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  • Bitcoin drops below $84k as markets react to tariffs

    Bitcoin drops below $84k as markets react to tariffs

    BTC on stack of cryptocurrencies with falling crashing graph in background

    • Bitcoin price fell to lows of $82,131, dipping to levels seen in November 2024.
    • The BTC sell-off happens after Trump’s latest tariffs announcement, including a 25% tarriffs on the EU.
    • Equities also dumped, with the S&P 500 seeing $500 billion wiped off.

    The price of Bitcoin dropped more than 6% in 24 hours to break below $84,000 on Wednesday.

    Notably, Bitcoin price has touched its lowest levels since November 2024, when it rose amid election momentum. According to crypto and stocks trader IncomeSharks, the market is bearish.

    BTC sold-off as the crypto market reacted to trade war sentiment, with this coming on the heels of the latest tariffs announcement by President Donald Trump.

    Having announced that the 25% tariffs on Canada and Mexico and 10% on China will go into effect in April, Trump said he would slap 25% tariffs on the European Union. The news saw the S&P 500 fall, with over $500 billion in market cap wiped off.

    Bitcoin dips amid ETFs outflows

    As equities reacted to the potential trade war, Bitcoin crashed below $84,000. Per data from CoinMarketCap, the price of BTC hit lows of $82,131.

    BTC price also dumped amid massive selling pressure from ETFs. Major issuers Fidelity, Ark and Grayscale all sold. BlackRock, which sent millions of dollars worth of BTC and ETH to an exchange on Tuesday, also offloaded $150 million of the flagship coin.

    While bulls had rebounded to above $84k at the time of writing, sentiment remains weak and a retest of $80k is possible. Crypto analyst Rekt Capital shared the chart below.

    According to analysts, the markets are pricing in a possible “rebound in inflation” with investors factoring in likely spikes in the prices of goods.

    “What’s interesting is the SHARP divergence between Gold and Bitcoin since the trade war began. While Gold is up +10%, Bitcoin is down -10%, even though Bitcoin is historically viewed as a “hedge” against uncertainty,” the Kobeissi Letter said.

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  • Bitcoin tumbles to $92k as geopolitical headwinds roil markets

    Bitcoin tumbles to $92k as geopolitical headwinds roil markets

    • Bitcoin fell 4.72% over the weekend and another 3.50% during Monday’s Asian session as tensions driven by Trump’s tariffs have investors de-risking their positions
    • Over the weekend, China responded to Trump’s tariffs by indicating interest in imposing tariffs on US goods, while Canada imposed a 25% tariff on CA$155 billion worth of US goods

    Bitcoin tumbled below $100,000 over the weekend, extending losses into today as threats of a possible trade war rock markets worldwide.

    Bitcoin price chart. Source: CoinMarketCap

    While most of Bitcoin’s price decline came this weekend, weakness began when its price failed to swing higher than the $108,000 level two weeks ago (January 20).

    BTC/USD chart. Source: TradingView

    A failure to swing higher can signify insufficient buy pressure to push prices higher. If that is the case, prices will seek the next major liquidity level, which could mean lower prices in the interim, as seen over the last two weeks.

    Scaling down to a lower time frame, Bitcoin’s price continued to break lower below $99,000. This was before retracing to an internal supply zone between the 50.00% and 61.80% Fibonacci levels (the golden zone for retracements) on Thursday, January 30.

    BTC/USD chart. Source: TradingView

    After being rejected by internal supply, the price broke down further on Friday, January 31, and over the weekend to settle at the next major demand level, between $92,000 and $96,000.

    BTC/USD chart. Source: TradingView

    Bitcoin’s price has found some support at $92,000 and is currently up 4.92% from Asian lows of $91,176.

    Wider trade wars stifle markets

    Meanwhile, the wider economic landscape faces uncertainty as a brewing trade war between the US and several of its trade partners, including Canada, Mexico, and China rocks various markets.

    The US tariffs on its largest trade partners, including a 25% tariff on imports from Canada and Mexico, and a 10% tariff on Chinese imports, have sparked tensions between nations.

