Weekly Crypto Wrap: 7th December 2023

TLDR

• Bitcoin soars past resistance to hit US$44K, up 10% in a week.
• El Salvador’s President: "Issue retractions and offer apologies”.
• Fresh money flows to crypto as stablecoin market expands.
• SEC delays Grayscale Ethereum ETF decision to January 2024.
• Uniswap Labs partnership brings institutional access to DeFi. 
• DigiFT secures Singapore regulatory approvals for token trading.

BTC Markets announcements

AUD card deposits are now available!

We're excited to announce that you can now deposit AUD directly into your BTC Markets account using your Australian-issued Visa or Mastercard credit or debit card!

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• Osko (PayID)
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OTC Desk: unlocking global liquidity, tighter spreads, and T+0 settlements.

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BTC Markets submission to Treasury.

BTC Markets submitted a comprehensive response to the Treasury's proposal paper for regulating digital asset platforms. This blog post outlines the content in our submission, reiterating our commitment to supporting the growth of digital finance in Australia and globally.

Read the full submission here.

State of crypto

• Bitcoin closed its 7th consecutive green week, breaking US$44k.
• Markets momentum linked to US Fed rate cut speculation.
• ATO reports a 400% increase in crypto allocation within SMSFs.
• Total crypto market cap breaks above US$1.58 trillion.
• Crypto-related stocks record double-digit gains.

In another remarkably positive week, Bitcoin marked its seventh consecutive weekly gain, reaching highs not seen since April 2022, accompanied by an overall positive trend in the total crypto market capitalisation.

Investors are rallying with optimistic sentiments, anticipating potential approval of Bitcoin exchange-traded funds (ETFs). Major investment firms foresee regulatory clearance for Bitcoin ETFs in January, potentially broadening access for investors.

Market activity surged on Friday following comments from US Federal Reserve Chair Jerome Powell, suggesting the central bank's policy is "well into restrictive territory," interpreted by some as a signal that interest rate hikes might conclude.

Crypto-related stocks, including Galaxy Digital, Marathon Digital Holdings, and Riot Platforms, recorded double-digit gains as Bitcoin approached US$42,000. In contrast to the broader US stock market, crypto-tied equities demonstrated resilience, posting substantial rallies in the first twenty minutes of Monday's trading session.

Derivatives exchanges observed a yearly high in Bitcoin perpetual futures open interest, reaching US$740 million. The increased premium on CME Bitcoin futures contracts indicates rising interest among sophisticated investors, implying growing participation and potential liquidity in the market.

The momentum in Bitcoin's value is linked not only to rate cut speculation but also fuelled by the resolution of high-profile legal cases involving FTX and Binance, leading to increased institutional investor interest in the crypto space.

Australian tax data reveals a growing trend of Australians incorporating crypto into their self-managed super funds (SMSFs). The latest figures show a 400% increase in crypto allocation within SMSFs over four years, surpassing stocks, and bonds in growth rate. The data highlights a shifting trend in investment preferences, with crypto emerging as the fastest-growing asset class in SMSFs.

Learn how to invest in digital assets via your SMSF on BTC Markets.

The future of crypto

The recent announcement of the Grand Theft Auto (GTA) 6 trailer has sparked significant interest in the market, particularly among gaming and crypto enthusiasts. The anticipation surrounding this event has the potential to influence various gaming tokens, three notable ones to watch are AXS (Axie Infinity), MANA (Decentraland), and ENJ (Enjin Coin).

The launch of Illuvium (ILV) on the Epic Games Store on November 28 already demonstrated the impact of gaming narratives on crypto markets, leading to a rally in gaming tokens such as AXS, APE (ApeCoin), and ILV. The upcoming GTA 6 trailer is expected to generate a similar effect, possibly fuelling a rally in tokens closely associated with the gaming sector.

