Weekly Crypto Wrap: 9th November 2023

TLDR

• ‘Mini altcoin season' lifts crypto market cap to US$1.342 trillion.
• SOL, XRP, ADA & LINK see double digit weekly gains.
• HSBC to introduce custody services for tokenised securities.
• LINK hits new all-time high amid CCIP adoption in Hong Kong.
• Ethereum’s surge in network activity turns ETH deflationary.
• XRP leads crypto market rally, soaring 12% overnight.

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State of crypto

• Altcoin rally pushes crypto market cap to a high of US$1.342 trillion.
• Solana (SOL) surges 25% in a week after Breakpoint conference.
• XRP gains 19% after Dubai International Financial Centre approval.
• Chainlink (LINK) up 132% on the year as HK adopts CCIP tech.
• Cardano (ADA) rallies 16% as Midnight protocol sidechain rolls out.
• Former FTX CEO, Sam Bankman-Fried found guilty on all seven counts.

Altcoins rally as Bitcoin’s price cools off.

Over the past week, several major altcoins, including XRP, Cardano (ADA), Solana (SOL) and Chainlink (LINK), experienced substantial gains as Bitcoin’s price cools off. The altcoin rally pushed the total crypto market cap to a high of US$1.342 trillion.

Solana remains firmly in the crypto spotlight with a 25.34% gain over the past week, trading as high as US$46.90. The recent Breakpoint event held in Amsterdam has likely contributed to its positive performance.

XRP surged by almost 19%, closing at US$0.66, reaching highs not seen since August. This rally continues a positive trend for XRP, and recent developments such as approval for use in the Dubai International Financial Centre have likely contributed to the bullish sentiment.

Cardano's native asset, ADA, has also seen an impressive 15.74% increase in the last trading week, attributed to the ongoing rollout of the Cardano ‘Midnight protocol’, which focuses on privacy-centric blockchain solutions. The protocol's recent opening to developers has added to its momentum.

The adoption of Chainlink's (LINK) Cross-Chain Interoperability Protocol (CCIP) technology by financial institutions in Hong Kong, particularly in the Central Bank Digital Currency (CBDC) trials, is expected to boost Chainlink's price as it sees gains of 10.38% on the week and an impressive 132% on the year.

Spot Bitcoin ETF updates.

The pending approval of a BlackRock spot Bitcoin exchange-traded fund (ETF) has stirred significant excitement in the crypto industry. This ETF is poised to provide institutional investors with unprecedented access to the crypto market, potentially attracting substantial capital.

The U.S. Security and Exchange Commission (SEC) currently has 8-10 filings for potential Bitcoin ETF products, with the 240-day SEC comment period for these applications set to expire on January 10, 2024. Regulators must decide to either approve or reject these applications by that date as market participants speculate on possible approval prior to years end.

Former FTX CEO, Sam Bankman-Fried found guilty on all charges.

Sam Bankman-Fried, the former CEO of FTX, has been found guilty of all seven counts of fraud and conspiracy following a five-week trial in New York. A tentative sentencing date has been set for March 28, 2024, and Bankman-Fried could face a potential prison term of up to 115 years.

The trial revolved around allegations that he defrauded FTX investors, customers, and Alameda Research lenders. The guilty verdict signals a significant development in the cryptocurrency industry, as it underscores the importance of regulatory compliance and ethical practices while holding high-profile figures accountable for their actions. An appeal is expected in the case.

Crypto market sentiment has soared further into the Greed zone, currently sitting at 69 on the Crypto Fear & Greed index, up from 66 yesterday.

The weekly crypto close.

Moving on to the weekly close across the crypto majors, Solana (SOL) was the best performer, achieving an impressive gain of 25.34%, closing at US$41.15. Followed closely by XRP which showed strength throughout the week, closing at US$0.6607, reflecting a substantial gain of 18.81%, whilst Cardano (ADA) saw a gain of 15.74% closing at US$0.3419.

