Weekly Crypto Wrap: 8th February 2024

TLDR

• Money Magazine: ‘Historic' decision set to boost Bitcoin.
• Token Airdrops - is this the next bull market catalyst?
• US Bitcoin ETF market dynamics & MicroStrategy's Bitcoin acquisition.
• Chainlink (LINK) up an impressive 25.44% on the year.
• RBA maintains cash rates at 4.35%, signalling stability.
• Fed Reserve Chairman stresses urgency on US debt sustainability.
• Hong Kong implements platform licensing requirements.

BTC Markets in the news

Money Magazine: ‘Historic' decision set to boost Bitcoin.

Retail investors will have greater access to Bitcoin through traditional exchanges following a decision by the US Securities and Exchange Commission (SEC) last month.

According to Caroline Bowler, chief executive of Australian-based exchange BTC Markets, being able to invest in Bitcoin through more established investment products such as ETFs is likely to increase its appeal among some investors.

“This further opens cryptocurrency to both retail and institutional investors via a traditional financial product,” she says. “It is also reasonable to assume this will expand crypto markets in general, as liquidity follows utility. So, while this is a historic day for the industry, the impacts will be increasingly felt over time.”

Source: Money Magazine - print edition

BTC Markets announcements

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Token Airdrops - is this the next bull market catalyst?

Opinion piece by Charlie Sherry, Head of Finance for BTC Markets.

In his latest opinion piece, our Head of Finance, Charlie Sherry, reflects on potential catalysts for the next bull market. Navigating the crypto winter, he discusses the challenges and highlights the emerging possibilities with the market recovery and increasing prevalence of airdrops.

Read Charlie's full opinion piece here.

The Bitcoin Halving

The Bitcoin mining industry faces consolidation ahead of halving.

As the Bitcoin network anticipates its fourth halving in April 2024, industry experts foresee significant consolidation in the crypto mining sector. Analysts suggest that only Marathon Digital Holdings (MARA) and Iris Energy (IREN) possess the operational efficiency and strategic foresight to navigate the challenges posed by the halving.

Historically, Bitcoin's Halving events have catalysed bull rallies, with past price surges of 11,000%, 2,850%, and 700% after the 2012, 2016, and 2020 halvings, respectively. The impending halving will reduce miners' revenue by 50%, intensifying the focus on operational efficiency and strategic growth. Read more on the Bitcoin Halving blog.

State of crypto

• Bitcoin remains range bound as it targets US$44k for a breakout.
• Chainlink (LINK) surges amid on-chain activity boost.
• Legal battle over Bitcoin's creator identity.
• US Bitcoin ETF market dynamics & MicroStrategy's Bitcoin acquisition.

Bitcoin range-bound, targets US$44k breakout for potential US$47k surge.

Over the last fortnight, Bitcoin (BTC) has been range-bound, fluctuating between US$41.6k to US$43.8k. Analysts note that a decisive break above the US$44k resistance is crucial to pave the way for a potential upward move to the US$47k mark. Substantial short selling activity has been observed around the US$43.5k level and despite price variations, Bitcoin is maintaining a medium-term upward trend. While last week’s biggest mover Chainlink (LINK), surged 25.37% due to heightened on-chain activity, with analysts optimistic about its potential to reach US$20.

Legal battle over Bitcoin’s creator identity.

A significant legal battle is set to unfold in a U.K. court starting February 5, concerning the identity of Bitcoin's creator, Satoshi Nakamoto. The trial involves computer scientist Craig Wright, who claims to be Nakamoto. The Crypto Open Patent Alliance (COPA) is suing Wright, seeking a declaration that he does not own the Bitcoin white paper. The trial aims to conclusively clarify Wright's claim to be Satoshi Nakamoto and is expected to last about a month.

US Bitcoin ETF market dynamics.

In just 17 days since its launch, the BlackRock iShares Bitcoin Trust (IBIT) ranks among the top five ETFs of 2024 based on inflows, with US$3.2 billion year-to-date. Notably, only index ETFs from iShares and Vanguard offering exposure to the S&P 500 or the total stock market have surpassed IBIT's inflows. BlackRock and Fidelity collectively own 134,357 BTC worth US$5.7 billion for their spot Bitcoin ETFs.