While the new GTA game itself may not incorporate a direct crypto component, there is speculation within the crypto community about the potential for increased adoption of play-to-earn gaming, a feature that allows players to earn cryptocurrency in real life. Despite the absence of confirmed details regarding gameplay and crypto transactions, leaked screenshots and videos have fuelled speculation, contributing to the overall excitement.

The robust interest in the GTA 6 trailer, as evidenced by the substantial number of views and social media speculation, aligns with the broader bullish sentiment in the crypto market. This combination of factors, including the potential of the next Bitcoin bull run, could further contribute to the positive outlook for gaming tokens.

Tokens like ENJ, AXS, and MANA, among others, are identified as having strong exposure to the gaming sector and are likely to benefit from the gaming narrative hype. Similar trends were observed after the Illuvium launch, where gaming tokens experienced notable gains.

Capital inflow into cryptocurrencies is identified as a potent catalyst for price gains, and the speculation surrounding the GTA 6 release, coupled with the broader enthusiasm for gaming and Web3 technologies, adds to the bullish prospects for gaming tokens.

The success of Iluvium's beta launch on the Epic Games Store further underscores the potential for significant gains in gaming tokens, especially those associated with innovative gameplay narratives.

The upcoming GTA 6 trailer release has generated substantial excitement in both the gaming and crypto communities. The potential for increased adoption of play-to-earn gaming and the broader bullish market sentiment could contribute to a positive trajectory for gaming tokens, making them an intriguing area to watch for future gains.

Illuvium has launched its Early Access phase, now accessible on the Epic Games Store, offering players a glimpse into its AAA-quality blockchain gaming world. This marks a unique era in Web3 gaming, emphasising interoperability.

The Bitcoin halving: A countdown to April 2024.

The Bitcoin halving, a programmed and integral event in the cryptocurrency's protocol, occurs approximately every four years, specifically every 210,000 blocks. The halving events, marked by a reduction in the rate at which new Bitcoins are created, have historically played a pivotal role in Bitcoin's market dynamics.

Looking ahead, predictions for Bitcoin's performance in future halving’s are mixed. Some analysts argue that the historical patterns will continue, with reduced supply leading to increased demand and, consequently, higher prices. Others caution that as Bitcoin matures, its market dynamics may evolve, potentially impacting the relationship between halving’s and price movements.

Read our full explainer for more insights on Bitcoin's halving.

The weekly crypto close

Solana led the charge this week, soaring by an impressive 9.40% and solidifying its position as the top performer. Bitcoin followed closely behind with a healthy 6.74% gain, demonstrating continued resilience. Other notable gainers included Chainlink (6.36%), Ethereum (6.33%), Avalanche (4.18%), Litecoin (3.26%), Cardano (1.96%), and XRP (1.17%).

These positive movements contributed to a 5.08% increase in the total crypto market cap, reaching US$1.465 trillion. Bitcoin maintained its dominance, gaining 1.61%, accounting for 53.38% of the market.

While the overall sentiment remains cautiously optimistic, it's important to remember that volatility is inherent to the crypto market.

Meanwhile, the Crypto market sentiment is maintaining its position in the Greed zone, currently at 72 on the Crypto Fear & Greed index, same as yesterday.

Year-to-date in the crypto space

Looking at the top performers over 2023, Solana (SOL) continues its dominant reign, boasting a remarkable 527% year-to-date increase, solidifying its position as the market leader.

Whilst Chainlink (LINK) remains steadfast, registering a commendable 176% alongside Bitcoin (BTC) showing a substantial 165% ascent year-to-date.

Other top performers include:

• Avalanche (AVAX) +140%
• XRP (XRP) +87%
• Ethereum (ETH) +87%
• Cardano (ADA) +82%
• Compound (COMP) 63%

Finally breaking its downward trend, Litecoin (LTC) has moved into the green with a modest 3.61% increase year-to-date.

*The weekly trading stats as of Monday, December 4that 11:00 am AEDT, based on data from Tradingview in USD.

**Year-to-date performance as of Thursday, December 7that 11:00 am AEDT, based on data from Tradingview in USD.

Crypto news

Bitcoin soars past resistance to hit US$44K, up 10% in a week.