Chainlink (LINK) posted a 10.38% gain on the week closing at US$12.23, reaching highs not seen since April 2022. Ethereum (ETH) was up 5.38%, reaching a value of US$1,891.71 and Litecoin (LTC) closed at US$71.60, posting a 4.08% increase.

Bitcoin (BTC) seems to be digesting its double-digit gains from the price rally over the past two weeks, as price rolls over with a 1.41% gain on the week, closing at US$35,011.88. The 10-week bullish streak for Bitcoin’s dominance, has finally come to an end, with a 2.15% decrease in the last trading week as traders roll their profits into alts. Although Bitcoin still maintains a dominant position, closing at 52.93% for the week.

Simultaneously, the total cryptocurrency market capitalisation witnessed further growth for a third straight week, with a gain of 3.93% throughout the week, ultimately closing at US$1.293 trillion.

What do you mean by rolling profits from Bitcoin into alts?

Last week, we spoke about traders rolling their profits from one crypto asset to another. When traders roll their Bitcoin profits into the altcoin market, it signifies a shift in investment focus within the cryptocurrency space.

This action is often driven by the desire to diversify one's portfolio and seek higher potential returns in the more volatile altcoin market. By moving profits from Bitcoin into alternative cryptocurrencies, traders are effectively increasing demand for those assets. This increased demand, coupled with the influx of capital, and relatively low market cap of projects outside of the top 10 coins, tends to push the prices of altcoins higher.

It's a reflection of the cyclical nature of the cryptocurrency market, where profits from established coins like Bitcoin flow into newer, promising projects, contributing to price appreciation in the altcoin sector. This strategy is not without risks, as the altcoin market can be more volatile, but it underscores the dynamics of capital rotation within the crypto ecosystem and its potential impact on prices.

Year-to-date in the crypto space.

The leading cryptocurrencies have posted significant gains, with Solana (SOL) maintaining its position at the forefront, showing an impressive 334% increase in value over the year. Chainlink (LINK) follows behind with a substantial 162% gain, while Bitcoin (BTC) isn't far behind, boasting an impressive 117% increase. XRP (XRP) also showing resilience, with a notable 101% gain.

Ethereum (ETH) recording a solid 58% increase in its value throughout the year. Cardano (ADA) has displayed consistent progress, achieving a modest gain of 46%. Additionally, Litecoin (LTC) has moved into positive territory, with a 5% increase in value over the year.

*The weekly trading stats as of Monday, November 6th at 11:00 am AEDT, based on data from Tradingview in USD.

**Year-to-date performance as of Thursday, November 9th at 11:00 am AEDT, based on data from Tradingview in USD.

Crypto news

HSBC to introduce custody services for tokenised securities and digital assets.

HSBC, the world’s 7th largest bank, has announced its foray into the custody services for tokenised securities and digital assets. This move follows the growing trend among major financial institutions to embrace digital asset custody, a trend initiated by US banking giant BNY Mellon in 2021.

HSBC has chosen to partner with Swiss crypto custody firm Metaco, recently acquired by blockchain startup Ripple, to provide secure storage for bonds and other securities in digital form. The bank views this as a complementary service to its HSBC Orion platform, which facilitates the issuance of digital assets, and a recently launched offering for tokenised physical gold.

For its custody services, HSBC will leverage Metaco's platform for institutions, known as Harmonise. This platform is designed to enhance the security and management of digital asset operations.

Tokenised securities, in essence, represent regulated assets like bonds and equities but in the form of tokens recorded on a blockchain. This technology, originally the foundation of cryptocurrencies like Bitcoin, has found varied applications in the banking sector, primarily for payments, trading, and asset digitisation. HSBC's decision to enter the custody and fund administration space for digital assets is driven by the increasing demand from asset managers and owners as the market continues to evolve.

