Weekly Crypto Wrap: 30th March 2023

TLDR

• Australian inflation dropped to 6.8%, lower than the predicted 7.2%.
• Investors flee to safe-haven assets like Bitcoin, amid banking contagion.
• XRP gains 16.13% on the week, reaching a five-month high.
• Crypto OG Litecoin having a stellar week, up 11.12%.
• Billionaire bullish on crypto as China eases regulatory crackdown.
• Binance sued by US regulators for derivative violations.

The week ahead

March 31st: the Chinese National Bureau of Statistics Manufacturing Purchasing Managers' Index (PMI) will be released, providing insights into the health of the Chinese manufacturing sector. Annual inflation rates in France and consumer price inflation in the Euro Area, as well as the Euro Area Unemployment Rate, will also be reported. Italy's inflation rate will be released, alongside United States Personal Spending, month-on-month Core Personal Consumption Expenditures (PCE) Price Index, and Personal Income reporting.

April 1st: investors will be paying attention to European Central Bank (ECB) President Christine Lagarde's speech, as well as speeches from US Federal Reserve officials.

April 3rd: Australia's economic reporting will feature several essential monthly indicators, such as Building Permits, Home Loans, Private House Approvals, and Retail Sales. Additionally, February Investment Lending for Homes and year-on-year Building Permits will be released. Japan's Business Confidence index and China's Caixin Manufacturing PMI will also be reported.

April 4th: the United States Institute for Supply Management (ISM) Purchasing Managers' Index (PMI) will be released, providing an overview of the state of the US manufacturing sector. The Reserve Bank of Australia (RBA) Interest Rate Decision and Germany's Balance of Trade will also be reported.

April 5th: investors will be monitoring the United States' Job Openings and Balance of Trade, as well as Canada's Balance of Trade report.

April 6th: the United States ISM Non-Manufacturing PMI will be released, providing an insight into the health of the US services sector. The RBA will also release its Financial Stability Review, while Australia's month-on-month imports and exports will be reported. Canada's Unemployment Rate will also be released.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

Australian inflation data for February showed a slower-than-expected rise to 6.8%, lower than the expected 7.2%. This result, attributed to a drop in fuel and travel costs supports a pause in RBA policy, allowing them to maintain their current cash rate at 3.6%. Analysts believe that this outcome will further encourage the RBA to focus on its objective of full employment and wage growth rather than raising interest rates to control inflation. According to the ABS, the most significant price increases were observed in housing (+9.9%), food and non-alcoholic beverages (+8.0%), and transport (+5.6%).

Australian bank CEOs have warned of a raging price war in the home loan market, with competition driving down margins and increasing the risk of a credit crunch. The CEO of National Australia Bank, Ross McEwan, said banks were "fighting tooth and nail" for new customers, while the Commonwealth Bank CEO, Matt Comyn, warned that the intense competition could lead to a "race to the bottom" in lending standards.

According to JPMorgan, European banks are in a better position than their US counterparts in terms of the risk posed by commercial property. The report suggests that the COVID-19 pandemic has had a less severe impact on the European commercial property market than the US. JPMorgan also noted that European banks have been more cautious in their lending practices and have implemented tighter credit standards. This has resulted in European banks being better placed to manage the risks posed by commercial property, compared to US banks who are said to have a larger exposure to this market.

The number of Australian superannuation funds investing in commercial real estate, particularly in major cities like Sydney and Melbourne, raises concerns regarding the potential risk to their members' savings. The high prices for commercial properties and the risk of a market downturn pose a significant threat to capital loss. This risk can be further exacerbated if banks must mark to market their holdings, which refers to the process of valuing assets based on their current market value. If the market value of the commercial property declines, the bank may be forced to mark down the value of their holdings, leading to potential losses for investors.

Global

US stock markets fell sharply on Monday, with the Dow Jones Industrial Average declined as concerns mounted over the potential contagion from bank failures. The banking sector was particularly hard hit, with shares of several large banks falling significantly, as investors worried about their exposure to bad loans and other risks. The news follows reports of serious problems at several major banks, including JP Morgan Chase, Citigroup, and Wells Fargo, raising concerns about the stability of the financial system. The ongoing uncertainty has led many investors to flee to safe-haven assets, such as gold, Bitcoin, and government bonds.

According to Morgan Stanley's equity strategist Michael Wilson, US stocks could face significant losses if bank issues persist. The US banking sector has been underperforming in recent weeks due to concerns about rising interest rates and inflation, as well as potential regulatory risks. Wilson believes that these concerns are weighing heavily on the market, and if they persist, there could be a "very material downside" for US stocks. He also noted that the market is likely to experience increased volatility in the coming weeks as investors try to gauge the impact of these issues on the broader economy.