Bitcoin (BTC) soared past US$43,000 on Tuesday reaching highs that haven't been seen since April 2022, rallying more than 5% within a 24-hour period and 10% in a week. When looking at year-to-date price action, BTC has seen a remarkable surge of more than 160%.

The current bullish sentiment can be attributed to several factors including increasing institutional adoption, growing acceptance as a store of value, and with ongoing macroeconomic uncertainties, Bitcoin has become more attractive to investors seeking a hedge against inflation. 

As Bitcoin continues to gain traction as a mainstream investment asset, many believe that its recent rally is indicative of a larger upward trend, with the potential for significant future appreciation. This optimistic outlook aligns with the evolving role of BTC as a legitimate and sought-after asset class in the global financial landscape.

El Salvador's Bitcoin portfolio has turned profitable, says President.

El Salvador's President, Nayib Bukele, is celebrating the success of the country’s Bitcoin (BTC) reserve purchased with public funds, as its value has turned profitable amid the ongoing BTC price surge.

At one point, the country's BTC holdings dropped to US$45 million from an initial value of US$103.9 million. Despite this, Bukele kept investing in Bitcoin, making repeated purchases throughout 2022.

Having invested over US$120 million of the nation's money in Bitcoin since 2021, Bukele called on critics to issue retractions and apologies in a post on X (formerly Twitter):

“El Salvador's #Bitcoin investments are in the black! After literally thousands of articles and hit pieces that ridiculed our supposed losses...The responsible thing to do would be for them to issue retractions, offer apologies, or, at the very least, acknowledge that El Salvador is now yielding a profit, just as they repeatedly reported that we were incurring losses.”

While El Salvador’s Bitcoin portfolio, comprising 2,764 coins, reportedly exceeded its initial value on Tuesday, some economists caution that it is premature to celebrate the success of this high-risk bet at the core of El Salvador's push for Bitcoin adoption.

Despite a minor miscalculation in the timeline, Bukele's posts have been well-received by crypto enthusiasts who see this as a vindication of his forward-thinking approach and the transformative potential of Bitcoin.

Buy Bitcoin on BTC Markets.

SEC delays Grayscale Ethereum ETF decision to 2024.

The US Securities and Exchange Commission (SEC) has announced another delay in its decision regarding Grayscale's proposed Ethereum (ETH) exchange-traded fund (ETF), pushing the verdict to January 2024.

Grayscale's ETF proposal represents an attempt to offer investors a traditional financial product tied to the value of ETH. The SEC has never approved a spot BTC or ETH exchange-traded fund, though it has previously given the green light to investment vehicles tied to crypto futures.

The postponement of the decision aligns with the SEC's cautious attitude toward crypto-related financial products, the regulatory body has sought similar extensions into early next year for several Bitcoin ETF proposals from TradFi institutions looking to enter the cryptocurrency market.

Investors and industry stakeholders will now have to wait until the new year for a potential green light on Grayscale's Ethereum ETF. 2024 looks set to become a pivotal year for crypto investors and industry participants awaiting broader regulatory frameworks for cryptocurrency-based financial

Buy ETH on BTC Markets.

Fresh money flows to crypto as stablecoin market expands.

The cryptocurrency market is experiencing a resurgence of interest and investment, marked by an influx of fresh capital making its way into stablecoins. Following an 18-month downtrend, the stablecoin market is witnessing considerable growth, signalling renewed confidence in the broader crypto space.

Stablecoins, which are pegged to traditional fiat currencies like the US dollar, are gaining traction as a preferred choice for investors seeking stability amid the volatility of crypto. For the first time since May 2022, the stablecoin market has expanded, with Tether's USDT being the main beneficiary.

Tether’s supply has increased by US$7 billion since September, rising to an all-time high supply of nearly US$90 billion. The combined market capitalisation of the largest stablecoins increased by almost US$5 billion throughout November to US$124 billion, according to data from blockchain intelligence platform, Glassnode.

