year. This marked the second consecutive month of export decline, primarily attributed to weak foreign demand, notably from China. In contrast, imports experienced a significant slump, plunging by 17.8%. This decline marked the fifth consecutive month of falling imports and represented the sharpest drop since August 2020. The decrease in imports was largely influenced by rising energy costs and the strength of the yen.

Europe

The European Central Bank (ECB) raised interest rates for the 10th consecutive time, marking a decisive move in response to inflation dynamics. The ECB, however, hinted at a potential pause in its tightening policy, acknowledging the beginning of an inflationary decline while emphasising that inflation is expected to remain persistently elevated. This latest rate hike pushed the main refinancing operations rate to a 22-year high of 4.5%, while the deposit facility rate reached a new record at 4%.

Canada

In July, Canada's Producer Prices (PPI) registered a 2.70 percent year-on-year decrease, indicating a decline in producer prices over the same period of the previous year. Meanwhile, Canada's annual Inflation Rate surged to 4% in August, exceeding market expectations of 3.8%. This marked the second consecutive acceleration in consumer prices since reaching a two-year low of 2.8% in June. On a monthly basis, the Canadian Consumer Price Index (CPI) rose by 0.4%. Additionally, Canada's Industrial Producer Prices increased by 0.4% in July compared to the previous month, marking the first period of producer price growth since October 2022. This growth was attributed to surging energy and petroleum product prices, as well as a notable increase in softwood lumber prices.

Regulation roundup

UK House of Lords passes bill to seize crypto assets tied to crime.

A bill that aims to expand the ability of authorities in the United Kingdom to target illicit cryptocurrency usage has been pushed to the final stages for approval by the House of Lords.

The Economic Crime and Corporate Transparency Bill, set to be enacted later this year, would give local courts and law enforcement agencies new powers to help freeze crypto they believe was used to launder money, traffic drugs, commit cybercrime and terrorism.

During the review, the House of Lords agreed on certain amendments to clarify its intent of targeting monetary proceeds from fraud or other financial crimes. In addition, the bill also aims to set provisions for corporate transparency and overseas business registrations.

At the final stage, the House of Commons will either decide to accept the proposed amendments or recommend changes to the bill. Following the approval, the bill will be signed into law through royal assent, a method by which a monarch formally approves an act of the legislature.

BTC Markets notification.

We have been made aware of a security incident from Crypto Tax Calculator (CTC). For details, please refer to their blog post and reach out to their customer service team if you need further assistance. To revoke the API key in your BTC Markets account and generate a new key follow these steps outlined on our blog.

Compliance conversations

Understanding the dynamics of a ‘rug pull’.

The financial markets are known for wild volatility and the potential for extraordinary gains. However, it is also a breeding ground for unscrupulous individuals and groups looking to make a quick buck at the expense of unsuspecting investors. One of the most infamous schemes in the finance space is a ‘pump and dump’ also known as a ‘rug pull’ in crypto. In this section, we'll delve into what rug pulls are, how they work, and most importantly, how you can protect yourself from falling victim to them.

What is a rug pull?

A rug pull is a form of market manipulation where scammers deceive investors into believing a cryptocurrency project is legitimate and promising. They lure investors into providing liquidity or buying tokens in a project. Once a substantial amount of funds is locked into the project, the scammers pull the rug, essentially draining the liquidity pool or selling off their tokens, causing the project to collapse and leaving investors with significant losses.

How they work.

• Creation: Scammers typically create a project, complete with a whitepaper, website, and social media presence, to make it appear legitimate.
• Attracting liquidity: To make the project seem credible, scammers encourage investors to provide liquidity to decentralised exchanges (DEXs) or invest in the project's tokens.
• False promises: Scammers make enticing promises of high returns, staking rewards, or yield farming opportunities, enticing more investors to participate.
• Draining liquidity: Once a substantial amount of funds are locked into the project, the scammers execute their exit strategy. They remove liquidity or sell their tokens, causing the project's value to plummet.
• Investor losses: Those who invested in the project, provided liquidity, or purchased tokens are left with near-worthless assets, while the scammers disappear with the stolen funds.

Protecting yourself from rug pulls.

• Research extensively: Thoroughly research any project before investing. Investigate the project's team, its code on GitHub, and its community. Look for red flags or inconsistencies.
• Verify audits: Many legitimate projects undergo security audits by reputable firms. Ensure that the project you're interested in has been audited and review the audit report.
• Caution with new projects: Be especially cautious with new, unproven projects. Wait for them to establish a track record and gain credibility in the crypto community.
• Community feedback: Engage with the project's community. Seek feedback and opinions from experienced crypto enthusiasts who can provide insights and warnings.
• Use reputable platforms: Stick to well-known crypto platforms and decentralised exchanges that have a track record of security and reliability.
• Stay informed: Keep up to date with the latest news and developments in the crypto space. Being informed can help you spot potential risks early on.

Rug pulls remain a significant concern in financial markets, as scammers continue to exploit unsuspecting investors, causing substantial financial losses. However, by staying informed, conducting thorough research, and practicing caution, you can reduce the risk of falling victim to these fraudulent schemes. Remember, in the crypto world, due diligence is your best defence against market manipulation.

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 10:00 AM AEST, on 21/09/2023.