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Weekly Crypto Wrap: 3rd August 2023

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Rachael Lucas
Weekly Crypto Wrap: 3rd August 2023

TLDR

  • The Reserve Bank of Australia holds interest rates at 4.10%.
  • Bitcoin’s volatility drops below that of gold and major stocks.
  • Ripple unlocks 1 billion XRP to enter circulation in September.
  • Proposed Ethereum upgrade to give dApps share in fee revenue.
  • Litecoin’s scheduled halving event has commenced.
  • Crypto boom is coming, “whether you like it or not”.

State of crypto 

During the past week, Bitcoin experienced predominantly sideways price movement. In Tuesday's trading session, the cryptocurrency briefly dipped to retest the US$25,858 level, which hadn't been seen since June 21st, but swiftly recovered, now trading in the range of US$29,000.

According to crypto analytics firm K33 Research, Bitcoin's five-day volatility has dropped below that of gold, Nasdaq 100, and S&P 500. According to the firm, previous instances of such low volatility in the past have preceded a significant uptick in Bitcoin’s price. While the current period of limited volatility is not uncommon in market cycles, K33 notes that the current stability is abnormal and could act as a pressure valve for heightened volatility once it reactivates.

At close of the crypto trading week on Monday, Bitcoin dropped below the US$30,000 support level, ending the week at US$29,281, representing a decrease of 2.67%. Ethereum (ETH) and XRP also followed suit, with decreases of 1.43% and 4.58%, respectively, closing at US$1,861 and US$0.7046. However, Litecoin (LTC) performed well, gaining 0.93% and closing at US$94.03. On the other hand, Cardano (ADA) closed in the red, recording a 0.47% loss at US$0.3156.

Bitcoin's market capitalisation decreased by 0.82%, with its dominance closing at 49.73%. The overall cryptocurrency market capitalisation experienced a downturn, decreasing by 1.84% and closing the week at US$1.145 trillion.

As we assess the year-to-date performance, XRP remains the top performer of 2023, boasting an impressive gain of 109.32%. Bitcoin secures the second position with a solid 77.34% gain. Ethereum in third place with a respectable increase of 56.34%, while Litecoin follows closely with a 29.57% gain. Lastly, Cardano holds onto a 24.57% gain.

*The weekly trading stats as of Monday, July 31st at 10:00 am AEST, based on data from Tradingview in USD.

The week ahead: upcoming economic events

August 3rd: Germany’s Balance of Trade. United Kingdom's Interest Rate.

August 4th: United States ISM Services PMI, Unemployment Rate and Non-Farm Payrolls. Canada’s Unemployment Rate.

August 5th: Canada’s Ivey Purchasing Managers Index.

August 8th: Australia’s Consumer Sentiment and Business Confidence Index. China’s Balance of Trade.

August 9th: China’s Inflation Rate. 

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

  • The Reserve Bank of Australia holds interest rates at 4.10%.
  • Aims to return inflation to the 2-3% target range.
  • Trade surplus widens to three-month high of AU$11.32 billion.
  • Strong migration policy helps mitigate severe recession during economic slowdown.

The Reserve Bank of Australia (RBA) has decided to maintain the cash rate target at 4.10%, providing a sense of relief to the markets. According to the meeting minutes, the RBA stated that higher interest rates implemented since last year are aiding in stabilising the economy, but they want more time to evaluate their impact and the overall economic outlook.

Despite declining inflation, which still stands at 6%, mainly due to rising service prices, the Australian economy is experiencing below-trend growth, particularly in household consumption and dwelling investment. The RBA stated that its primary objective remains to return inflation to the 2–3% target range, and they have indicated that further monetary policy tightening may be required. The decision will depend on various factors, including global economic risks, household spending, inflation trends, and labour market conditions.

Australia's trade surplus widened to a three-month high of AU$11.32 billion in June from a downwardly revised AU$10.49 billion in May, beating market forecasts as exports fell less than imports. Shipments dropped by 1.7% from the previous month to AU$55.63 billion. Meanwhile, imports shrank by 3.9% to AU$44.31 billion.

Australia's migration policy is credited with helping avoid a severe recession amid an economic slowdown. Factors like strong population growth, conservative investor positioning, and inflation's impact on incomes contributed to a low likelihood of a deep recession. Household and corporate sectors' improved financial balance sheets also reduce vulnerability. While certain sectors show strain, the outlook for a deep recession in 2023 remains low.

Global

US

The United States government's credit rating has been downgraded following concerns over the state of the country's finances and its debt burden. Fitch, one of three major independent agencies that assess creditworthiness, cut the rating from the top level of AAA to a notch lower at AA+ on Tuesday, citing a "steady deterioration" in governance over the last 20 years. In a statement, the U.S. Treasury Secretary Janet Yellen called the downgrade "arbitrary and based on outdated data".