As more established financial institutions recognise the potential and stability offered by stablecoins to facilitate secure transactions, they may also serve as a gateway for individuals and businesses to enter the wider crypto ecosystem.

Buy USDT on BTC Markets.

Uniswap Labs partnership brings institutional access to DeFi.

Uniswap Labs has announced a strategic partnership with Talos, an institutional investing technology firm, to boost institutional participation in decentralised finance (DeFi), bridging the gap between traditional finance (TradFi) and the evolving DeFi landscape. 

Roland Jarquio, the vice president of growth and product marketing at Talos told Blockworks:

“Some institutional investors are looking for exposure to certain protocols and projects that can only be traded on DEXs like Uniswap.”

Addressing institutional demand for regulated DeFi engagement, Uniswap Labs will offer its Trading APIs to Talos clients in the familiar Talos order book format. Additionally, there are plans to integrate Talos clients with the UniswapX ecosystem at a later date. Fireblocks, a platform designed for storing, moving, and issuing digital assets, will support institutional access to Uniswap. The partnership aims to provide decentralised exchange accessibility for institutions and marks a broader trend of DeFi integration into institutional frameworks, in a step toward mainstream adoption.

In a press release, Mary-Catherine Lader, COO of Uniswap Labs said:

"This integration brings institutions the deep liquidity they need and sophisticated smart-contract market structure that they've never had access to before. It's a big step forward for adoption of onchain markets."

Buy UNI on BTC Markets.

The week ahead: upcoming economic events 

December 8th: US Non-Farm Payrolls & Unemployment Rate.

December 9th: US Consumer Sentiment. China’s Inflation Rate.

December 12th: Australia’s Westpac Consumer Confidence & NAB Business Confidence. UK Unemployment Rate. Germany’s ZEW Economic Sentiment Index. US Inflation Rate.

December 13th: UK GDP MoM. Japan’s Tankan Large Manufacturers Index. US PPI MoM.

December 14th: US Federal Reserve Interest Rate Decision & Press Conference.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

• RBA holds interest rates steady at 4.35% in December meeting.
• Australia's economic growth disappoints as GDP comes in lower.
• Q3 corporate earnings cools as retail sales slide.

The Reserve Bank of Australia (RBA) has opted to maintain the cash rate at 4.35% in its December meeting, following a recent rate hike prompted by concerns over slower progress in reaching the inflation target.

As economic data aligns with the RBA's expectations, indicating moderating inflation and consistent wages growth. The impact of recent rate increases on demand, inflation, and the labour market is still under assessment, with rate cuts not anticipated until November 2024.

In Q3, corporate earnings experienced a slight decrease, the smallest dip since Q1 of 2021, suggesting potential stabilisation in corporate performance. October saw a 0.2% decline in retail sales, the first drop since June, possibly attributed to consumers holding back on discretionary spending before Black Friday sales.

New home loans increased in October, driven by heightened construction activities and purchases of existing and newly built homes. Investment lending for homes in Australia also displayed a positive trend as home prices in November saw the smallest gain since February. Conversely, commodity prices fell by 10.5% year-on-year in November.

On the employment front, there was a decrease in job advertisements in November, suggesting a potential easing in the tight labour market due to higher interest rates. The services PMI fell in November, indicating declining business activity in the service sector, while business inventories unexpectedly grew in Q3. Australia’s composite PMI for November declined, signalling a sharper downturn in Australia's private sector output.

In Q3 2023, Australia's economy saw modest growth, marking the eighth consecutive period of expansion but falling below market expectations. The slowdown was attributed to softer fixed investment and a negative impact from net trade.

Household consumption remained stagnant, and household savings declined to its lowest since Q4 2007 as net trade negatively impacted GDP, with a decrease in exports and an increase in imports. Despite these challenges, the economy expanded throughout the year, aligning with Q2's pace and surpassing forecasts.