This partnership is a significant step forward for HSBC, which already allows its Hong Kong clients to trade in Bitcoin and Ethereum exchange-traded funds, further showcasing the bank's commitment to embracing digital assets. As financial institutions like HSBC continue to explore the potential of digital assets, the collaboration with Metaco highlights the industry's momentum toward real-world use cases in custody, issuance, trading, and settlement of tokenised assets, potentially unlocking new revenue streams and economic benefits.

Germany’s DZ Bank to introduce crypto custody for institutional investors.

DZ Bank, the third largest bank in Germany, has launched its own digital asset custody platform. According to an announcement published on November 2nd, the platform will offer institutional clients crypto securities.

DZ Bank applied for a crypto custody license from the German Federal Financial Supervisory Authority (BaFin) in June of this year, with the aim to facilitate the sale of cryptocurrencies to institutional investors and private customers in future.

Holger Meffert, Head of Securities Services and Digital Custody at DZ Bank, said in a statement:

“We assume that within the next ten years, a significant proportion of capital market business will be processed via distributed ledger technology (DLT)-based infrastructures. In the medium term, we see DLT as a complementary technology to the established infrastructures in the existing capital market processes.”

German banks have been shifting towards crypto adoption despite the country’s strict regulatory framework. In March 2023, Deutsche WertpapierService Bank launched its wpNex crypto trading platform, which gives 1,200 banks in Germany access to the digital asset industry.

Asset management group DWS, majority-owned by Deutsche Bank, announced in May it was working on exchange-traded products of cryptocurrencies. Other traditional banks, including Commerzbank and DekaBank, have also applied for crypto custody licenses from Germany’s financial watchdog, BaFin.

SEC faces hiring challenges due to own policy against employees owning crypto.

A new report from The Securities and Exchange Commission (SEC)’s Office of Inspector General reveals the regulator is facing difficulties hiring crypto experts, because suitable candidates often do not want to sell their digital assets to work for the SEC.

"Many qualified candidates hold crypto assets, which the Office of the Ethics Counsel has determined would prohibit them from working on particular matters affecting or involving crypto assets…this prohibition, according to SEC officials, has been detrimental to recruiting, as candidates are often unwilling to divest their crypto assets to work for the SEC."

The comments have come to light in a report that details the SEC's priority management and performance issues. Crypto, along with artificial intelligence, was cited as an ‘emerging area’ presenting special challenges for the regulator.

The SEC’s hiring efforts have been frustrated by a small candidate pool and high competition with the private sector for crypto experts. Many potential candidates hold crypto assets, which disqualifies them from working for the agency under a determination by the Office of Ethics Counsel (OIG).

According to Cointelegraph, the OIG is planning to give SEC recruitment practices more scrutiny in 2024.

Bitcoin (BTC) slows as 'mini altcoin season' lifts crypto market cap to US$1.342 trillion.

Crypto investment products saw US$261 million in new liquidity last week, establishing a six-week stretch of positive inflows, according to CoinShares’ latest crypto fund report. Coinciding with Bitcoin’s climb to US$35,000 in anticipation of a spot Bitcoin ETF, Bitcoin was the largest recipient of weekly inflows by asset at US$229 million.

Increasing risk-on sentiment in traditional markets also supported the digital asset space. The widening crypto rally has lifted the total cryptocurrency market cap to its highest reading since late May 2022, currently at US$1.342 trillion, up 1.56% over the last 24 hours.

Bitcoin spiked Wednesday afternoon nearly 3% to US$35,500 in a short squeeze. As Bitcoin’s price reached its highest level in 18 months, some degree of scepticism and hedging could be on the horizon. Despite the short squeeze on BTC, Bitcoin’s futures open interest has reached its highest level since April 2022, standing at US$16.3 billion.

As BTC's price remains rangebound between US$34,000 and US$36,000, capital rotation into altcoins is creating a ‘mini altcoin season’ according to a K33 Research report. In the crypto market, taking profits and investing them in altcoins is common practice after a significant surge in Bitcoin’s market value.