    In response, Canada imposed a 25% tariff on CA$155 billion worth of US goods, Mexico has announced tariffs on US goods, but has not provided details, while China also announced plans to impose retaliatory tariffs on US goods.

    The result is uncertainty around the expansion of global trade and a de-risking of portfolios, with the crypto market being one of the first on the chopping block.

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  • How the Fed’s latest decision could affect crypto markets in 2025

    How the Fed’s latest decision could affect crypto markets in 2025

    Bitcoin may have kicked off 2025 with a rebound back to $100,000, but since the release of the U.S. Federal Reserve’s December 2024 Federal Open Market Committee meeting on Jan. 8, the BTC/USD exchange rate dropped to as low as $91,220.84.

    Bitcoin has stabilized at around $95,000 since then, but concerns run high whether further news about the future direction of interest rates and monetary policy will result in an additional negative impact to the performance of Bitcoin and other cryptocurrencies.

    As cryptocurrencies have entered the financial mainstream, they have become increasingly sensitive to policy changes from the Federal Reserve. With this in mind, let’s take a closer look at the latest news from the Fed, and see what it could mean for the performance of both Bitcoins and altcoins in the months ahead.

    Why Cryptos Fell on The Latest Fed News

    As revealed in the aforementioned Fed meeting minutes, the central bank once again cut interest rates by 0.25%, or 25 basis points. This was in line with expectations. However, while the latest rate cuts arrived as expected, other takeaways from the meeting minutes caught investors off-guard.

    Namely, the Fed’s signaling of its plans to reduce the number of 25-basis point rate cuts in 2025. Before the meeting minutes hit the street, the market was still expecting four such cuts throughout the year. The latest remarks from Fed officials regarding quantitative tightening also suggested that the “Fed pivot” this year will not be as rapid of a shift from hawkish to dovish as previously anticipated.

    Taking this into account, it’s not completely surprising that Bitcoin has once again encountered negative volatility. Nor is it surprising that more volatile altcoins, like Ethereum, Solana, and Dogecoin, have all experienced double-digit declines over the past week. As “risk-on” assets, cryptocurrencies, especially altcoins, perform better during times of accommodative fiscal policy.

    Yet while the Fed may be not turning as dovish as previously expected, and is in fact continuing to engage in monetary tightening, the impact of these policy decisions on cryptocurrency prices in 2025 may not be as dire as it seems at first glance.

    What This Means for Bitcoin and Altcoin Prices in 2025

    Although the cryptocurrency market reacted negatively to the Fed’s current policy gameplan, said plans could still result in further upside for Bitcoin and other cryptocurrencies. For one, the planned implementation of fewer 25 basis-point rates still means a further loosening of monetary policy, helping to justify additional upside for this “risk-on” asset class.

    Second, with regards to Bitcoin, other positive factors are at play that could drive further upside for the largest cryptocurrency by market capitalization. These include increased institutional and retail investor allocation, as well as the specter of a more favorable crypto regulatory environment from the incoming Trump administration.

    Binance CEO Richard Teng commented on what we can expect in the crypto industry in 2025, “We expect to see development across all aspects. Crypto regulation saw great growth across the world in 2024 and we expect to see more in 2025. Given the recent U.S. presidential election and expected crypto regulation from its new government, we expect to see other countries follow the lead from the U.S. and enact more legislation across the world.”

    Teng continues, “In terms of institutional interest, financial giants like BlackRock and Fidelity entered the crypto business in 2024, and we expect to see more new players next year. More companies are learning about crypto and integrating crypto features like tokenization into their business. This is a trend that has grown for years and we expect to see more development in.”

    Admittedly, the recently-announced changes to the Fed’s rate cut plans could still negatively impact the performance of altcoins in the short-term. Altcoins are much more sensitive to changes in fiscal policy. Nevertheless, if a bull market continues in Bitcoin, chances are it will spill over into the altcoin space as well. Investors profiting from a continued run up in the price of Bitcoin could cycle their gains into Ethereum, XRP, Solana, and other major and emerging altcoins.