Finally, Australia's trade surplus widened in October, exceeding expectations. This indicates a strong export performance, potentially boosting economic growth, government revenue, and job creation. However, overreliance on exports and potential inflationary pressures require monitoring.

Global

• US job openings fall to a 2-1/2-year low in October. 
• Services sector expands for the 11th month in a row in the US.
• Manufacturing dips in China, falling short of market expectations.
• Euro Area inflation rate declines, lowest level since July 2021.

United States

This week's macroeconomic discussions were centred on pivotal developments, particularly in US employment data. Job openings experienced a significant decline in October, hitting a 2-1/2-year low, indicating the impact of higher interest rates on labour demand and fuelling expectations that the Federal Reserve might conclude its monetary policy tightening cycle. Concurrently, the services sector extended its expansion for the 11th consecutive month.

US Federal Reserve Chair Powell, in a public appearance, reiterated the Fed's commitment to tackling inflation, countering expectations of potential interest rate cuts in the first half of 2024. Powell addressed market expectations for aggressive rate cuts, deeming talk of cutting rates 'premature' and suggesting the possibility of further hikes. Despite Powell's stance, the market is pricing in nearly a 60% probability of the first-rate cuts by March.

In Q3 2023, the US economy expanded by an annualised 5.2%, surpassing both the preliminary estimate and market forecasts, marking the strongest growth since Q4 2021. However, core PCE prices in October, excluding food and energy, increased modestly, in line with expectations but easing from September's rise.

The annual rate of core PCE, the Federal Reserve's preferred inflation measure, decreased to 3.5%, the lowest since April 2021. The headline gauge remained unchanged in October, contrary to market predictions.

Furthermore, personal income in October met market forecasts, while personal spending rose by 0.2%, the smallest advance in five months, influenced by elevated interest rates.

The ISM Manufacturing PMI held steady, indicating continued contraction in the manufacturing sector.

China

China's services sector experienced a surge in activity, reaching a three-month high in November, driven by an increase in new orders. The Caixin/S&P Global services Purchasing Managers' Index (PMI) rose however, the survey presents a mixed picture of the services sector, contrasting with the official gauge, which unexpectedly contracted for the first time since December last year.

India

In Q3, India's economic growth reached 7.6% year-on-year, surpassing the robust 7.8% expansion in the preceding period and exceeding expectations for a 6.8% rise. This figure notably surpasses the Reserve Bank of India's projection of 6.5%.

Euro Area

In November, the Euro Area saw a decline in its year-on-year inflation rate, reaching 2.4%, the lowest since July 2021 and below the market consensus of 2.7%. In Germany, the trade surplus exceeded market expectations in October, while consumer price inflation decreased to its lowest level since June 2021.

France experienced a slowdown in consumer price inflation, marking the lowest rate since January 2022. Italy's annual inflation rate also dropped in November, the lowest since March 2021, reflecting a broader disinflation trend in Euro Area countries influenced by high base effects and the prolonged period of restrictive monetary policy from the ECB.

Canada

Canada's economic trajectory shifted in the latter half of 2023. While the Ivey PMI indicated strong growth in November, the GDP contracted in the third quarter, highlighting the impact of rising interest rates.

This shift is further reflected in the increase in the unemployment rate to 5.8%, aligning with market expectations and representing the highest rate since January 2022. These contrasting indicators suggest a complex landscape for the Canadian economy, with positive growth signals alongside concerning trends in unemployment and GDP.

Regulation roundup

DigiFT secures Singapore regulatory approvals for token trading.

DigiFT, a digital asset exchange, has obtained regulatory approval from the Monetary Authority of Singapore (MAS) to operate collective investment schemes and function as an "organised market" for secondary-market trading.

This marks the end of an 18-month long process during which DigiFT successfully navigated the central bank's FinTech Regulatory Sandbox. Henry Zhang, the founder and CEO of the Singapore-based company, revealed in an interview this week that the exchange was issued a Recognised Market Operator (RMO) license on December 1st and the Capital Markets Services (CMS) license on Tuesday.