Genesis, a bankrupt crypto lender, is seeking approval from a U.S. judge to sell over US$1.6 billion in Bitcoin (BTC), Ethereum (ETH), and Ethereum classic (ETC) held in Grayscale's trust products. The assets include US$1.4 billion in Grayscale Bitcoin Trust (GBTC), which converted to an ETF. If approved, this sale could exert significant selling pressure on Bitcoin, like FTX's US$1 billion GBTC sale in January, coinciding with the price drop. Genesis also holds US$165 million in Grayscale Ethereum Trust and US$38 million in Grayscale Ethereum Classic Trust. The company, a key part of Digital Currency Group's empire, declared bankruptcy, with Gemini as its largest creditor. Gemini claims over 100,000 affected users owed between US$1 billion and US$10 billion.

WisdomTree, renowned for its spot Bitcoin ETF, is reportedly on the verge of obtaining a Limited Purpose Trust Charter from the New York Department of Financial Services (NYDFS). This development, shared by Fox Business reporter Eleanor Terrett, signifies progress in the approval process, with NYDFS being "very close" to granting the license. Currently, only nine companies in New York, including Coinbase and Fidelity, hold this charter. WisdomTree's potential license could be linked to its digital asset-focused app, WisdomTree Prime, as speculated by Bloomberg Intelligence ETF analyst James Seyffart. The app, discussed in CEO Jonathan Steinberg's recent earnings call, offers enhanced user control over assets, features access to cryptocurrencies, a proprietary gold token, and acts as a gateway to tokenised digital funds.

MicroStrategy's Bitcoin acquisition and financial performance.

MicroStrategy, a prominent holder of Bitcoin, acquired an additional 850 BTC in January, bringing its total holdings to 190,000 BTC valued at US$8.1 billion. The business software firm's CFO, Andrew Kang, stated a net income of US$89.1 million for Q4 2023, attributing the performance to investors recognising the broader theme of a "digital transformation" of assets.

Future of crypto

• A look into Bitcoin inflows and institutional interest.
• Miner reserves and selling pressure.
• Network demand and Bitcoin fees.

Factors supporting the stability of Bitcoin's price this week include its historical significance, dominant market position, and high liquidity. Bitcoin's role as the first and most recognised cryptocurrency, often sets the tone for the entire market, with many other cryptocurrencies following its lead.

Additionally, its perception as a store of value and its impact on market sentiment contribute to its influence on the overall cryptocurrency space. External factors like media attention, global economic conditions, and regulatory developments further amplify Bitcoin's influence, shaping the dynamics of the cryptocurrency market. Despite bullish efforts to push Bitcoin's price higher, overcoming resistance at US$43.5k remains uncertain.

Bitcoin has displayed resilience in its price, showing an increase of 4.87% gain over the past week. Despite uncertainty in the immediate direction, three factors suggest potential short-term strength:

Inflows and institutional interest.

Bitcoin recorded US$703 million in inflows, with investment products seeing 99% of all inflows. Notably, Grayscale's GBTC ETF outflows slowed down, aligning with a reversal in negative sentiment. The market correction in late January, which saw over US$500 million in outflows, and aggressive GBTC selling may have contributed to the uncertainty.

Miner reserves and selling pressure.

Bitcoin miners, previously on a selling spree at the end of January, have seen an increase in reserves over the past 24 hours, with more than 2,400 BTC added. This suggests a reduction in selling pressure from miners. While the Miner's Position Index (MPI) indicates moderate selling, a continued rise in miner reserves could lead to a decline in the MPI, indicating a shift to a more holding-oriented stance.

Network demand and Bitcoin fees.

Bitcoin fees have risen by 35.71% over the past week, indicating increased on-chain revenue during a consolidating market. Rising network utilisation suggests an expanding user base, with users willing to pay higher fees for inclusion in the next block.

Top narratives to watch in 2024.

zkSync ecosystem overview: Empowering Ethereum with ZK-rollup technology.

zkSync stands as a Layer-2 protocol dedicated to scaling Ethereum through advanced zero-knowledge (ZK) technology. Beyond merely increasing Ethereum's throughput, the mission of zkSync is preserving its fundamental values: freedom, self-sovereignty, and decentralisation, all achieved at scale.

Understanding zkSync in the blockchain: A comprehensive exploration.
zkSync serves as a Layer-2 scaling solution for the Ethereum blockchain, leveraging zk-rollup technology to enhance scalability and operational efficiency. By aggregating multiple transactions into a single cryptographic proof and processing them off-chain, zkSync significantly amplifies Ethereum's transaction throughput.

zkSync facilitates decentralised entry and exit from the Ethereum mainnet, offering reduced transaction fees compared to the legacy ecosystem. The benefits of zkProofs include high transmission speed and lower gas fees, addressing key concerns for Ethereum users.