Buy Bitcoin on BTC Markets.

Ethereum’s surge in network activity turns ETH deflationary.

Ethereum (ETH) has broken out of its downtrend and could head higher according to analysts, as the latest altcoin rally boosts network activity. As a result, more ETH was burned than added to its supply over the past week, turning the token deflationary following two months of being inflationary.

Alongside a major rally for Bitcoin and the rest of the crypto market, Ethereum saw price gains of almost 20% in October, at the time of writing, ETH is hovering around the US$2,950 mark.

Capital rotation from Bitcoin to altcoins has led to an increase in user activity on the Ethereum network, which is the foundation of many decentralised finance (DeFi) protocols and decentralised exchanges (DEXs).

Last week, the network settled US$250 billion of asset transfers, the most in value since mid-March and up from US$105 billion in late August.

Buy ETH on BTC Markets.

Chainlink (LINK) reaches new all-time high amid CCIP adoption in Hong Kong.

Chainlink (LINK) surged past the US$12.50 mark this weekend to reach a new all-time high following a significant rally, likely catalysed by the adoption of Chainlink’s Cross-Chain Interoperability Protocol (CCIP) by Hong Kong’s Monetary Authority (HKMA).

In November 2022, The HKMA launched its e-HKD (e-Hong Kong dollar) pilot program to assess the viability of a HKMA-issued CBDC, as part of its ‘Fintech 2025’ strategy. Earlier this week, hybrid financial (HyFi) platform, Arta TechFin announced its initiative to develop regulated, interoperable fund tokens on major blockchains, in collaboration with Chainlink Labs.

The HKMA is now gearing up for the second phase of its e-HKD pilot program, and Chainlink’s CCIP is a central component. In partnership with Arta TechFin, CCIP technology is utilised for the cross-chain atomic settlement of the firm’s tokenised funds, to ensure that transfers are highly secure and provide market liquidity in exchange for tokenised cash or stablecoins.

Buy LINK on BTC Markets.

XRP leads crypto market rally, soaring 12% overnight.

The price of XRP shot up 11.5% earlier this week ahead of Ripple's annual conference, Swell 2023. The conference kicked off in Dubai on Wednesday, bringing together innovators and leaders across the crypto industry. As an XRP ODL provider, BTC Markets is represented at Ripple Swell 2023 by our CEO, Caroline Bowler, where attendees can discuss important topics facing the Ripple ecosystem and wider industry.

The fifth biggest cryptocurrency last traded at US$0.69, up 101% year-to-date. This uptick in price comes days after Ripple received approval for use within the Dubai International Financial Centre (DIFC) from the Dubai Financial Services Authority (DFSA). A press release confirmed that licensed firms will now be authorised “to incorporate XRP into their virtual asset services.”

Ripple’s native token joins Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) as assets previously approved by the DFSA. Ripple Labs CEO Brad Garlinghouse said in a statement:

“Dubai continues to demonstrate global leadership when it comes to the regulation of virtual assets and nurturing innovation…Ripple will continue to double down on its presence in Dubai, and we look forward to continuing to work closely with regulators to realise cryptos’ full potential.”

Buy XRP on BTC Markets.

The week ahead: upcoming economic events

November 9th: China’s Inflation Rate.

November 10th: US Fed Chair Powell Speech. UK GDP Growth Rates. European Central Bank’s President Lagarde Speech.

November 11th: US Michigan Consumer Sentiment.

November 14th: Australia’s Westpac Consumer Confidence Change & NAB Business Confidence Index. UK Unemployment Rate. Germany’s ZEW Economic Sentiment Index. US Inflation Rate.

November 15th: Japan’s GDP Growth Rate. China’s Industrial Production & Retail Trade. UK Inflation Rate. US PPI & Retail Sales.

November 16th: Japan’s Balance of Trade.