DigiFT's platform, built on the Ethereum blockchain, will provide secondary trading liquidity for security tokens backed by real-world assets such as bonds and equities, enabling investors to engage in the subscription, trading, and redemption of on-chain assets using fiat currency or stablecoins.

Singapore appears committed to striking a balance between encouraging the growth of the crypto sector while ensuring the integrity and security of its financial system. In a bid to combat potential risks associated with cryptocurrencies, Singapore recently extended its regulatory reach to cover a wide range of activities, including digital payment token services and decentralised finance (DeFi) platforms.

Compliance conversations

Unveiling the dark side of crypto recovery offers.

As the popularity of digital assets grows, so does the risk of falling victim to scams and fraudulent activities. One scheme that has emerged is the so-called "crypto recovery offer," claiming to help individuals recover their lost funds. However, beneath the veneer of assistance lies a web of deception that could lead to further financial woes.

The rise of crypto recovery offers.

The surge in cryptocurrency investments has unfortunately been accompanied by an increase in cybercrime. Hacks, phishing attacks, and other malicious activities have left many investors in despair after losing their hard-earned assets. In response, a market for crypto recovery services has emerged, with promises of retrieving lost funds.

The scam within the scam.

Crypto recovery services have become a dark underbelly in the space, and it is crucial to recognise that scammers are adept at exploiting the desperation and vulnerability of those who have suffered losses. In many cases, these fraudsters acquire personal information through various means, such as hacking databases or purchasing data from other criminals.

The warning signs.

Crypto recovery scams often follow a similar pattern. Victims receive unsolicited messages or emails claiming to help in recovering their lost funds. These messages may seem personalised, referencing specific details about the individual's cryptocurrency transactions. This apparent attention to detail is a smokescreen, as scammers leverage purchased information to create an illusion of legitimacy.

These fraudulent recovery services typically request upfront payments or personal information to initiate the recovery process. This should serve as a red flag for investors.

Protecting yourself from crypto recovery scams.

Verify legitimacy: Before engaging with any recovery service, conduct thorough research. Check for reviews, testimonials, and independent sources confirming the legitimacy of the service. 

Beware of unsolicited offers: Legitimate recovery services do not reach out to potential clients unsolicited. Be cautious of unexpected messages or emails, especially those that seem too good to be true. 

Consult professionals: If you've fallen victim to a cryptocurrency scam, seek guidance from legal and financial professionals. They can provide advice on the best course of action and help you navigate the recovery process safely. 

As cryptocurrency markets continue to evolve, so do the tactics of scammers. Understanding the risks associated with crypto recovery offers is crucial for investors seeking to protect their assets.

By remaining vigilant, verifying the legitimacy of recovery services, and seeking professional advice, individuals can navigate the crypto world with greater confidence.

ASIC provides a checklist of common scams and ways to avoid them. To learn more, visit ASIC’s website.

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Disclaimer: The information provided on this page is issued by BTC Markets Pty Ltd (BTC Markets, we, us, our). The information is general only and is not intended to constitute an opinion or recommendation with respect to its contents. Past performance is not a reliable indicator of future performance. Any reference to past performance is intended to be for general illustrative purposes only. The information cannot be relied upon for any purposes and is not intended to be a substitute for professional advice. The information does not purport to be complete, accurate or contain all of the information that a person may require to make a decision. It may also contain forward looking statements, which are subject to known and unknown risks, uncertainties and other factors. We recommend you obtain professional advice before making any decision with respect to the matters discussed in this document. To the maximum extent permitted by law, BTC Markets will have no liability for any loss or liability of any kind: (i) arising in respect of the information contained (or not contained) on this page; or (ii) arising from a person relying on any information or statement contained on this page. The information provided is only intended for recipients in Australia. This information cannot be reproduced without our prior written permission.

Prices are accurate as of 11:00 AM AEST on 12/07/2023.