Zero-knowledge rollups origin and evolution: Matter Labs' contribution.
Zero-knowledge rollups, the foundation of zkSync, originated in 2020 through the efforts of Germany-based Matter Labs. The project's development commenced in 2019, culminating in the release of the first version, zkSync 1.0, in 2020.

The weekly crypto close

Chainlink (LINK) emerged as this week's top performer, surging an impressive 25.37%, while Ethereum gained a modest 1.46%.

View prices on BTC Markets.

Concurrently, the cryptocurrency market sentiment resides in the Greed zone, currently at 66 on the Crypto Fear & Greed index, up from 62 yesterday.

Source: Crypto Fear & Greed Index

The year-to-date performance in the crypto space.

Chainlink (LINK) is also this year’s best performer up an impressive 25.44%, followed by Ethereum up +6.66% and Bitcoin at +5.48%.

• Bitcoin (BTC) +5.48%
• Ethereum (ETH) +6.66%
• XRP (XRP) -16.60%
• Cardano (ADA) -14.70%.
• Solana (SOL) -0.15%
• Avalanche (AVAX) -8.25%
• Chainlink (LINK) +25.44%
• Litecoin (LTC) -5.13%

The weekly trading stats as of Monday, February 5th at 11:00 am AEDT, based on data from Tradingview in USD.

Year-to-date performance as of Thursday, February 8th at 11:00 am AEDT, based on data from Tradingview in USD.

Crypto news

GoDaddy partners with Ethereum Name Service (ENS).

Ethereum Name Service (ENS) and GoDaddy, the largest internet domain registry, have reached an agreement to enable users to connect their internet domain names with their ENS addresses free of charge, facilitating a closer integration between traditional web domains and blockchain technology. This partnership signals a move towards broader adoption of Web3 technologies by mainstream companies. Nick Johnson, the founder of ENS, foresees the possibility of doing this “for addresses for all chains to set text records.”

Buy ETH on BTC Markets.

A court order requires Ripple to provide financial documents to the SEC.

Ripple has been ordered to hand over its 2022-2023 financial statements and contracts related to institutional sales of XRP to the Securities and Exchange Commission (SEC) by a U.S. district judge. The court's order aims to aid in determining appropriate penalties by examining Ripple's financial health and the details of institutional sales, despite Ripple's argument that such information is irrelevant to the case.

Buy XRP on BTC Markets.

Chainlink (LINK) price surges significantly, with eyes on further potential growth.

Chainlink (LINK) has shown significant market performance, with a 44.8% price increase over the past 30 days, reaching a 24-month high, nearing US$20. Crypto analyst Ali Martinez sees its potential to break through a key resistance level, which could lead to a 38% rally if overcome. Also, the increased trading volume and institutional interest act as driving factors, with blockchain data indicating substantial LINK withdrawals by institutional investors, which suggests a strategic accumulation for future price appreciation.

Buy LINK on BTC Markets.

The liquidity protocol NAVI on Sui stands out.

NAVI, established by Silicon Valley veterans, stands as the pioneering Native one-stop liquidity protocol on Sui. NAVI enables users to participate as liquidity providers or borrowers within the Sui Ecosystem, aiming to become a Web3 bank for Web2 users. NAVI has shown impressive performance, with US$150 million in total value locked (TVL) and borrowed assets of US$60 million. NAVI plans on integrating with Sui's DeepBook for liquidity support in the future, highlighting NAVI's commitment to innovation and user experience.

Buy SUI on BTC Markets

The week ahead: economic events 

February 8th: China Inflation Rate.

February 10th: Canada Unemployment Rate.

February 13th: Australia Consumer Confidence MoM and Business Confidence. United Kingdom Unemployment Rate. Germany ZEW Economic Sentiment Index.

February 14th: United States Core Inflation Rate MoM, Core Inflation Rate, Inflation Rate MoM, and Inflation Rate. United Kingdom Inflation Rate.

February 15th: Japan GDP Growth Rate.

Economic Calendar (tradingeconomics.com)

Market reflections

Overview

The Reserve Bank of Australia maintains cash rates at 4.35%, emphasising stability amid challenges in retail and housing. Globally, the US Federal Reserve focuses on debt sustainability, while the US manufacturing sector shows recovery. China's economic dynamics are explored, and the Bank of England holds its key interest rate. Canada experiences robust economic expansion.

Australia

• RBA maintains cash rate at 4.35%, signalling stability.
• Official board statement hints at possible future rate hikes.
• Challenges persist in retail and housing markets.
• Service sector contracts in January, while job ads see a 1.7% increase.