The latest economic reports have shown mixed results across various countries. In the US, the manufacturing sector could be at risk as durable goods orders decreased by 1%. On a positive note, Japan's annual inflation rate declined to 3.3%, benefitting consumers, though core consumer prices are still above the Bank of Japan's 2% target. In the UK, consumer confidence slightly improved but remained weak overall.

Meanwhile, Germany's Ifo Business Climate Indicator and GfK Consumer Climate Indicator rose, signalling improved business and consumer sentiment. This could be attributed to lower energy prices and the hope of avoiding a recession.

State of crypto

The crypto markets have experienced a volatile week whilst the digital asset majors managed to hold steady. Bitcoin experienced a minimal 0.02% decrease and closed the week at US$27,968. Ethereum also remained stable, with a slight loss of 0.38%, and ended the week at US$1,773. In contrast, XRP broke away from the crowd and reported a significant increase of 16.13% for the week, closing at US$0.4479. Finally, Litecoin had a stellar week, with an 11.12% gain and closing at US$93.32.

In terms of yearly gains, Bitcoin has performed exceptionally well, showing an impressive 72.63% gain, currently trading at US$28,546. Following closely is Ethereum with a 50% yearly gain, presently trading at US$1,792, while XRP is up an impressive 56.86% and is currently trading at US$0.5307. Litecoin has gained 28.77% and currently trading at US$90.31.

Bitcoin's market capitalisation has shown a small increase of 0.32% on the weekly close, with its dominance holding steady at 47.20%. Moreover, the overall cryptocurrency market capitalisation has come off slightly with a 0.46% loss, currently valued at US$1.122 trillion.

Alt action

Litecoin (LTC) is on the rise.

Litecoin (LTC), is a fork of the Bitcoin blockchain and created by former Google engineer Charlie Lee in 2011. It has seen a significant price increase this year, up over 28% in 2023. Litecoin is a peer-to-peer cryptocurrency that operates on a decentralised network, much like Bitcoin. It was designed to complement Bitcoin and address some of its shortcomings, such as slow transaction times and high fees.

Litecoin claims that their transactions are faster and cheaper than Bitcoin due to its use of a different algorithm for verifying transactions called Scrypt. Litecoin also has a larger total supply than Bitcoin, with 84 million Litecoin’s compared to Bitcoin's 21 million.

The recent surge in Litecoin's price could be attributed to the next halving event scheduled for August 2023. Previous halvings in Bitcoin and Litecoin markets have preceded extended bull runs and could produce a similar outcome.

Litecoin (LTC) is currently trading at US$89.58, up 27.49% on the year.

Trade LTC now on BTC Markets

The Big 3

Bitcoin investors reach record highs amid easing of US Federal Reserve tightening.

The number of Bitcoin addresses holding more than one BTC reached a record high of 989,875, according to on-chain analytics firm, Glassnode. Of the total number of addresses holding Bitcoin, roughly 70%, or 31.96 million, are currently in profit.

This comes as the US Federal Reserve raised interest rates by 25 basis points, easing investor concerns over steeper rate hikes. Despite recent bank failures, the Fed continues to attempt to balance persistent inflation with preventing a nationwide recession.

Singapore-based crypto financial services firm Matrixport warns that investors may continue to seek alternatives to bank deposits, with the US regional bank index likely to indicate the severity of stress in the system.

Meanwhile, Jack Dorsey, CEO of Square, has announced the creation of a new business unit focused on building decentralised financial services using Bitcoin. Dorsey revealed that the new business will be focused on creating an open developer platform with the sole goal of making it easy to create non-custodial, permissionless and decentralised financial services.

Dorsey also talked about the potential of the Lightning Network, which he said could help Bitcoin achieve mainstream adoption by enabling fast and cheap transactions. He added that he sees Bitcoin as a long-term investment for Square and that the company will continue to focus on its adoption and education.

Trade BTC now on BTC Markets

Ethereum developers confirm Epoch for Shapella Fork, allowing withdrawals.

The Ethereum Shapella hard fork, considered the most significant on Ethereum since Paris (The Merge), is scheduled to take effect on April 12, 2023. Shapella marks two parallel network developments. Firstly, there’s the Shanghai upgrade happening on the execution side of Ethereum. Simultaneously, the Capella upgrade will take place on the consensus side. Hence the two names eventually merged into “Shapella.”

The hard fork will enable Ethereum validators to withdraw their Ether (ETH) from the Beacon Chain, with Ethereum Improvement Proposal EIP-4895 enabling “pushing” staked Ether from the Beacon Chain to the Ethereum Virtual Machine (EVM), also known as the execution layer.

