Weekly Crypto Wrap: 2nd November 2023

TLDR

• ‘Buy Bitcoin’ searches up 826%, BTC's dominance hits 54%.
• Standard Chartered-backed crypto custodian launches in HK.
• BlackRock's Bitcoin ETF attracts attention from market-makers.
• XRP breaks key resistance level, gaining 10% in 24 hours.
• Solana soars to a 14-month high, up 317% year-to-date.
• Bitcoin could hit US$150k by 2025, predicts Bernstein.
• Crypto funds see largest weekly inflows in over a year.

BTC Markets announcements

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The ASX Markets Day for Charity raises $800,000.

Thank you to all our clients for participating in the ASX Refinitiv Markets Day for Charity on Tuesday and helping the finance industry raise a massive $800,000 to support the most vulnerable individuals in our communities. This generous contribution adds to the $35 million that has been raised and distributed over the past three decades by the ASX Refinitiv Foundation.

This annual event, made possible with the generous support of principal donors ASX and nabtrade, serves as a beacon of hope for thousands of Australians. The funds raised will undoubtedly make a positive impact on the lives of many, and we look forward to continued collaboration and success in our charitable endeavours.

Read more about this event.

BTC Markets sponsors Blockchain APAC Crypto Assembly event.

Considering the recent announcement by the Australian Treasury regarding proposed crypto regulation for Australian exchanges, engaging in government discussions has become more crucial than ever. That's why BTC Markets is proud to be a foundational sponsor of the Blockchain APAC Crypto Assembly event scheduled for November 23rd and 24th in Sydney.

As an active contributor to the crypto industry, we strongly believe in supporting its growth and advancement. Our sponsorship underscores our dedication to educating industry stakeholders and users, facilitating discussions on regulatory matters, and actively participating in the creation of legal frameworks that benefit all participants in this ever-evolving landscape.

Join us as key players in the industry share their wealth of experience, expertise, and unwavering passion for blockchain and cryptocurrencies. For more information, please visit the event page.

State of crypto

• Bitcoin’s dominance hits 54%, Solana outperforms, up 317% YTD.
• Standard Chartered-backed crypto custodian launches in HK.
• BlackRock's Bitcoin ETF attracts attention from market-makers.
• ‘Buy Bitcoin’ Google searches surge 826% after price rally.

As the market continues to digest the news that large institutional investors are already in the space, more announcements further buoy price action. Standard Chartered-owned crypto firm, Zodia made its debut in Hong Kong, aiming to establish a significant presence in the crypto industry.

Meanwhile, the financial world is abuzz with interest in BlackRock's Bitcoin ETF, as prominent market-makers express their desire to participate. 'Buy Bitcoin' search queries on Google have experienced a remarkable 826% surge in the UK, reflecting a global trend in increased interest driven by a substantial rise in BTC's price.

In the courtroom, the FTX fraud trial is nearing its conclusion as Sam Bankman-Fried wraps up his testimony in the case this week. Whilst in the United Kingdom, regulators have affirmed their commitment to formally regulate the crypto industry, setting the stage for forthcoming legislative developments.

On the market front, Bitcoin's dominance peaked as high as 54.34% last week, as traders start rotating their profits into alt coins. Solana benefiting, currently up almost 100% since October 1st, and this week’s stand out performer, trading at US$41.58.

Crypto market sentiment has soared further into the Greed zone, currently sitting at 72 on the Crypto Fear & Greed index, up from 66 yesterday.

The weekly crypto close.

The crypto market concluded its second consecutive week* in the green as Bitcoin (BTC) led the way with an impressive 15.12% gain, closing at US$34,525.89. Ethereum (ETH) followed suit, registering a 7.90% increase to reach US$1,795.14.

XRP showed strength throughout the week, holding above a significant psychological level, and ending at US$0.5561, reflecting a gain of 6.41%. Litecoin (LTC) exhibited a similar pattern, closing at US$68.79, experiencing a 5.41% increase.

Cardano (ADA) secured a closing price of US$0.2954, marking an impressive gain of 11.94%. Notably, Solana (SOL) stood out with a substantial surge, closing at US$32.83 and achieving a remarkable gain of 13.01%.

Bitcoin’s dominance continued its bullish momentum, closing its tenth consecutive week in positive territory, with a 3.80% increase, and maintaining a dominant position at 54.09% for the week.

