Weekly Crypto Wrap: 6th April 2023

TLDR

• Cardano (ADA) is coming to BTC Markets.
• Monthly Market Wrap from our CEO, Caroline Bowler.
• Digital asset-based trusts and funds have been increasing their Bitcoin holdings.
• ETH Shanghai upgrade expected to increase blockchain's staking ratio.
• SEC's v Ripple drags on as XRP secures another week of a double-digit percentage gains.
• China's young tech talent turns to AI and cryptocurrency after crackdown.

Cardano (ADA) is coming!

We are excited to announce that Cardano (ADA) is coming to BTC Markets. Cardano is a promising blockchain platform that has gained significant traction in the cryptocurrency space since its launch in 2017. Created by IOHK, a blockchain research and development company founded by Charles Hoskinson, one of the co-founders of Ethereum, Cardano has been designed with a strong focus on sustainability, security, and scalability.

One of the key features of Cardano is its proof-of-stake (PoS) consensus algorithm, which is designed to be more energy-efficient and scalable than the proof-of-work (PoW) algorithm used by Bitcoin and other early cryptocurrencies. This makes Cardano a popular choice for developers who want to create decentralised apps that can handle large volumes of transactions without compromising on security.

Learn more about Cardano (ADA) and for instant updates, follow us on Twitter.

The week ahead

April 7th: the United States will release the latest updates on the Unemployment Rate and Non-Farm Payrolls, two key economic indicators that provide insight into the health of the US labour market.

April 10th: Japan will release its latest Consumer Confidence figures, revealing the level of optimism or pessimism among Japanese consumers regarding the country's economic prospects.

April 11th: Australia will release several economic indicators, including the Westpac-Melbourne Institute Index of Consumer Sentiment for Australia, which reflects the level of confidence and sentiment among Australian consumers. Additionally, the NAB Business Confidence Index will be released, providing insight into the outlook of Australian businesses. China will also release its Annual Inflation Rate.

April 12th: The United States will release several inflation-related indicators, including the Core Consumer Price Inflation Rate, which measures the change in the price of goods and services (excluding food and energy), as well as the Annual Inflation Rate and the monthly change in the Consumer Price Index (CPI).

April 13th: Canada's Interest Rate and the United States' Fed Funds Rate to be released, both of which influence borrowing costs and monetary policy. China will release its Balance of Trade figures, providing insight into the country's import and export activities. The United Kingdom will release its Monthly GDP figure, which measures the change in the value of goods and services produced in the UK. Lastly, the United States will release the Producer Price Inflation figure, which measures changes in the prices of goods and services at the producer level.

Economic Calendar (tradingeconomics.com)

CEO's Corner: Monthly Market Wrap

March was a month of significant gains for Bitcoin, surging by approximately 23% - a similar percentage to what was seen during the same period in 2021. Throughout the month, the price held steady at around US$28k, with very little trading activity observed over the weekends. At the close of March, the price remained around this level, but there was a slight drop-off of about 2% to US$27.7k on our platform.

Interestingly, this price point had not been seen since June 2022, making it a notable milestone for Bitcoin. Recent trading activity on our platform has been brisk, with the order book indicating a 2:1 buy to sell ratio for Bitcoin. Additionally, there has been a significant increase in trades over $20,000 in size on the exchange, with a 145% surge in this trade size observed from December 2022 (when Bitcoin was trading at around US$17k) to March 2023 (when Bitcoin hit US$28k). In fact, there was a 43% increase in these larger trades from February to March alone.

During the March price rally, there was also a return of retail investors to the Bitcoin market. While it's still too early to declare a change in trend, there are certainly enough indicators to suggest that there are some "green shoots" in the market.

Large financial institutions like the NASDAQ, JP Morgan, and NAB are increasingly expanding their reach into the digital asset space, indicating a growing interest in the potential of cryptocurrencies and blockchain technology. Recent developments have shown that these institutions are exploring new ways to incorporate digital assets into their operations and services, recognising the potential benefits that these assets can offer. It's essential to stay informed about these developments to gain a better understanding of how the financial industry is evolving and adapting to new technologies.

- Caroline Bowler, CEO BTC Markets.