The Reserve Bank of Australia (RBA) opted to keep its cash rates steady at 4.35%, maintaining the stance after a cumulative 425 basis points rate increase in the last two years. The RBA emphasised the importance of building confidence in inflation returning to the target range, hinting at the possibility of further rate hikes.

The official statement, coming from the whole board, clearly said that "the possibility of a further increase in interest rates cannot be discounted."

RBA chair, Michelle Bullock stated “I really understand that mortgage holders are sweating on us…But the big issue that is confronting not just mortgage holders, but everyone is inflation. And the fact that inflation is so high in so many parts of their lives at the moment is really what’s hurting. What’s really important here is we address that issue for people. So in the end, I think that’s why we need to stay the course.”

In other economic news, Australia's retail sales witnessed a significant 2.7% month-on-month decline in December 2023, the sharpest drop since August 2020, despite a 0.3% uptick in Q4 trade. The service sector slightly contracted in January, while job ads saw a 1.7% increase.

The country achieved record agricultural exports in the 2022-23 financial year, but challenges persist in the housing market, as reflected in a 0.4% rise in CoreLogic's Home Value Index in January 2024, marking the 12th consecutive month of value increases.

Global

• Fed Reserve Chairman stresses urgency on US debt sustainability.
• US manufacturing sector shows signs of recovery in January.
• Robust January jobs report in the US diminishes likelihood of a March rate cut.
• Insights into China’s economic challenges and prospects.
• Bank of England maintains key interest rate at 5.25%.
• Canada's Ivey PMI records strongest economic expansion in nine months.

US Federal Reserve chairman stresses urgency on US debt sustainability.

In a pivotal moment, Federal Reserve (Fed) Chairman, Jerome Powell has expressed deep concerns regarding the fiscal trajectory of the United States. Powell underscored the critical need to address debt sustainability, acknowledging the long-term challenge by stating, "In the long run, the U.S. is on an unsustainable fiscal path...and that just means that the debt is growing faster than the economy."

Powell's measured remarks have drawn attention, aligning with worries voiced by some Fed sceptics about the national debt. The emphasis on addressing growing debt relative to economic expansion highlights the significance of this statement from the Fed chair.

US manufacturing sector shows signs of recovery in January.

According to the Institute for Supply Management (ISM), the US manufacturing sector stabilised in January, marked by a rebound in new orders. The ISM Manufacturing Purchasing Managers Index (PMI) for January 2024 improved, the highest since October 2022, indicating a contraction in the manufacturing sector but at a softer pace. Key indicators such as new orders and production rebounded, while employment experienced a slight decline. Despite inflation at the factory gate picking up, these positive trends in the manufacturing sector contribute to a cautiously optimistic economic outlook.

Robust January jobs report in the US diminishes likelihood of a March rate cut.

The robust January jobs report in the United States, featuring a surge in payrolls, wage increases, and a decline in unemployment, suggests that the Fed is unlikely to cut interest rates in March. The report exceeded expectations, indicating momentum in job creation across various sectors. Concerns arise from an increase in part-time jobs and a drop in the average workweek, signalling potential challenges. The Federal Reserve is expected to maintain a cautious stance, with a possible rate cut not anticipated before May. The job market's strong performance, while indicative of economic strength, presents uncertainties reflected in labour market surveys and data releases.

Insights into China’s economic challenges and prospects.

Amid global economic discussions, attention turns to China, where concerns are raised about its economic stability. Kyle Bass, founder of Hayman Capital, likened China's current economic situation to the U.S. financial crisis of 2008, emphasising the significant challenges arising from the collapse of its real estate market. With a heavy reliance on real estate and substantial banking leverage, China's economic fundamentals are under strain, leading to defaults and concerns of systemic risks.

Additionally, a report from the Rhodium Group highlights structural problems in China's economy, suggesting a potential slowdown in annual growth to 3-4% unless addressed. The manufacturing sector, however, shows signs of resilience, with the Caixin PMI indicating growth for the third consecutive month.

Canada's Ivey PMI records, strongest economic expansion in nine months.

Canada experienced its fastest economic expansion in nine months, according to the Ivey Purchasing Managers Index (PMI) for January. The seasonally adjusted index rose in December, marking the highest level since April. Despite the overall positive trend, the employment gauge slightly decreased, and the prices paid index eased. The unadjusted PMI surged, reflecting the sixth consecutive month of economic expansion. The Ivey PMI provides insight into Canada's dynamic economic landscape, showing growth when the reading is above 50.