The US economy experienced strong growth in the 2nd quarter, mainly driven by non-residential fixed investment and services. However, consumer spending slowed down, and net trade had a negative impact on economic growth. In June, there was an increase in durable goods orders, particularly in the transportation equipment sector. Core PCE prices (a measure of inflation) rose but at a slower pace, while personal spending exceeded expectations, indicating that consumers were resilient to higher interest rates. Personal income also increased, but it fell slightly below market expectations due to a decline in personal dividend income.

Japan

In July, the Bank of Japan (BoJ) kept its key interest rate unchanged and made its yield control policy more flexible. The BoJ is optimistic about the economy's moderate recovery, though inflation is expected to slow down temporarily. The central bank aims to maintain monetary expansion until inflation reaches 2% and is prepared to implement further easing measures if necessary.

Euro Area

The European Central Bank (ECB) raised interest rates by 25 basis points to 4.25%, the ninth consecutive rate hike, aiming to combat persistently high inflation. The deposit facility rate also reached 3.75%, its highest level in over 22 years. The ECB plans to maintain restrictive rates until inflation returns to the 2% target, marking the fastest rate increase in its history.

The Eurozone economy grew by 0.3% in Q2 2023, exceeding expectations, but higher interest rates and declining confidence continue to affect the region. France and Spain showed sustained growth, while Germany stagnated, and Italy experienced an unexpected contraction. Annual inflation decreased to 5.3% in July 2023, the lowest since January 2022, mainly due to lower energy and food prices. However, services inflation continued to rise, and core inflation remained at 5.5%, above the headline rate. The ECB's inflation target remains at 2%.

The Big 3

SEC reportedly asked Coinbase to halt trading in everything except Bitcoin.

The U.S. Securities and Exchange Commission reportedly asked Coinbase to stop trading in all cryptocurrencies except Bitcoin before suing them, showing their intent to regulate a larger part of the market. Coinbase's CEO, Brian Armstrong, revealed that the SEC believed all assets other than Bitcoin were securities, in a recent interview with the Financial Times. Agreeing to this request would have endangered the crypto industry in the US, so Coinbase chose to go to court instead. The SEC's push for wider authority over the crypto industry could impact other American crypto businesses. The oversight of the crypto industry remains uncertain, with the SEC and CFTC seeking control.

Billionaire Mike Novogratz believes that Bitcoin could reach a new record high.

Billionaire Mike Novogratz believes that Bitcoin could reach a new record high as BlackRock's CEO, Larry Fink, has become a true believer in the cryptocurrency. Fink's positive stance and BlackRock's application for a Bitcoin spot ETF indicate growing institutional support. Novogratz sees shifting attitudes toward Bitcoin, and with a potential interest rate cut, it could surpass its previous record of US$69,000. Ripple's court victory and the development of Worldcoin also contribute to the positive outlook for the cryptocurrency market.

Buy Bitcoin now on BTC Markets.

Proposed Ethereum upgrade could allow Layer 2 developers to share fee revenue.

Ethereum developers are proposing an upgrade that would let popular dApps (decentralised applications) earn a share of the transaction fees they generate on Layer 2. 

EIP-6968 proposes a new type of token providing “contract secured revenue” (CSR), allowing developers to claim a percentage of the transaction fees generated by users interacting with their smart contracts. New revenues generated could fund dApp development, public goods, or enable incentives for developers to join a network.

EIP-6968 seeks to shake up the highly competitive Ethereum scaling sector, with CSR providing a new type of incentive for developers. While Layer 2 rollups are presently the leading scaling solution, top L2 teams including Arbitrum, Polygon, and zkSync are already investing resources into building infrastructure for Layer 3 networks.

L3s typically comprise “app-chains” that host a single dedicated decentralised application. Owocki described upgrade EIP-6968 as enabling “ecosystem-chains,” described as a move forward from app-chains.

Buy ETH now on BTC Markets.

Ripple unlocks 1 billion XRP to enter circulation in September.

Ripple Labs has moved ahead with its scheduled release of one billion XRP. According to data from Whalestats, Ripple executed four transactions involving a total of two transactions worth 400 million XRP and two transactions worth 100 million XRP each. These tokens are scheduled to remain locked until the 1st of September. At that point, the next batch of Ripple will be released into circulation.

To ensure greater certainty in XRP’s supply, Ripple had previously placed 55 billion XRP tokens into a series of escrows. These represent 55% of the entire potential supply. These escrows are securely stored on the ledger, and their release is governed by the ledger’s mechanics, enforced through consensus, to regulate the supply of XRP. The primary objective behind this approach was to enhance predictability in the Ripple token’s supply.

The XRP releases have been taking place since 2017. The final release from the existing escrows is expected later this year, just before the commencement of the next escrow phase. That phase is set to end in March 2026.

Buy XRP now on BTC Markets.