    The Bottom Line

    Over a longer timeframe, the Fed’s decision to more cautiously lower interest rates and loosen fiscal policy may do little to threaten the long-term bull case for cryptocurrencies. Due to a variety of trends, including the proliferation of exchange-traded cryptocurrency investment products, institutional and retail capital inflows into cryptocurrencies are poised to continue.

    Of course, nothing’s for certain. For instance, following the latest jobs report, there is growing doubt whether the Fed will further walk back its 2025 rate cut plans. Even if the Fed sticks to its current plan, this asset class is likely to stay highly volatile. Caution and patience remain key.

    Nevertheless, taking into account not just the Fed news,but the other positive trends at play as well, the opportunity for long-term price appreciation with Bitcoin and other cryptocurrencies is still on the table.

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  • 2024 saw crypto markets dramatically mature

    2024 saw crypto markets dramatically mature

    2024 was a landmark year for the cryptocurrency market. It was a year when the market matured, barriers to the institutional investing world came down, and international regulations started to pave the way for digital currencies to enter the mainstream global financial system. 

    With a President-elect keen on making the US a global crypto hub, the market experienced significant growth. As crypto adoption rose, more users turned to crypto platforms and ETFs to invest. 2024 was a transformative experience for the crypto market and the blockchain technology that powers it. 

    The general public, buoyed by positive sentiment and rising crypto prices, has flocked to DeFi platforms to download their first wallet. Many of those new users have found their way to the highly trusted crypto brand Binance.

    It takes a leader to help an industry continue to mature and Binance CEO Richard Teng has taken on that role throughout 2024’s massive growth. Teng commented on his leadership and the future, “we have served in the best interests of our users since day one, leading the industry’s standard and continue building the future of the industry responsibly.”

    Binance accounts for approximately 50% of all trading volume globally. This number has only increased from Jan-Nov 2024. During the 2024 US Presidential election week, Binance captured $7.7 billion out of the $20 billion total inflows across all exchanges. Combine that with the leading crypto exchange reaching a new milestone surpassing 200 million users and safeguarding over $130 billion in user assets.

    So, these are exciting times for the crypto industry that come off the back of a lot of hard work in 2024. The highlights of the year included: 

    Institutional Involvement and Widespread Adoption

    In 2024, BlackRock launched its spot Bitcoin ETF IBIT, before bringing options to the table on November 19th 2024, and broke all the records on day one with 354,000 contracts traded and $1.9 billion in notional value. This was a landmark moment for the crypto industry, but it came at the end of a year of institutional investment. 

    Pension funds, hedge funds, and sovereign wealth funds have worked hard into crypto this year as they try to take advantage of the growth potential and protect against problems with fiat currency. They follow on the heels of Goldman Sachs, Morgan Stanley, and Fidelity Investments, who all offer Bitcoin as part of their Wealth Management services.

    Institutional investment has curbed market volatility, and this year, Bitcoin emerged as one possible protection against inflation. New clarity with the regulations, improved custody solutions, and advanced risk management frameworks all gave the institutions the confidence to jump into crypto feet first in 2024. 

    The Rise and Rise of DeFi

    Decentralized Finance (DeFi) is changing the world we live in and providing a real alternative to traditional banking. The world’s unbanked poor and privacy-obsessed High Net Worth Individuals alike have discovered the delights of downloading a crypto wallet and sending money with low fees and no questions. 

    According to one recent study, the global DeFi market should be worth almost $440 Billion in 2030, up from just over $20 billion in 2023. 

    We can now tokenize any asset, from real estate and fine art to cars and stocks, to create more liquidity without the help of a traditional bank. This is opening up new methods of borrowing, saving, lending, and earning interest that put the power in the hands of the people.

    Unbanked individuals around the world can have access to basic financial services, including sending and receiving money from friends or families, without huge fees. We are also seeing an ecosystem of liquidity pools and borrowing facilities open up that can change the world of finance. 