Simultaneously, the total cryptocurrency market capitalisation experienced significant growth, gaining an impressive 10.95% throughout the week and ultimately closing at a valuation of US$1.247 trillion.

Year-to-date in the crypto space.

Solana (SOL) stands out as the top performer, boasting a remarkable 317% increase in value on the year** Bitcoin (BTC) follows closely with an impressive gain of 114%. XRP (XRP) has also demonstrated strength and growth, registering a substantial 78% increase.

Ethereum (ETH) has shown a solid 54% increase in its value over the year, while Cardano (ADA) has displayed steady growth, with a modest gain of 24%. Unfortunately, Litecoin (LTC) remains in the negative territory, experiencing a slight decline of 0.48% for the year.

*The weekly trading stats as of Monday, October 30th at 11:00 am AEDT, based on data from Tradingview in USD.

**Year -to-date performance as of Thursday, November 2nd at 11:00 am AEDT, based on data from Tradingview in USD.

Crypto news

Crypto funds see largest weekly inflows in over a year.

Inflows into crypto exchange-traded products (ETPs) amassed US$326 million for the week ending October 27th, far outpacing the US$66 million recorded the week before, to reach the highest level in over a year, according to a report from CoinShares.

Bitcoin could hit US$150k by 2025, predicts Bernstein.

The crypto industry has been alive with rumours of US regulatory approval for a spot Bitcoin exchange-traded fund (ETF), which would open the gateway for traditional investors to enter the market.

Amid the speculation and interest of major financial institutions, Bitcoin posted its strongest monthly rally since January, up 27% in October and reaching a seventeen-month high of US$35,000.

According to reporting from CNBC, financial brokerage firm Bernstein predicts that the price of Bitcoin (BTC) could reach a high of US$150,000 by mid-2025, if the US Securities and Exchange Commission (SEC) approve a spot Bitcoin ETF.

In a note to clients on Tuesday, analyst Gautam Chhugani said that the firm expects the SEC grant approval by early 2024 (echoing a recent report from JPMorgan analysts) and anticipates that up to 10% of Bitcoin’s circulating supply will move towards ETFs. 

The note also highlights the cyclical nature of Bitcoin price cycles and pre-empts that the next Bitcoin halving, scheduled for April 2024, will boost the price of BTC by forcing out inefficient miners, leaving significant gains for those that remain.

Buy Bitcoin on BTC Markets.

Solana soars to a 14-month high, up 100% since October 1st.

Wednesday saw Solana (SOL) continue its incredible rise to reach a 14-month high in price. Over the past 24 hours, the seventh-largest cryptocurrency in terms of market capitalisation experienced a 17% increase, reaching its highest point since August 2022 at US$46, widely outperforming other major cryptocurrencies.

Many in the crypto space have expressed surprise at Solana’s return to prominence as one of the best performing assets, up 317% year-to-date. It was almost this time last year that SOL experienced a nose-dive price drop of 50% in the week following the collapse of FTX, one of the top-backers of the Solana ecosystem. But, with a growing developer base – up 40% year on year – and many ardent supporters, Solana has since made an impressive comeback.

A cryptocurrency’s price can be greatly impacted by the state of the development community, which affects the ecosystem growth, community attitude, technological advancements and overall security of the network. When determining the likelihood of future price movements, savvy investors frequently keep a careful eye on these factors.

This week, Solana announced that its nodes are now available for deployment on Amazon Web Services (AWS). When Solana makes "node development blueprints available on AWS," it means they are providing guidelines and templates on how to set up and manage nodes on their blockchain using Amazon's cloud computing services, making it easier for developers to participate in the Solana network. Solana is the second blockchain to be powered by the AWS Blockchain Node Runner initiative, after Ethereum.

Buy SOL on BTC Markets.

Standard Chartered-owned crypto firm launches in Hong Kong.

Zodia Custody, a joint venture between trad-fi giants Standard Chartered, SBI Holdings, and Northern Trust, is extending its operations to Hong Kong, as part of its expansion in the Asia-Pacific region following launches in Singapore, Japan, and Australia.

Launched in December 2020, Zodia Custody aims to deliver crypto custody solutions for institutional and corporate clients. The UK-headquartered firm will initially support a limited number of cryptocurrency assets and is in talks with Hong Kong’s Securities and Futures Commission and the Monetary Authority regarding regulatory approvals.

Despite China's anti-crypto stance which saw a ban on Bitcoin trading and mining introduced in 2021, Hong Kong has become increasingly receptive to the digital asset sector.