Market reflections

Australia

The Reserve Bank of Australia (RBA) has announced its decision to keep the cash rate target at 3.60% and the interest rate on Exchange Settlement balances at 3.50%. This follows a cumulative increase of 3.5% since May last year. The decision was made to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook. The RBA remains vigilant in its determination to return inflation to the 2-3% target range while keeping the economy stable.

The global economy is expected to experience below-average growth this year and next, with recent banking system problems in the US and Switzerland causing volatility in financial markets and a reassessment of global interest rates. According to the RBA, the Australian banking system is strong, well capitalised, and highly liquid. It is well placed to provide the credit the economy needs.

Inflation in Australia is expected to decline this year and next, with the central forecast for inflation to be around 3% in mid-2025. While the labour market remains tight, growth in the Australian economy has slowed, and the combination of higher interest rates, cost-of-living pressures, and a decline in housing prices is leading to a substantial slowing in household spending.

The RBA Board expects that further tightening of monetary policy may well be needed to ensure that inflation returns to target. The Board will closely monitor developments in the global economy, household spending trends, and the outlook for inflation and the labour market when assessing when and how much further interest rates need to increase.

The recent flash data reveals an increase in private house approvals in Australia, but a decline in building permits and new home loans, as well as a modest increase in retail sales. While the housing market saw some growth, the overall decline in building permits and new home loans, coupled with a consistent decline in retail sales, indicate potential risks to the growth in Australia's economy.

Whilst Australia's trade surplus increased in February 2023, as exports fell less than imports, which tumbled to a ten-month low. The first two months of the year also saw a widening of the trade surplus, suggesting a relatively strong trade performance and positive impact on the economy.

Global

This month's economic data projects a mixed picture of the global economy, with both positive and negative indicators. Personal income in the US increased slightly, which could indicate a positive trend in the US economy. Personal spending only increased slightly, which may indicate that consumers are becoming more cautious with their money. The lower-than-expected increase in Core PCE prices suggests that inflation might be under control in the US, but the annual rate is still high, which could cause concern.

The United States ISM Non-Manufacturing PMI fell this month, signalling the slowest growth in the services sector in three months, with a contraction in the backlog of orders. However, most companies remain positive, and price pressures eased. The US trade deficit rose, driven by lower exports of natural gas and nonmonetary gold, and the deficit with China grew. Canada’s trade surplus decreased, with lower exports of metal and non-metallic mineral products.

The decline in the Bank of Japan's index for big manufacturers' sentiment may indicate that business confidence is weakening, which could impact the economy. The unexpected fall in China's Caixin China General Manufacturing PMI suggests that the ongoing property downturn and global financial uncertainty could be impacting the Chinese recovery momentum.

In France, although the inflation rate decreased slightly, it remains well above the European Central Bank's target, which may signal potential economic instability. Similarly, while the Euro Area unemployment rate is at a record low, the high consumer price inflation rate may cause concern for the economy. Finally, the trade surplus in Germany reached a record high, indicating that exports grew significantly.

State of crypto

During the last trading week, the digital asset majors experienced gains, leading to a positive performance in the crypto market. Bitcoin rose 0.73% to close the week at US$28,171.87, while Ethereum gained 1.16% to finish at US$1,794.51. XRP had a strong showing with another double-digit gain of 15.65%, closing at US$0.5180, while Litecoin experienced a slight loss of 0.59% and ended the week at US$92.77.

Year-to-date, Bitcoin has been the top performer, showing an impressive gain of 69.91%, currently trading at US$28,105. Ethereum is a close second with a 55.85% gain, currently trading at US$1,864. XRP has also performed well with a gain of 48.19% and is currently trading at US$0.5022, while Litecoin has gained 31.54% and is trading at US$92.26.

Bitcoin's market capitalisation increased by 0.27% on the weekly close, with its dominance remaining steady at 47.76%. The cryptocurrency market capitalisation increased by 0.43% last week, currently valued at US$1.14 trillion.

Alt action

Chainlink (LINK) facilitates transaction value of over $7 trillion.

Chainlink is a powerful Web3 services platform that has enabled over $7 trillion in transaction value. Its decentralised oracle network connects smart contracts to external data sources, APIs, and payment systems, allowing for the creation of reliable and secure smart contracts that can access off-chain data and resources. This technology is essential for unlocking the potential of blockchain for enterprises, particularly in sectors such as DeFi, gaming, insurance, and more.