    Retail Market Integration

    In the background, the Web3 technology that underpins the crypto market has found a home with DeFi platforms, as well as retail and e-commerce. Blockchain technology is now the foundation of supply chain management, healthcare providers, and numerous company processes. If the blockchain continues to take over corporate and public life, then the tokenized crypto ecosystem has to go with it. 

    Retailers are increasingly relying on the blockchain, with Starbucks using it to trace their coffee from the farm to the cup and Nike tokenizing each pair of sneakers on its Swoosh platform for authenticity and traceability.

    In October 2023, Ferrari started accepting crypto payments for its high-end sportscars, joining the likes of Tesla, PayPal, Shopify, and Microsoft. This is a slow process, but crypto has slowly acquired the social proof it requires to break through with mainstream retailers. The blockchain that forms its foundations and is becoming such a mainstream hit was an unexpected bonus. 

    Regulatory Frameworks: Chaos to Clarity

    Fragmented regulations that change from country to country are terrible for the crypto industry, and 2024 was the year it finally got its house in order. The Financial Stability Board, International Monetary Fund, and World Economic Forum helped guide disparate countries towards one set of standard practices for crypto taxation, Anti Money Laundering compliance, and consumer protection. A simple foundation of regulations that works across borders could work wonders for the industry. We’re not there yet, but we are getting closer. 

    Technological Advancements Driving Maturity

    It isn’t just the political landscape that had to change to give the crypto market a shot at mass adoption. Real technical issues with the early blockchain systems kept them as a niche interest rather than an everyday occurrence. 

    Blockchain congestion, slow transactions, high energy consumption, and scalability were all real issues. Ethereum 2.0 and Layer 2 solutions mean that Ethereum, the most ubiquitous blockchain by far when it comes to dApps and Web3 technology, is now much more scalable, with lower fees and less blockchain congestion. Solana and alternative blockchains like BNB Smart Chain also offer alternative solutions, with blockchain bridges seamlessly connecting the networks.

    AI integration has already changed the world of trading, analytics, risk management, and supply chain management. Artificial Intelligence has unlocked another level of performance from Web3 technology and automated complex processes that can streamline almost any company. 

    Conclusion

    These factors have all combined to create a market that is ready, willing, and waiting for mass adoption. Institutional adoption, regulatory clarity, cultural acceptance, and technical improvements have all helped the cryptocurrency industry go from a sideshow to a central player in 2024. We have not seen anything yet, and next year could be the biggest yet. 

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  • Prediction markets tokens rise as other tokens dip: Gnosis, Augur price outlook

    Prediction markets tokens rise as other tokens dip: Gnosis, Augur price outlook

    • Bitcoin has suffered its worst weekly percentage loss since the collapse of FTX.
    • Some of the factors behind the dip include reports of SpaceX selling its BTC holdings and the Chinese property giant Evergrande bankruptcy filing.
    • Top prediction markets tokens have maintained a bullish trend amid the crypto meltdown.

    In what has caught most crypto investors by surprise, the price of Bitcoin (BTC) has decreased by 11.2% to about US$26k. Last week has been the worst week for Bitcoin (BTC) since FTX’s demise in November 2022.

    The market crash has not only affected BTC, seeing that the rest of the asset class has not fared any better. Ethereum (ETH) fell by approximately 9.5% to $1.7K and Binance-coin (BNB) dropped by about 9.8% to $217, just to mention a few of the top cryptocurrencies by market capitalization.

    While most of the top cryptocurrencies experienced a price dip, popular prediction markets tokens like Gnosis (GNO), SX Network (SX), Kleros (PNK), and Augur (REP) registered significant gains. Chancer (CHANCER), a new prediction markets token is also gaining traction as its token presale continues to gain traction.

    What caused the crypto market to drop?

    The price decrease was caused by a number of causes. They included speculation that SpaceX wrote down the value of its Bitcoin assets, the collapse of the Chinese real estate firm Evergrande, and rising yields in the US.