Economic Calendar (tradingeconomics.com)

Market reflections

Australia

• RBA lifts rates to a 12-year high of 4.35% as inflation persists.
• Repayments rising over 50% since the rate hikes commenced.
• Australia's rental crisis deepens as migration hits record highs.
• New housing approvals continue to decline, as demand increases.

The Reserve Bank of Australia, has raised interest rates to a 12-year high of 4.35% due to persistent inflation, resulting in repayments rising over 50% since the rate hikes commenced. It also increased its inflation expectations for 2024, stating that although inflation peaked this year, it remains "too high" and is returning to the target range of 2 to 3% more slowly than expected.

This move contrasts with decisions by other global central banks like the Bank of England, the US Federal Reserve, and the European Central Bank, which have opted to hold rates in recent months. This rate increase is the first under Governor Michele Bullock, who took office in September.

The increase in the costs of borrowing money occurs as Australia's rental crisis deepens and a surge of migrants enters the country. In the Deloitte Access Economics Business Outlook, Australia's economy is described as operating in a precarious state, affected by global uncertainties. The data reveals a retail recession and other economic challenges.

In the latest housing report from the Australian Bureau of Statistics (ABS), data indicates a decline in private house approvals in Australia, which could have implications for the country's housing supply as fewer new housing units being approved for construction.

Global

• US labour market cools as strikes impact manufacturing payrolls.
• Unemployment in the US rose to 3.9% in October, beyond forecasts.
• China’s trade surplus shrinks, driven by weaker exports in October.
• Germany’s trade surplus reduced in September, lowest since May.
• Bank of England keeps interest rates high amid economic concerns.
• Canada’s unemployment rate spikes to 5.7% in October.

United States

The US labour market is showing signs of cooling, influenced by strikes, including those led by the United Auto Workers union, impacting manufacturing payrolls. The unemployment rate increased slightly to 3.9% in October, surpassing expectations and marking the highest since January 2022, with more unemployed individuals and reduced employment and participation rates.

The ISM Services PMI for October reached a five-month low, falling well below forecasts. Business activity, production, and employment slowed, while inventories and new export orders contracted. However, new orders grew faster, and price increases were modest whilst supplier deliveries improved.

Business sentiment is mixed, with some firms optimistic about stable conditions and others concerned about factors like inflation and interest rates. As employment challenges persist, with concerns on rising labour costs and shortages.

China

In October, China's trade surplus saw a significant contraction, well below market expectations. This marked the smallest trade surplus since February, primarily driven by exports declining more than anticipated, attributed to continued weak international demand. Surprisingly, imports experienced unexpected growth during this period.

Germany

In September, Germany's trade surplus shrank, reaching its lowest level since May. This reduction was primarily due to a more substantial decline in exports compared to imports.

United Kingdom

During its November meeting, the Bank of England opted to maintain its benchmark interest rate at a 15-year high of 5.25% for the second consecutive time. This decision follows policymakers' assessment of recent signs pointing to an economic slowdown in the UK, alongside the persistent challenge of elevated inflation. The central bank underscored its intention to uphold a restrictive monetary policy for an extended period to guide inflation back toward the 2% target.

In the backdrop, inflation projections were slightly revised upwards, while GDP growth forecasts indicate a stagnation in the UK economy in the last quarter and only marginal growth in the final three months of this year.

Canada

In October, Canada's unemployment rate increased to 5.7%, up from the previous month's 5.5%, marking the highest level since January 2022 and surpassing market expectations of 5.6%. This outcome aligns with the Bank of Canada's earlier caution about the noticeable impact of its aggressive rate-hiking cycle on the Canadian economy, resulting in softer labour market conditions.

Meanwhile, the Ivey Purchasing Managers Index showed an uptick in October but fell short of market forecasts. This latest reading suggests a third consecutive month of modest economic expansion, with reduced price pressures. Meanwhile, the pace of job creation decelerated, and inventories grew.

Regulation roundup

Hong Kong regulators consider spot crypto ETFs for retail investors.