The hard fork will allow for partial and full withdrawals, but mechanisms are in place to prevent a flood of Ether supply from disrupting the market. Ethereum validators will be economically incentivised to update their client software for the Mainnet to avoid a delay in activation time.

The Ethereum Foundation doubled rewards for any bugs found in the Shapella code, offering a reward ranging from US$2,000 to US$250,000, depending on the bug's "criticality". Other significant Ethereum hard forks include London, which introduced a base fee, Berlin, which optimised gas costs, Beacon Chain Genesis, the first block produced on the proof-of-stake chain, and Istanbul, which improved resilience to denial-of-service attacks and made scaling solutions more performant.

Trade ETH now on BTC Markets

XRP reaches five-month high amid speculation of commodity classification.

XRP, the cryptocurrency associated with the blockchain payment firm Ripple, has surged to a five-month high amid optimism that it could be classified as a commodity rather than a security. XRP gained 8% over a 24-hour period, despite a fall in the wider crypto market following a US Commodity Futures Trading Commission filing against Binance.

Some commentators said that the mention of major tokens as commodities in the Binance case could suggest that XRP was also a commodity rather than a security, as alleged by the Securities and Exchange Commission in an ongoing case against Ripple. Ripple Chief Technology Officer David Schwartz has previously described XRP as a commodity, arguing that it is “a raw good that trades in commerce” and whose value is not reliant on any legal obligations.

In the meantime, Ripple developers continue to work on the cross-border payments network. Most recently, they’ve proposed a cross-chain bridge to strengthen its use case. It would allow the XRP Ledger to operate with other blockchains.

Trade XRP now on BTC Markets

Crypto news

Billionaire investor bullish on crypto as China eases regulatory crackdown.

Billionaire investor and cryptocurrency enthusiast, Mike Novogratz, sees the recent strength in the crypto market linked to China lifting its regulatory stance on the sector. Novogratz believes that China's shift away from harsh regulations has given investors’ confidence in the market's future, as the country has been a key driver of crypto adoption in the past. Additionally, Novogratz notes that the recent surge in Bitcoin prices could also be attributed to its ability to act as a hedge against inflation, as central banks continue to print more money to stimulate the economy.

Novogratz's comments come as Bitcoin approaches the US$30,000 mark, reaching its highest level in almost a year, while other cryptocurrencies also experience gains. Despite this, Novogratz warns that investors should be cautious, as the market remains volatile and unpredictable. Furthermore, he suggests that the future of cryptocurrencies may depend on their ability to integrate with traditional financial systems, rather than replace them entirely. This would require greater regulatory clarity and oversight, which Novogratz believes is necessary to protect investors and ensure the long-term viability of the market.

Overall, Novogratz remains optimistic about the future of cryptocurrencies, predicting that they will continue to gain mainstream adoption as more people become familiar with their potential benefits. He suggests that cryptocurrencies have the potential to revolutionise the financial system by making it more transparent, efficient, and accessible to everyone, regardless of their location or financial status.

Crypto exchange Binance sued by US futures regulator.

The US Commodity Futures Trading Commission (CFTC) has sued Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao for allegedly offering unregistered crypto derivative products and allowing US customers to evade compliance controls using virtual private networks (VPNs). The lawsuit, filed in the US District Court for the Northern District of Illinois, alleges that Binance operates a derivative trading operation in the US, offering trades for cryptocurrencies including Bitcoin, Ethereum, Litecoin, Tether and Binance USD, which the lawsuit referred to as commodities.

The lawsuit against Binance comes as regulatory scrutiny of the crypto industry increases around the world, with the UK’s Financial Conduct Authority and the US SEC both issuing warnings over Binance’s activities. Meanwhile, the CFTC has also said it will investigate whether other crypto exchanges are breaking its rules.

The US Securities and Exchange Commission recently informed Coinbase, a company listed on Nasdaq, that it intends to take enforcement action against the exchange for possible breaches of securities laws relating to its "staking" products. Despite this development, Coinbase remains confident in its legal standing and views the legal process as an opportunity to obtain clarity on the matter. However, the company also acknowledged the increasing frequency with which US regulators have been scrutinizing the cryptocurrency industry in the past year.

Some in the crypto community said the classification of major tokens as a commodity in the CFTC filing against Binance could mean XRP tokens were also commodities instead of a security, as alleged by the US Securities and Exchange Commission in the ongoing Ripple v SEC case.

Web3 gaming developers continue to be favoured by investors.