In an exclusive interview with CNBC, Zodia Custody’s CEO Julian Sawyer acknowledged the Hong Kong government's hopes to establish itself as a hub for the global crypto industry and noted that significant demand in Hong Kong is primarily driven by institutional investors.

Goldman Sachs: Ethereum’s Dencun upgrade is a step toward a scalable settlement layer.

Ethereum's (ETH) Dencun upgrade, now anticipated in the first quarter of 2024, will play an important step towards the blockchain's scalability as a settlement layer, Goldman Sachs said in a note last week.

“Dencun’s primary impact will be to increase its data availability for layer-2 rollups via proto-danksharding, resulting in a reduction of rollup transaction costs which will be passed on to end users.”

A blockchain's foundational layer, is called a layer 1 network. A collection of off-chain systems or distinct blockchains constructed on top of layer 1s are collectively referred to as layer 2's. Rollups handle transactions on a speedier layer 2 blockchain and, at a much lower cost, transmit the data back to the parent network.

The upgrade will enhance Ethereum’s scalability using rollups. Additionally, network security will be improved, gas pricing will be optimised, and several other changes to increase the network’s user-friendliness will be introduced.

Buy ETH on BTC Markets.

XRP breaks key resistance level surging 10% in 24 hours.

Several altcoins have experienced a price jump in the past week as investors continue to funnel cash into the market amid increased optimism around the approval of a Bitcoin exchange-traded fund (ETF). 

Following months of stagnation, Ripple's (XRP) price broke through a multi-month resistance level on Tuesday, reaching above the US$0.60 mark. Alongside the price pump, traders placed bullish bets on XRP, the fifth largest cryptocurrency, which led toa 145% spike in volume and US$2.15 billion worth of transactions completed in one day, according to data from CoinMarketCap.

Crypto commentators note that XRP has attracted significant capital inflows from investors over the past week amid improved regulatory clarity. At its current price, XRP is still down around 80% from its all-time high of US$3.29 set in 2018. What caused the token to undergo a 10% price gain in less than an hour remains unclear, but the sentiment for now, is bullish.

Buy XRP on BTC Markets.

The week ahead: upcoming economic events

November 2nd: Bank of England Interest Rate Decision. 

November 3rd: Germany's Balance of Trade. Canada's Unemployment Rate. United States' Non-Farm Payrolls and Unemployment Rate.

November 4th: United States' ISM Services PMI.

November 7th: Canada’s Ivey Purchasing Managers Index. China's Balance of Trade. Australia's Interest Rate.

November 9th: China's Inflation Rate.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

• RBA to announce interest rate decision on Cup Day.
• Australia's core inflation accelerated during the September quarter.
• IMF advises the RBA to raise interest rates to tackle inflation.

As financial markets await the Reserve Bank of Australia's (RBA) interest rate announcement on Melbourne Cup Day, economic experts are foreseeing a succession of rate hikes aimed at curbing the growing inflation. Recent data revealed that Australia's core inflation, measured according to the RBA's preference, accelerated during the September quarter, surpassing both expectations and the central bank's own projections.

Former RBA official turned Challenger chief economist Jonathan Kearns said:

“The real policy rate is not as restrictive relative to history or other economies and it has been a deliberate RBA strategy to preserve jobs, but this means it will take longer for inflation to slow to target.”

Whilst the International Monetary Fund (IMF) has advised the RBA to continue raising interest rates to bring down inflation more rapidly. The IMF noted that inflation in Australia remains well above the central bank's target range, and they recommended further monetary policy tightening to ensure that inflation returns to the target range by 2025.

In the September quarter, headline inflation rose by 5.4%, significantly above the central bank's target range of 2-3%. The IMF also suggested that federal and state governments could help alleviate inflationary pressures by implementing public investment projects at a more measured and coordinated pace to address supply constraints.

Global

• Economists anticipate central banks to delay rate reductions.
• US economy grew at the fastest pace in nearly two years.
• Jobs data out of the US show consistently tight labour market.
• US FOMC skips interest rate hike but hints at further increases.
• China’s factory activity contracts in blow to economic momentum.
• BOJ relaxes grip on rates as end to yield control looms.
• European monetary tightening causes economic stagnation.

United States

Markets reacted positively to the news from the Federal Reserve as they decided to keep the target range for the federal funds rate at its 22-year high. Rates are currently at 5.25%-5.5% for a second consecutive time in November, reflecting policymakers’ dual focus on returning inflation to the 2% target while avoiding excessive monetary tightening.