Despite the many benefits of blockchain technology, its adoption in enterprises has been hindered by various technical challenges. One of the most significant challenges is the lack of secure connectivity between enterprise systems and blockchains, making it difficult to integrate blockchain technology with existing systems. Another challenge is the limited interoperability between various on-chain networks, which makes it difficult for businesses to create custom blockchain solutions that leverage the full potential of blockchain technology.

To address these challenges, Chainlink has announced a strategic joint business relationship with auditing and advisory firm PwC Germany. This partnership aims to accelerate enterprise adoption of blockchain technology by helping companies overcome technical challenges and build custom solutions that leverage Chainlink's secure middleware to connect companies' existing backends to the blockchain ecosystem.

PwC Germany is known for its expertise in developing enterprise blockchain technology solutions and analysing blockchain's potential to transform the global economy. Through this collaboration, both companies aim to accelerate enterprise adoption of blockchain technology in key enterprise sectors, such as capital markets. By combining their respective strengths, Chainlink and PwC Germany can help businesses create compliant and secure smart contracts and operate infrastructure that connects to the blockchain economy.

Chainlink (Link) is currently trading at US$7.354, up 31.91% on the year.

Trade LINK now on BTC Markets

The Big 3

US government sells US$216m of Bitcoin as funds increase their holdings.

The US government recently sold nearly $216 million worth of Bitcoin in March of this year. The sale was a result of the seizure of 50,000 Bitcoin from James Zhong, who was accused of wire fraud for manipulating the Silk Road darknet market's transaction system in 2012. The remaining 41,000 Bitcoin, valued at $1.1 billion, are expected to be sold in four batches this year.

Concerns have arisen regarding the sale of the seized Bitcoin, as the US typically prefers selling it through public auctions. The decision to sell it on the open market could lead to a drop in the cryptocurrency's price. Despite the concerns, Bitcoin traders seem unfazed, as the cryptocurrency continues to trade at around US$28,000. This stability indicates that the market may have already factored in the sale of the seized Bitcoin.

In other news, data from CryptoQuant shows that digital asset-based trusts and funds have been increasing their Bitcoin holdings. Recent reports suggest that they have added about 4,000 bitcoins as investor demand rebounds. These funds had experienced a sharp drop in holdings to below 688,000 Bitcoins in mid-March after the failures of Silvergate Bank, Signature Bank, and Silicon Valley Bank. They have since added back to their holdings, which now stand at over 692,000 Bitcoins as of April 2, worth nearly $20 billion at the current price of just above USD$28,000.

Analysts believe that investors have been encouraged to boost their holdings due to widespread speculation that the US Federal Reserve has reached the end of its interest rate hike cycle. James Butterfill, the head of research at European digital asset manager CoinShares, stated that it is not yet clear if the Fed's bailout program has stemmed the run-on banks. Regardless, he believes that it is likely to be supportive for Bitcoin in the long run.

Trade BTC now on BTC Markets

Ethereum upgrade expected to increase blockchain's staking ratio.

According to a research report by JPMorgan, Ethereum's upcoming Shanghai upgrade, set to take place in the next few weeks, is expected to boost the blockchain's staking ratio in the medium term. At present, the staking ratio is around 14%, which is significantly lower than the average of about 60% for other major PoS (proof-of-stake) blockchains.

The staking ratio measures the amount of staked Ether compared to the circulating supply. JPMorgan notes that assuming the staking ratio converges over time to the average of other major PoS networks, the validator number could increase from 0.5 million to 2.2 million, and the yield would fall from 7.4% to around 5%. In a proof-of-stake system, validators confirm the accuracy of a block before adding it to the blockchain.

JPMorgan predicts that a significant portion of the increase in staking will move to liquid staking protocols like Lido, which allows liquidity for staked assets that would otherwise be locked in staking contracts by providing an equal amount of derivative tokens in exchange for staked ether that can be traded. The bank acknowledges that the derivative tokens of liquid staking protocols have typically traded at prices below their underlying asset, but as the Shanghai upgrade approaches, they are converging to parity with Ether (ETH).