Crypto News

Crypto boom is coming, “whether you like it or not” says asset manager.

In an interview earlier this week, M.H. Carnegie & Co Founding Partner Mark Carnegie, told Sky News Australia that the prevalence and popularity of cryptocurrencies and digital assets is “coming whether you like it or not”. 

Carnegie cited the recent application for a Bitcoin exchange-traded fund (ETF) from BlackRock as a key indicator to the likelihood of a crypto boom:

“By launching a Bitcoin ETF, BlackRock are legitimising the asset class. The biggest asset manager in the world... so this is coming whether you like it or not.”

When queried regarding the riskiness of crypto investments, Carnegie acknowledge the importance of minimising security risks through appropriate compliance and disclosure requirements, highlighting that people “have got to be sure that they are on the right exchanges with the right coins.”

Finally, when asked about the future of blockchain, Carnegie used an example from his personal life to underscore the potential that the technology unlocks for digital ownership:

“I watch my kids on social media and realise that they have got very important digital assets - their online profiles – which are at risk of getting removed. Suddenly, they have spent twelve years building a Substack profile, and Substack can take it away from them. I think a world where you can actually own your assets and digital accounts properly, rather than having to live at the grace and favour of big internet companies, will be better for people.”

Watch the full Sky News interview here.

Japan Blockchain Association seeks crypto tax changes.

The Japan Blockchain Association (JBA) is requesting revisions to the national tax regime for digital assets to ease the fiscal burden on crypto holders. They want to eliminate year-end unrealised gains tax on corporations holding crypto assets, change personal crypto asset trading profits taxation method to self-assessment separate taxation with a uniform tax rate of 20%, and eliminate income tax on profits from individual crypto asset exchanges.

The JBA sees these changes as crucial for promoting the blockchain industry and encouraging broader use of crypto assets in Japan. Japanese Prime Minister Fumio Kishida has also reaffirmed the country's commitment to fostering the blockchain industry.

Alt action

Litecoin’s halving event has begun as the Litecoin Foundation launches limited collectibles.

As the much-anticipated Litecoin halving is underway, the Litecoin Foundation and crypto cold-storage card manufacturer Ballet have collaborated to launch a limited edition of 500 collectible cards made from 50 grams of fine silver, each pre-loaded with a minimum of 6.25 Litecoin (LTC). These unique cards are created to commemorate Litecoin's third halving event, scheduled to take place on August 2nd.

The collectible cards were announced during a Twitter livestream, just one week ahead of the halving event. Litecoin's halving event occurs approximately every four years, where the block rewards for miners are reduced by 50%. This halving will lower the current 12.5 LTC subsidy to 6.25 LTC. To celebrate this event, Litecoin plans to reimburse miners from Litecoinpool with at least 6.25 LTC, which they will then send directly to the blockchain addresses associated with the silver cards.

The commemorative cards are anticipated to be sold for around US$1,000 each, with some potentially auctioned off as limited editions. The sale proceeds will be donated to the Litecoin Foundation to support further adoption and development of the blockchain.

LTC is currently trading at US$89.90.

Regulation Roundup

Treasury set to regulate crypto exchanges.

The Australian Treasury plans to release a consultation paper to regulate cryptocurrency exchanges and protect customer funds. This move comes after the collapse of FTX, and major crypto platforms in Australia, such as BTC Markets, Kraken, Swyftx, and Coinbase, support the regulation. The proposed rules will cover crypto custody, licensing, cybersecurity, customer protection, and anti-money laundering to prevent scams.

The regulation aims to bring clarity to the legal framework surrounding tokens and provide confidence to developers using blockchain systems. Delay in regulation has hindered innovation and caused a "mass exodus" of digital asset developers from Australia. The consultation paper will define when a token becomes a financial product and subject to ASIC regulation. Overseas exchanges hope to use global custodians, but this could impact their presence in the Australian market.

BTC Markets announcements

Want to transfer your crypto from Binance to your BTC Markets account? 

We have created a comprehensive guide on transferring your cryptocurrency from Binance to your BTC Markets account. Follow our step-by-step instructions to ensure a seamless transfer process.

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Plus, take advantage of a special offer: get 30% off your first Koinly tax report by using the code BTC23 at checkout on Koinly.com.au. This offer is valid until October 31, 2023. Terms and conditions apply. See the tax webinar blog.

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Disclaimer: The information provided in this email is for general purposes only. It should not be construed as professional financial advice from BTC Markets Pty Ltd. BTC Markets is not a financial adviser, and you should consider seeking independent legal, financial, taxation or other advice to ensure that the information relates to your unique circumstances. BTC Markets is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this information contained within this email. Past performance is not an indicator of future performance. We note that we may, at any time, change the characteristics of the product. The information provided is intended for recipients in Australia. This information is not to be reproduced without permission.

Prices are accurate as of 10:00 AM AEST, on 03/08/2023.

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