    SpaceX Bitcoin holdings

    The Wall Street Journal published a report late last week stating that Elon Musk’s space exploration company SpaceX marked down the value of the Bitcoin it had on its books by US$373 million for the years 2022 and 2021. The report claims that the business also sold a portion of the BTC it had at one point over the previous two years. The WSJ has identified documents that it claims offer uncommon insights into the business’s finances.

    However, the WSJ’s assertions cannot be independently verified because SpaceX is a privately held corporation. Musk acknowledged that SpaceX did acquire Bitcoin during a panel appearance in 2021, but it is unclear how much or when the commodity was purchased.

    Evergrande bankruptcy 

    In a disclosure made over the weekend, the Chinese real estate tycoon Evergrande filed for bankruptcy protection in the United States. The corporation reportedly took action to secure its assets while still trying to control its creditors.

    Before proposing a comprehensive off-shore debt restructuring program in 2021, Evergrande experienced a public meltdown and went into default on its obligations. The business currently seems to be on life support.

    Investors are worried that China’s enormous real estate market may become contagious. Country Gardens and other significant developers are not paying their debts either, and the industry—which is thought to account for up to 30% of Chinese GDP—is in serious need of government assistance.

    US Treasury yields

    US Treasury yields are skyrocketing and pushing away investors from risky markets like the crypto market and toward saving. As the US Federal Reserve gradually increased rates throughout the previous year to reach a target rate of slightly over 5%, bond yields increased.

    As strong US economic data keeps coming out, yields have increased this week in anticipation that rate rises will continue. Since 2011, the 30-year US Treasury yield has never been higher. Treasury bonds give a high, secure yield, which is detracting from the value of other asset types like shares and cryptocurrencies.

    Gnosis and Augur price prediction

    Gnosis has risen by 0.2% while Augur has registered a 1% surge after a bear week. In the past seven days, Gnosis dropped by 8.8% while Augur fell by 11.7%.

    Gnosis price daily chart

     

    Having bounced off the support at $97.60, the Gnosis (GNO) token is expected to test the resistance at $104.75. However, that depends on whether the current daily candlestick closes above the lower band line of the Bollinger Bands indicator.

    Augur price daily chart

     

    Augur, on the other hand, seems to have slid into consolidation after erasing most of the gains it made between July 19 and July 20. All eyes are on the support at $0.3246 and the resistance at $2.1844. If the REP price jumps above the upper Bollinger Bands line, it could test the $2.1844 resistance level and if it drops below the lower Bollinger Bands line, it could drop to the support at $0.3246.

    The prediction markets tokens including Chancer, are expected to experience significant price gains as popular games including the English Premier League and the American MSL gather steam.

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  • Schwab-backed crypto exchange EDX Markets goes live

    Schwab-backed crypto exchange EDX Markets goes live

    new crypto exchange edx markets goes live
    • EDX officially launched trading in bitcoin, ether, litecoin, and bitcoin cash today.
    • The crypto exchange has also completed a second funding round with new investors.
    • EDX has plans of launching a clearinghouse business later this year as well.

    Investors can now trade bitcoin, litecoin, ether, and bitcoin cash on a new digital assets marketplace – EDX Markets.

    EDX Markets is backed by financial giants

    On Tuesday, the crypto exchange that has support from a bunch of Wall Street behemoths, including Fidelity, Charles Schwab and Citadel Securities launched trading in the said digital assets.

    EDX Markets had first revealed plans of launching a non-custodial exchange last year in September. In a press release this morning, its CEO Jamil Nazarali said:

    EDX’s ability to attract new investors and partners in the face of sector headwinds demonstrates strength of our platform and demand for a safe and compliant crypto market.

    It is noteworthy that neither of the four crypto assets available to trade on EDX were dubbed “securities” in the recent complaints the U.S. SEC has filed against Binance and Coinbase.

    EDX will soon launch a clearinghouse business

    In its press release, EDX Markets also confirmed today that it has completed a second round of funding with new investors. CEO Nazarali added:

    We are committed to bringing the best of traditional finance to cryptocurrency markets, with an infrastructure built by market experts to embed key institutional best practices.