The utility of liquid staking protocols may decrease as the upgrade date approaches, according to some experts. Others argue that their utility is not just limited to providing liquidity but also serves as an intermediary for retail investors who may face a barrier of 32 ETH for staking. Therefore, liquid staking protocols have emerged as significant decentralised finance (DeFi) players, raising concerns about network centralisation.

Trade ETH now on BTC Markets

Update on the SEC's legal battle with Ripple.

The ongoing legal battle between Ripple and the US Securities and Exchange Commission (SEC) is generating much attention within and beyond the cryptocurrency community. Legal expert John E. Deaton, who is supporting Ripple as an amicus curia (“a friend of the court” that is not a party to a legal case but has an interest in its outcome), recently shared his interpretation of a crucial legal term related to the case and his thoughts on the ruling deadline.

According to Deaton, a "digital asset is not listed" and "software code is not listed" under the definition of "security" from the 1933 Securities Act. He cited several cases to support his point, including those involving GRAM, Kik Interactive's token, and LBRY's LBC.

He also noted that every altcoin starts out as a security, regardless of whether it was offered through an initial coin offering (ICO) or not. Deaton stated that there is no specific deadline for Judge Analisa Torres to make a summary judgment ruling, and it could come out within the next hour or take another 30-60 days, based on previous cases.

The outcome of the Ripple v. SEC case is predicted to have a significant impact on the price of XRP, which has recently displayed a substantial increase over the previous week.

On a related note, a Freedom of Information Act (FOIA) request filed by an XRP community member seeking disclosure of communications between the SEC and JP Morgan about Ripple Labs and XRP continues to be delayed.

The request, made in August 2022, aims to determine whether JP Morgan influenced the SEC's lawsuit against Ripple in December 2020. The latest response from the SEC indicates that a "large portion" of the requested records require confidential treatment, and the review process will take an additional 60 days. XRP holders are demanding the information be released without charge, believing that the public has the right to understand how private companies influence the SEC and its staff.

District Judge Analisa Torres has not yet issued a ruling on the release of the documents related to JP Morgan, Ripple, and XRP, meaning the documents remain under confidentiality protection. Lawyers from the XRP community expect a ruling to come by the end of April.

Ripple filed a FOIA request at the beginning of the litigation, and a government watchdog group also filed a request for access to internal SEC documents and records involving former SEC officials for "possible conflicts of interest" during their tenure.

Trade XRP now on BTC Markets

Crypto news

China's young tech talent turns to AI and cryptocurrency after crackdown.

Beijing is signalling that its crackdown on the tech sector has passed and is urging firms to come out strong to lead economic growth and compete globally. The move is aimed at reviving the economy after the end of its “zero-COVID” strategy.

Sun, the founder of global cryptocurrency network Tron, believes the younger generation of Chinese entrepreneurs is focused on artificial intelligence (AI) learning and cryptocurrencies, which offer more potential for growth than older industries. Sun’s business is based in Singapore, and he has given up his Chinese citizenship in favour of a Grenadian passport to make international travel easier.

Although the US Securities and Exchange Commission recently announced civil charges against Sun and three of his companies over alleged fraud and market manipulation, Sun believes the charges “lacked merit” and that the SEC’s framework for crypto was underdeveloped.

Beijing’s efforts to put the tech crackdown behind it appear to fit into a larger push to revitalise the economy, which grew just 3% last year, its second-lowest rate in almost 50 years. During its annual parliamentary session last month, China inaugurated a new premier and reshuffled its top economic team. Li, the new premier, aimed to reassure foreign business executives that China would open further.

Beijing’s move to allow ride-hailing app Didi back on app stores and to ease its grip on tech firms, signals that there may be positive takeaways for the crypto industry.

Hong Kong advances as a cryptocurrency hub.

Hong Kong is looking to legalise cryptocurrency retail trading and introduce a licensing regime for digital asset providers. It published draft rules in February that would allow individual investors to trade certain major cryptocurrencies starting June 1. This has already attracted the interest of over 80 virtual asset-related firms expressing their desire to establish a presence in Hong Kong. Some experts are sceptical whether Hong Kong has the right conditions for all forms of Web3 organisations and businesses to thrive. Despite this, it is expected that crypto-trading-related firms will likely be the first to benefit from the policy change.