Blockchain gaming is gaining momentum among investors, who are betting on the potential of the emerging sector. Web3 gaming is a term used to describe blockchain-based games that are integrated with decentralised finance (DeFi) protocols and non-fungible tokens (NFTs). The technology allows gamers to earn crypto tokens while playing and trading assets outside of the game.

Several investors and venture capitalists, including Union Square Ventures, Andreessen Horowitz, and Paradigm, are investing in Web3 gaming startups, according to a recent report. Investors are attracted to the gaming industry due to its potential to generate significant revenue and user growth. Web3 games offer a unique proposition, as they allow players to earn tokens that can be used for other purposes, such as buying NFTs or investing in DeFi protocols.

Some examples of blockchain gaming coins are:

Enjin (ENJ): A cryptocurrency that powers the Enjin gaming platform, which allows game developers to integrate blockchain technology into their games.

Decentraland (MANA): A blockchain-based virtual world where users can buy, sell, and develop virtual real estate and other digital assets.

The Sandbox (SAND): A blockchain-based virtual world where users can build, share, and monetise their own gaming experiences.

The report also notes that Web3 gaming is still in its early stages, and there are challenges that need to be addressed, such as high transaction fees and scalability issues. However, investors are optimistic about the potential of the sector and are continuing to invest in startups that are developing new Web3 games and infrastructure.

Regulation roundup

Digital Assets (Market Regulation) Bill 2023.

Australian Senator Andrew Bragg has introduced a 'Digital Assets Bill' aimed at providing regulatory guidelines for cryptocurrency exchanges, custody services, and stablecoin issuers to protect consumers and promote investment. The bill proposes licensing requirements to operate a cryptocurrency exchange, custody service, or stablecoin issuer in Australia.

BTC Markets is supportive of the 'Digital Assets Bill' introduced as this is a crucial initial step towards regulating the crypto industry in Australia. The scope of the bill is limited, meaning that it is looking to tackle parts of the industry that mirror tradfi and regulating inherently negative human behaviour and limiting investor harm. At first read, it does not seem to address the wider issues on DeFi, or the varying nature of digital assets.

Overall, we welcome the introduction of Senator Bragg's 'Digital Assets Bill' as a significant step forward for the Australian crypto industry. With the right regulatory framework in place, we are confident that the industry will continue to thrive and grow in the years to come.

BTC Markets recently provided feedback on the government's token mapping paper, expressing our approval of the bill's scope, and providing additional recommendations. We are committed to working collaboratively with policymakers and regulators to create an environment that fosters innovation and growth while prioritising investor protection. It's a first step towards a more comprehensive framework, and we look forward to working towards a common goal as the industry matures.

BTC Markets updates

Transferring your crypto.

In this section, we will discuss your BTC Markets deposit address and the importance of ensuring your deposit addresses are compatible with the token/network you intend to deposit.

What is your BTC Markets deposit address?

Your unique deposit address is generated by BTC Markets to enable clients to deposit their crypto assets. This address acts as a bridge between the client’s balance and the exchange's storage system. When a client deposits crypto funds, the transaction is processed through the deposit address. To learn more about transferring your crypto on our blog.

Scam watch

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

Every week, we go over ASIC's top 10 indications of a possible cryptocurrency scam. In the previous week, we highlighted scammers who coerce individuals into using crypto to pay for financial services. This week, we take a closer look at what happens when the app you are using or being directed to is not listed on the Google Play Store or Apple Store. These apps trick users into providing their private keys and other sensitive information, which the scammers then use to steal their cryptocurrency.

The scammers create a fake app that looks and functions like a legitimate app, but its only purpose is to steal the user's information. Once the user downloads the fake app and enters their private keys, the scammers gain access to their cryptocurrency wallets and can transfer all their funds to their own accounts.

The scammers often use phishing techniques, such as sending emails or messages with links to the fake app, to lure users into downloading and using the app. They also use social engineering tactics to make the user believe that the app is legitimate, such as using fake reviews, social media profiles, and celebrity endorsements.

To avoid falling victim to this scam, users should always be careful when downloading apps and never download any app that is not listed on the official app stores. They should also verify that the app they are using is from a legitimate developer by doing research and checking the reviews and ratings. Users should also never share their private keys or other sensitive information with anyone, as this can leave them vulnerable to hacks and thefts.

In conclusion, users should always be vigilant and cautious when it comes to downloading and using apps related to cryptocurrency. By being aware of the risks and taking necessary precautions, they can protect their assets and prevent scammers from stealing their hard-earned cryptocurrency.

To learn more, visit ASIC's website.

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Prices are accurate as of 11:00 AM AEDT, on 30/03/2023.