    A non-custodial crypto exchange is known to be safer than the custodial wallet. On Tuesday, EDX Markets revealed plans of introducing a clearinghouse business in the coming months as well.

    The news arrives only days after BlackRock officially filed to launch a Spot Bitcoin ETF in the United States (read more), suggesting the long-term institutional demand remains intact despite the FTX fiasco and the ongoing regulatory crackdown.

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  • Bitcoin, stocks eye recovery after ECB news jolts markets

    Bitcoin, stocks eye recovery after ECB news jolts markets

    • Bitcoin retested the $25,000 area, while S&P 500 had gained about 1% after plunging on ECB interest rate hike news.
    • The ECB on Thursday surprised with a 50 basis point rate hike.
    • Reports that JPMorgan and Morgan Stanley are looking to help First Republic Bank buoyed stocks.

    Bitcoin and stocks have recovered slightly after trading lower as investors reacted to the latest monetary policy news from the European Central Bank (ECB.)

    On Thursday, markets were digesting recent events around US banks and the possible ramifications to the Federal Reserve’s next move on its rate hikes when the ECB announced a surprise 50 basis points interest rate hike. Stocks reacted lower and so did the crypto market, with crypto analyst Michael van de Poppe suggesting the Fed could follow suit at its meeting next week. 

    S&P 500, Bitcoin recover after ECB news

    The S&P 500 staged a slight recovery, thanks to the resurgence of regional bank shares.

    Despite trading down 0.7% at one point, the benchmark index was up 1% at 12:20 pm ET, while the Dow Jones Industrial Average that had initially plunged by more than 300 points, reversed and was hugging gains with just over 100 points, or 0.3% higher. Elsewhere, the Nasdaq Composite was up by 1.5%.

    While US stocks have rebounded higher amid reports that banking giants JPMorgan and Morgan Stanley were coming to the aid of embattled lender First Republic Bank, concerns remain and investors continue to be cautious. 

    Bitcoin toyed with resistance around $25,000 on Thursday as cryptocurrencies continued to track events around the stock market.

    The flagship cryptocurrency, which traded lower earlier in the day amid the highlighted broader market downswing, showed it’s still highly correlated to equities despite last week’s spike that had some observers suggesting a rising decorrelation.

    Indeed, as CoinJournal analyst Dan Ashmore argues in our deep dive published today, Bitcoin could eventually decouple from other risk assets. However, that’s an outlook that mostly doesn’t apply to the current trading scenario, with the two assets largely in lockstep.

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  • Bitcoin, stocks swing as markets react to CPI data

    Bitcoin, stocks swing as markets react to CPI data

    • Bitcoin price was trading sideways after hitting highs of $22,300, with major US indexes also down.
    • The markets’ reaction comes after hotter-than-expected inflation data for the first month of 2023.
    • US CPI rose 0.5% over the month and 6.5% year-over-year.

    Bitcoin was holding just above $22,000 at around 11:00 am ET, with the flagship cryptocurrency having swung from highs of $22,300 as the broader crypto market mirrored Wall Street following Tuesday’s US inflation data.

    Across crypto, Ethereum first ticked closer to $1,570 across major exchanges, rising as much as 5% before the upside cooled to see ETH trade near $1,540 at the time of writing. A similar picture held for Binance Coin, with BNB nearing $300 with about 3.5% in gains before shedding some of the gains.

    The action across US stocks also had the major indexes in the green premarket, before broader reaction to consumer price data released on Tuesday saw the major indexes trade lower.

    The S&P 500 rose nearly 0.7% but had flipped negative after the latest Consumer Price Index (CPI) data from the US Bureau of Labor Statistics showed inflation picked up over the past one month after consecutive months of declines. The S&P 500 was down 0.6% at the time of this report.

    The outlook was similar for the Dow Jones Industrial Average and the Nasdaq Composite, which were down about 0.8% and 0.6% respectively.

    Markets react to January CPI data

    On Tuesday morning, the US government’s data on inflation showed consumer prices rose 0.5% in January and 6.4% over the past twelve months, higher than the forecast 6.2%. 