Hong Kong was once home to major crypto companies like Crypto.com, BitMEX, and FTX, but many firms have left due to increased competition from Singapore, concerns about China’s tough approach to crypto, and Hong Kong’s prolonged and strict response to COVID-19. With US regulators intensifying their crackdown on crypto products and services, Hong Kong is looking to attract cryptocurrency companies.

The Securities and Futures Commission proposed a new licensing framework in February focused on investor protection. More than 20 crypto and blockchain companies from mainland China, Europe, Canada, and Singapore have expressed plans to establish a presence in Hong Kong, while over 80 firms have shown interest in doing so. Some firms are questioning how much profit an operation in Hong Kong can generate and how much it will cost to obtain and maintain licenses. The proposed rules for centralised exchanges and retail trading have also been criticised as too conservative.

Some companies have already relocated their headquarters to Hong Kong, including Kaiko, a digital assets data provider based in Paris, Bybit, a Dubai-based cryptocurrency exchange, Metalpha, a digital assets wealth manager, and LD Capital, a crypto investment fund. Concerns have been raised that Hong Kong's current licensing framework may disadvantage some custodians as the focus is on regulating centralised exchanges and not addressing the custody of assets. Custodians argue that assets should be "as segregated, as independent as possible" to minimise risks to customer funds.

Ralph Lauren adopts Web3 and enables crypto transactions.

Ralph Lauren, the luxury fashion brand, has announced that it will start accepting cryptocurrency payments at its new concept store in Miami. The store, which opened recently, will accept payments in Bitcoin (BTC), Ethereum (ETH), Polygon (MATIC), Dogecoin (DOGE), and other cryptocurrencies. It is the first time that a Ralph Lauren store has accepted cryptocurrency as payment.

The Miami location will also serve as the brand’s entry point into the Web3 community and will host a series of immersive experiences and activations throughout the year. The store's design includes interactive screens where users can browse the brand's catalogue and book styling appointments.

To celebrate the opening of the Miami location, Ralph Lauren has partnered with Poolsuite, a Miami-based Web3 leisure community. Poolsuite members will be gifted a Poolsuite x Ralph Lauren NFT, which will unlock access to an exclusive in-person event at a waterfront private estate in Miami in late April. The event will be one of many Web3 activations that Ralph Lauren has planned to commemorate the opening of the Miami store.

Miami has been a hub for crypto activity for years, with several dominant Web3 companies based in the city. The annual Bitcoin Conference and NFT-centric Art Basel Miami Beach events also take place in the city. Established luxury brands are continuing to offer their wares to select, curated groups of high-impact customers through NFTs and other blockchain-based tools.

Scam watch

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

Each week, we go over ASIC's top 10 indications of a possible cryptocurrency scam. In the previous week, we took 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. This week, we discuss scams where more money is needed to access your funds.

This type of scam can take many forms, but the basic idea is the same: the scammer convinces the victim that there is some sort of problem with their account or their funds, and that to access their money, they need to pay a fee or provide some other form of payment.

These scams can be devastating for victims, who may end up losing even more money in their efforts to retrieve their original funds.

One example of this type of scam is a phishing scam where the scammer sends an email or message to the victim posing as a representative of a legitimate company, such as a bank or cryptocurrency exchange. The message may state that there is a problem with the victim's account or funds, such as unauthorised activity or a security breach, and that to resolve the issue and access their funds, the victim must provide personal information, pay a fee, or transfer cryptocurrency to a specific wallet address.

The email may contain a link to a fake website that looks identical to the exchange's website, where the victim is prompted to enter their login credentials and other personal information, which the scammer can use to steal the victim's funds.

It's important to note that legitimate companies and organisations will never ask for personal information, account credentials, or payment in cryptocurrency or other forms of payment via email or unsolicited messages.

If you receive such a message, it's best to contact the company or organisation directly using a verified contact method to confirm the legitimacy of the message before taking any action. If you are ever in doubt about communications from BTC Markets, always raise a support ticket via our platform at www.btcmarkets.net. This is the best way to protect you and your account.

To learn more, visit ASIC's website.

Feedback

If you have any feedback on our newsletter or want to request specific content, please submit a support ticket and we will respond shortly.

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 06/04/2023.