Policymakers emphasised that the extent of any additional policy tightening would consider the cumulative impact of previous interest rate hikes, the time lags associated with how monetary policy influences economic activity and inflation, and developments in both the economy and financial markets.

During the press conference, Federal Reserve Chair Jerome Powell, signalled that the September dot-plot showing most participants forecasting one more rate hike this year may not be accurate anymore. He also stated the Federal Open Market Committee had not discussed any rate cuts yet, while the primary focus remains on whether the central bank will need to implement additional rate hikes.

In October, the US manufacturing sector experienced its 12th consecutive month of economic contraction after enjoying a 28-month period of growth, as per the latest reports. Concurrently, job openings in the United States remained elevated, with layoffs reaching a nine-month low in September. This resilience in job openings indicates an ongoing labour market tightness that continues to underpin the economy.

Economists are now projecting that central banks across the globe, may delay cutting interest rates into the second half of 2024. In Q3, the US economy outperformed expectations, with a robust annualised growth rate of 4.9%, the highest since 2021, despite 18 months of Federal Reserve interest rate hikes aimed at controlling inflation.

Strong consumer spending, driven by a strong labour market and a sense of financial security, played a pivotal role, contributing over half of the quarter's growth. However, experts predict a slowdown due to rising interest rates and increased borrowing costs, impacting both businesses and households. While some economists forecast a decline in GDP growth, the possibility of a recession remains a topic of debate.

China

In October, China's manufacturing activity unexpectedly contracted, reflected in the official manufacturing purchasing managers' index dropping below the previous month's level. This setback follows a brief return to expansion in September, challenging China's economic momentum. Despite better-than-expected Q3 GDP growth of 4.9%, the latest manufacturing data indicates ongoing economic challenges.

Chinese economists noted that when considering both manufacturing and non-manufacturing data, it's the worst on record except during COVID-19 lockdowns, with the services sector barely growing. The non-manufacturing index also showed slower growth, surprising economists. This has increased pressure on Beijing to implement further fiscal stimulus to address the manufacturing downturn.

Japan

The Japanese yen hit a one-year low as the Bank of Japan disappointed markets with minimal changes to its yield curve control policy. Japanese authorities are on intervention watch as the yen's decline comes after the Bank of Japan made limited changes to its policy, signalling that a shift away from its ultra-dovish stance will take longer than expected. A weaker yen is seen as a threat to the Japanese economy, prompting past government interventions.

Germany

German consumer price inflation declined to 3.8% year-on-year in October, a drop from the previous month's 4.5% and slightly below the market consensus of 4%. This is the lowest inflation level since August 2021. The decline in inflation signals a significant cooling in Europe's largest economy, which shrank in the third quarter, raising concerns about a potential recession in the region.

EU

The European Central Bank (ECB) broke a 15-month streak of consecutive rate hikes during its October meeting by keeping interest rates at multi-year highs. Policymakers adopted a cautious stance due to easing price pressures and recession concerns.

This decision followed ten consecutive rate increases that began in July 2022, raising the main refinancing rate to 4.5% and the deposit facility rate to 4%. The ECB aims to bring inflation back to a 2% target and plans to maintain elevated rates for an extended period.

France

Despite a domestic demand rebound, French GDP growth decelerated significantly in Q3 2023. The economy expanded by just 0.1%, a marked slowdown from Q2's 0.6% growth, aligning with market expectations. Inflation in France fell to 4% YoY in October 2023, down from 4.9% in the previous month, consistent with market projections, marking its lowest level since the previous February.

Italy

Italian GDP remained unchanged in Q3 2023, failing to recover from the 0.4% contraction in Q2, contrary to the expected 0.1% expansion. Year-on-year, Italy's GDP stagnated at 0%. Inflation in Italy decelerated to 1.8% in October 2023, significantly lower than the previous month's 5.3% and market expectations of 2.3%, marking the lowest rate since June 2021.

Regulation roundup

UK confirms plans to regulate crypto industry.

The UK government has announced its final regulatory framework for the cryptocurrency industry, stating that regulations will be implemented gradually, with legislation for fiat-backed stablecoins expected in early 2024.

The government’s proposals include stricter rules for exchanges, custodians that store crypto on behalf of clients, and crypto lending companies. These rules will bring relevant activities under the purview of the Financial Conduct Authority (FCA).