Hong Kong’s securities regulator, the Securities and Futures Commission (SFC), is moving towards allowing retail investors to buy spot crypto exchange-traded funds (ETFs).

In January, the SFC tightened regulations by restricting retail investors from accessing crypto spot ETFs, limiting them to professional investors with portfolios of at least HKD$8 million (AU$1.6 million).

However, in October, the SFC updated its rules to allow a broader range of investors to engage in spot-crypto and ETF investing, with the requirement that they pass a mandatory knowledge test.

Julia Leung, chief executive officer of the Securities and Futures Commission, said in an interview with Bloomberg that the regulator is evaluating such retail investment products:

“We welcome proposals using innovative technology that boosts efficiency and customer experience…We’re happy to give it a try as long as new risks are addressed. Our approach is consistent regardless of the asset.”

Hong Kong officially started its crypto licensing regime for virtual asset trading platforms in June 2023, allowing licensed exchanges to offer retail trading services. At this moment in time, Hong Kong has listed three futures-based crypto ETFs – Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF and CSOP Ether Futures ETF.

Compliance conversations

The never-ending battle against smishing and phishing.

In the ever-evolving landscape of online threats, one battle that continues to demand our attention is the fight against smishing and phishing scams. In this section, we will take a deep dive into the world of smishing and phishing, shedding light on their unique characteristics, and providing you with an arsenal of defensive strategies to protect yourself against these persistent and insidious dangers.

Understanding the differences between smishing and phishing.

Smishing and phishing are both methods employed by cybercriminals to trick individuals into revealing personal information or financial data. Let's differentiate between the two:

Smishing: smishing is a combination of "SMS" and "phishing." It is a form of cyberattack conducted through text messages. Scammers send fraudulent texts with malicious links or prompts to compromise sensitive information, such as passwords or personal details.

Phishing: phishing is a broader term that encompasses various tactics, not limited to text messages. It involves the use of fraudulent emails, websites, or messages to trick individuals into sharing sensitive data, like login credentials, credit card information, or personal identification.

Comparing smishing and phishing.

Now, let's compare these two cyber threats to better understand their similarities and differences:

Medium of attack:

• Smishing targets victims through SMS or text messages.
• Phishing encompasses a broader range, including emails, websites, and messages through various platforms.

Attack context:

• Smishing typically aims at stealing personal information or cryptocurrency-related data.
• Phishing can have various objectives, from financial information theft to stealing login credentials for various accounts.

Delivery method:

• Smishing uses text messages with malicious links, often luring victims with fake crypto investment opportunities or prize claims.
• Phishing employs fake emails or websites that appear legitimate, tricking individuals into providing confidential information.

Protecting yourself against smishing and phishing

Both smishing and phishing are dangerous threats that require vigilance. Here's how you can safeguard yourself against these scams:

Scepticism: approach unsolicited messages, whether via SMS or email, with scepticism. Verify the sender's legitimacy before taking any action.

Confidentiality: never share personal information, sensitive data, or login credentials through messages or emails.

URL verification: before clicking on any links, double-check the URL's authenticity. Ensure it matches the official website's domain and watch out for misspelled words or suspicious variations.

Trusted sources: only download cryptocurrency-related apps and wallets from trusted sources like official app stores. Avoid sideloading apps or using third-party platforms.

Two-factor authentication (2FA): enable 2FA on your crypto wallet and exchange accounts to add an extra layer of security.

Software updates: keep your operating system, antivirus, and related software up to date to benefit from security patches.

Awareness: stay informed about the latest scams and phishing tactics to enhance your online safety.

Reporting: if you receive any suspicious messages, promptly report them to your mobile carrier or email service provider and relevant authorities.

Smishing and phishing are prevalent online threats that target individuals in the cryptocurrency space and beyond. By understanding the differences between these scams and following the protective measures outlined in this blog, you can navigate the crypto world with greater confidence and protect your valuable assets.

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 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 11:00 AM AEST, on 09/11/2023.