    Even for the Core CPI, which leaves out the more volatile food and energy components, the readings were 0.4% in January and 5.6% year-over-year.

    The data thus showed inflation had picked up in the first month of 2023, coming in hotter than economists expected, with Wall Street reacting lower on the news as investors weigh what this means for the Fed’s interest rates path. Market observers say this could point to a higher for longer path that the Fed has previously pointed out.

    Tim Seymour, the CIO of Seymour Asset Management certainly thinks this could be on the cards now.

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  • Crypto markets rallying but damage remains severe

    Crypto markets rallying but damage remains severe

    Key Takeaways

    • Bitcoin is up close to 50% from its lows, but is still down over two-thirds from all-time highs
    • Some on-chain metrics show how much the rally pales in comparison to the prior fall 
    • Positive news from the industry remains few and far between, as market prepares for latest interest rate policy, to be revealed at FOMC meeting Wednesday

    Let us start with a riddle. How much profit/loss have you made if an asset you own rises by 47%, having previously fallen by 77%?

    The answer is a gruesome 67% loss. 

    That is the predicament facing Bitcoin investors who bought at all-time highs in late 2021. While markets have kicked off the year in scintillating fashion, it is important not to lose perspective. 

    Humans have short memories, though. With Bitcoin up nearly 50% from the lows post-FTX collapse, crypto markets have that giddy feel about them again. It’s amazing what hope can do for people, huh? And by hope, I mean hope that interest rates will come down again.

    Federal Reserve controls the Bitcoin price

    I wrote a piece last week about how this latest rally, if it shows anything, simply proves once and for all how much Bitcoin is trading as an extreme risk-on asset. 

    Bitcoin was crushed last year as central banks worldwide flipped hawkish for the first time in Bitcoin’s existence. With the cheap money of the last decade no longer available, and stout yields available on other investments such as T-bills, high-risk assets collapsed. 

    The tech sector, also notoriously sensitive to interest rates, has been sacking employees left, right and centre – Meta, Salesforce, Twitter, Google, and the list goes on. 

    This latest rally now comes as inflation begins to cool, with hope renewed that the pain of suffocating monetary policy will, in fact, one day come to an end. 

    Market remains ravaged

    While the picture undoubtedly looks rosier than this time two months ago, the crypto market is still in a world of pain. 

    Bankruptcies are still flowing – see Genesis filing last week – while there are numerous other potential downside catalysts as the market still delves through Sam Bankman-Fried’s chaotic mess: DCG still present a lot of uncertainty, for example.

    While prices have been running, there is no particularly good news to explain this rally. As I said, it’s all macro, with investors staring squarely at the Federal Reserve. 

    A couple of charts paint a good picture of the pain still present in markets. Despite the recent upturn, the net realised profit marker, which is an on-chain metric calculated by comparing the price of recent coins moved to the price at which they previously moved, shows how much the recent rally pales in comparison to the scale of the fall last year. 

    In truth, there is no need to complicate things. Despite the bluster of “hedge” narratives and “uncorrelated investment” that floated around through COVID, it is as clear as night and day that Bitcoin is trading off interest rate expectations right now. 

    The below chart is perhaps the most important one in all of crypto over the last couple of years. 

    That little bounce at the end could reverse very quickly depending on how things shake out at the upcoming Fed meeting. It could also do the opposite if things end up being more hawkish than the market has currently priced in. 

    Either way, it is clear what is moving markets right now.

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  • Its the calm before the storm in crypto markets

    Its the calm before the storm in crypto markets

    Key Takeaways

    • Crypto volatility has come down and extreme on-chain activity subsided in period of relative calm
    • Several concerning developments around Genesis, Gemini and DCG are still ongoing, however
    • Volatility could also spark up once the US inflation data is revealed this week
    • Period is reminiscent of the low drama environment pre-FTX in October 

     

    After a tumultuous rollercoaster following the shocking demise of FTX, a period of notable serenity has descended upon cryptocurrency markets. 

    With 2022 being a complete and utter bloodbath, it almost feels suspicious that there is even a couple of weeks of low drama in the digital market space. 