In a statement accompanying the document, Treasury Minister Andrew Griffith said:

“I am very pleased to present these final proposals for cryptoasset regulation in the UK on behalf of the Government... I look forward to our continued work with the sector in making our vision a reality for the UK as a global hub for cryptoasset technology.”

The UK has certainly picked up the pace in the process of regulating the crypto industry, however, many have complained of delays and poor feedback from the FCA, while recently introduced rules restricting crypto marketing have led big players to halt UK operations altogether.

Compliance conversations

Safeguarding your crypto: understanding & securing your seed phrases.

In the world of cryptocurrencies, safeguarding your assets is of paramount importance. One essential aspect of securing your digital wealth is understanding and protecting your crypto seed phrases. In this section, we will delve into what seed phrases are and provide guidance on how to manage them.

What are crypto seed phrases?

A crypto seed phrase, also known as a recovery phrase or mnemonic seed, is a series of words typically consisting of 12, 24, or sometimes 25 words. These words are generated by a cryptocurrency wallet during the setup process and serve as the key to your crypto kingdom. Essentially, your seed phrase is the master key to all the funds stored in your wallet.

The importance of these words cannot be overstated. If you ever lose access to your wallet due to a lost password, a damaged device, or other unforeseen circumstances, your seed phrase is the lifeline to recover your funds.

What happens to my seed phrase on an exchange like BTC Markets?

When you store your cryptocurrency on an exchange, you don't need a seed phrase because you are relying on the exchange's infrastructure to secure your assets. Exchanges typically manage user accounts and the private keys associated with those accounts on your behalf.

Here's why you don't need a seed phrase on an exchange:

• Custodial control: Cryptocurrency exchanges are custodial services, meaning they hold your assets on your behalf. They maintain control of the private keys associated with your holdings.
• Account-based system: Exchanges use an account-based system, where your holdings are associated with your account on the exchange. You access your funds using your username, password, and two-factor authentication, rather than a seed phrase.
• Centralised security: Exchanges employ various security measures to protect your assets, such as cold storage, multi-signature wallets, and cybersecurity protocols. They are responsible for securing your assets against hacks and breaches.
• Ease of use: For many users, exchanges are a convenient way to buy, sell, and trade cryptocurrencies. Not needing a seed phrase simplifies the user experience.

If you do opt to custody your own crypto, keeping your seed phrases safe should be your number one priority.

• Offline storage: The safest way to store your seed phrase is offline. Write it down on a piece of paper, preferably using a pen and paper rather than a digital device. Make multiple copies and store them in different secure locations.
• Secure locations: Choose secure and fireproof locations for your physical copies. Banks offer safety deposit boxes that are ideal for storing sensitive documents like your seed phrase.
• Cryptosteel or metal plates: For added durability, consider using a cryptosteel or a metal plate to engrave your seed phrase. These are designed to withstand fire, water, and physical damage.
• Keep it private: Never share your seed phrase with anyone. Not with family, friends, or strangers. Your seed phrase is your responsibility and should remain your secret.
• Test recovery: Before storing your seed phrase away, use it to recover your wallet to ensure it works. This ensures you have noted down the correct words, and they are in the right order.
• Avoid digital storage: Refrain from storing your seed phrase on digital devices, especially those connected to the internet. Digital storage can be vulnerable to hacks and malware.
• Use strong passwords: The security of your seed phrase is only as strong as the password protecting it. Use a robust, unique password for your wallet.
• Updates and maintenance: Regularly check the physical condition of your storage. Make sure the words are still legible, and the storage location remains secure.

The consequences of seed phrase neglect.

Neglecting the security of your seed phrase can have dire consequences. If someone gains access to it, they can easily steal your crypto assets. Conversely, if you lose it, you may lose access to your own funds forever. There have been numerous unfortunate cases of people losing their seed phrases, resulting in substantial financial losses.

Your crypto seed phrase is the key to your digital wealth, and safeguarding it is crucial. Follow the best practices outlined above, and you can rest assured that your crypto assets are secure. Remember that, in the crypto world, self-responsibility is the ultimate guardian of your financial future. Take care of your seed phrase, and you take care of your crypto wealth.

To learn more about the security features on BTC Markets, visit our help article. ASIC provides a checklist of common scams and ways to avoid them. For more information, visit ASIC’s website.

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Prices are accurate as of 11:00 AM AEST, on 02/11/2023.