In December 2023, Canada reported a trade deficit of CAD $0.3 billion, a shift from the previous month's surplus and contrary to market expectations. The annual trade balance shifted from a surplus of CAD $19.7 billion in 2022 to a slight deficit of CAD $1.4 billion in 2023, with both exports and imports falling by 1.4%.

Bank of England maintains key interest rate at 5.25%.

The Bank of England opted to keep the key bank rate steady at 5.25%, marking the fourth consecutive maintenance at this 16-year high during its first meeting of 2024, aligning with market expectations. While two policymakers favoured a 25bps increase, one member leaned towards a 25bps reduction. The central bank emphasised the need for a sustained restrictive monetary policy to bring inflation back to the 2% target in the medium term. References to further tightening were dropped, acknowledging a more balanced risk to inflation. Despite elevated indicators of inflation persistence, services inflation and wage growth have slightly fallen. Policymakers anticipate gradual GDP growth, influenced by a diminishing drag from previous bank rate increases. CPI inflation is projected to temporarily reach the 2% target in Q2 2024 before rising again in Q3 and Q4.

Euro area inflation eases to 2.8% YoY in January 2024.

In January, the Euro Area's inflation rate decreased to 2.8% year-on-year from the previous month's 2.9%, aligning with market expectations. The core rate, excluding volatile food and energy prices, eased to 3.3%, slightly above forecasts but still the lowest since March 2022. On a monthly basis, consumer prices fell by 0.4% in January, contrasting with a 0.2% increase in December.

Italy's annual inflation inches up to 0.8% in January 2024.

Italy's annual inflation rate experienced a slight increase, reaching 0.8% in January 2024, compared to 0.6% in December but falling short of market expectations at 1.1%. On a monthly basis, consumer prices rose by 0.3%. Net inflation decelerated to 2.8% from 3.1% in December.

Regulation roundup

Hong Kong reminds investors to check platform licensing as deadline approaches.

All crypto trading platforms in Hong Kong are required to submit a license application by 29th February as mandated by the Securities and Futures Commission (SFC), or they must shut down their businesses by 31st May.

As the deadlines are approaching, SFC reminds investors to keep an eye on their trading platform and see if it is on the licensed or applicant list and suggests moving their assets to a licensed one if not.

Hong Kong initiated its crypto licensing regime to improve investor protection and market stability in June 2023. Currently, two platforms called HashKey and OSL have been granted licenses, allowing them to offer legit retail crypto trading services.

Another 14 crypto platforms, including OKX, Bybit and HKVAEX which is related to Binance, have applied for a license. The SFC is going through the reviewing process. Christopher Hui, Secretary for Financial Services and the Treasury, states that “the local government will soon publish a consultation on a proposed regulatory framework for over-the-counter crypto trading platforms as risks mount.”

Compliance conversations

Defi scams are on the rise: What to look out for.

In 2023, alongside the infamous pig butchering scams, a more sophisticated breed of decentralised finance (DeFi) scams surfaced. Exploiting DeFi applications, these scams resulted in victims in the U.S. alone facing losses amounting to billions of dollars. 

Evolving from the "liquidity mining" frauds of 2022, these new scams integrate tactics involving fake romance and friendship, employing smart contracts and mobile crypto wallets, thus giving rise to what is referred to as “DeFi Savings” scams. These scams demonstrate significant technical advancements compared to pig butchering scams.

No need to install custom apps: Unlike previous scams that often require victims to install custom apps through complex procedures or bypassing app store reviews, DeFi scams leverage trusted applications from well-known developers. Victims are only required to load a web page from within that application, which makes it harder for victims to know that they might be caught up in a scam.

False sense of fund control: Victims are not required to deposit their crypto assets into a wallet controlled by scammers or execute direct wire transfers. Victims can monitor their wallet balances, creating the illusion of fund safety. Scammers may even add extra crypto tokens to victims' accounts to falsely portray profits. Wallet data remains visible to victims until the scam is activated.

Hidden laundering via contract wallets: After victims engage in the scam, the scammers gain control of their wallets through a contract wallet. The operations of the scam hide the network used for laundering the stolen cryptocurrency behind this contract wallet.

These developments increase the risk of DeFi Savings scams by overcoming past technical obstacles and suspicions, posing a greater threat to individuals using cryptocurrency and DeFi applications.

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

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Weekly prices are accurate as of 11:00 AM AEST on 08/02/2024.

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.