    But the metrics show that the last few weeks have been among the quietest of the last couple of years. Given the fear of contagion that transpired out of FTX’s collapse, that is a good thing. 

    Fear still elevated in crypto circles

    Having said that, there is plenty to be concerned about right now. As Coinbase CEO Brian Armstrong stated yesterday when he announced Coinbase was cutting an additional 20% of its workforce, there are likely “more shoes to drop” and there is “still a lot of market fear” out there. 

    Crypto lender Genesis last week laid off 30% of its workforce and is reportedly mulling bankruptcy. Crypto exchange Gemini, founded by the Winklevoss twins, has $900 million of customer assets stuck in limbo with Genesis, its sole lending partner for its Earn product. 

    The twins have demanded Barry Silbert, CEOP of Digital Currency Group (DCG), which owns Genesis, to step down, accusing him of defrauding Gemini Earn customers. 

    DCG fired back, calling it “another desperate and unconstructive publicity stunt from Cameron Winklevoss to deflect blame”. It also affirmed it was “preserving all legal remedies in response to these malicious, false, and defamatory attacks).  

    DCG is also the parent company of the Grayscale Bitcoin Trust, which has seen a massive discount to its net asset value, peaking at 50% in the aftermath of the FTX collapse as investors questioned whether reserves were safe (I wrote about GBTC yesterday).  

    Markets stand firm for now

    For now, while all these episodes play out, the markets are standing firm. Action has been relatively muted, and in fact there has been a tangible return to normal levels for a lot of on-chain activity that went wacky over recent periods. 

    The below snapshot shows the net transfer volume in and out of exchanges. Since the start of the year, the action has been tepid, having spiked to extreme levels in November and December as first FTX collapsed and then the questions spiked about the health of Binance. 

    This notion that activity has returned to normal is reinforced when looking a the volatility of Bitcoin. The world’s biggest cryptocurrency has been trading sideways for a while now, and the 30-Day Pearson measure of volatility shows how there was a perceptible drop back down to pre-FTX levels in December. 

    Macro climate looking more optimistic

    It hasn’t just been a respite from within crypto circles. The broader macro environment is looking at least a bit brighter today than it did last month. Inflation is still rampant, but there have been two consecutive readings below expectation, and there is renewed hope that it may have peaked.

    The most recent round of interest rate hikes kicked rates up 50 bps as opposed to 75 bps in the two prior months, and while Fed chair Jerome Powell and other central bank chiefs have affirmed that rates will continue to rise until inflation is conquered, the market has moved cautiously upward after European inflation came in at 9.2%, compared to 10.1% last month.

    Next up is the US CPI reading on Thursday, which will – as always – be a vitally important day in markets. Expect volatility in crypto markets as coins stare at the number to try to assess what Jerome Powell may do with regard to interest rate policy.

    After all, we know by now that crypto is very much holding the stock market’s hand – apart from when, you know, high-profile executives are revealed to be fraudulent (FTX), or top 10 coins cease to exist (LUNA).

    Never a dull moment for long in crypto

    Back in late October, Bitcoin was seemingly locked in crab motion around $20,000. With traders getting impatient, I warned how crypto could be one event away from a nasty downward wick. T

    Three weeks later, FTX collapsed. I never imagined this would happen, and the timing was coincidental, but the premise of the piece reminds me of how I feel now. It’s amazing how short memories are in markets, but we have been here before.

    Crypto won’t stay silent for long, and the asset class is far from out of the woods yet. The aforementioned ongoings around DCG, GBTC, Genesis and Gemini are just a few of the million things that could turn south at any moment.

    There is also the story around Binance chief Changpeng Zhao being under investigation for money laundering offences by the SEC, there is Coinbase laying off 20% of its workforce following a 905 drawdown in its share price, and God knows what will come out of testimonies in the Sam Bankman-Fried court proceedings.

    And then there is macro, where anything could happen to inflation, the Russian war in Ukraine or myriad other variables. It’s been a quiet couple of weeks but don’t worry – the madness will return soon.

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