Coinsquare Market commentary May 4th 2023

Market Commentary – April 14th, 2023


At the time of writing, Bitcoin is trading at $30,800 USD and Ethereum at $2,115 USD.

Ethereum is outperforming in the top 10 following the Shapella upgrade. Earlier this week, Ethereum developers successfully deployed 2 upgrades, Shanghai and Capella, together known as Shapella. The upgrade has successfully allowed staked ETH withdrawals to begin, which was the most important infrastructure change introduced during the upgrade. The successful implementation of this upgrade has likely boosted investor confidence in Ethereum’s future prospects, leading to increased demand and higher prices for ETH. The upgrade is one of many slated for the network’s foreseeable future. The future upgrades will focus on addressing Ethereum’s scaling challenges. For instance, EIP-4844 (Ethereum Improvement Proposals) introduces ‘a new kind of transaction type to Ethereum.’ The transaction, referred to as ‘Proto-Danksharding,’ aims ‘to make transactions on Layer 2 as cheap as possible for users and should scale Ethereum to >100,000 transactions per second.’

Last week, traders were transacting BTC at a loss at twice the rate of profit after BTC consolidated for the third consecutive week. This is the first time this ratio has been negative in 5 weeks and when this happens the selling pressure from these short-term holders may cap any upswing in the price of BTC should their selling be persistent. However, after ETH’s successful upgrade, BTC investors started buying more helping it cross $31,000 USD as crypto excitement spread throughout the whole industry helping BTC and some alt coins make a move higher. 


Yesterday, on Thursday April 13th, newly released economic data showed US producer price inflation rate slowed, consistent with the profit-led inflation narrative. The transitory demand-led consumer durable goods inflation and the supply-led energy inflation have both receded into disinflation; both matter to producer prices. Profit-led inflation occurs more frequently at the end of the supply chain, affecting consumer prices more than producer prices. 

The most recent March CPI data released earlier this week on Wednesday showed a month over month change of 0.1% versus 0.2% expected and a year over year change of 5.0% versus 5.1% expected. Investors were happy to see that this was the lowest annual pace of inflation change since May 2021. The Federal Reserve changed their tune a bit from talking up the possibility of a soft landing after aggressive interest-rate increases and now says a “mild recession” is likely by the end of the year. The International Monetary Fund’s director of research said “the fog around the world economic outlook has thickened.” The IMF expects global growth to slow significantly.

March US retail sales data was released today but showing consumption for retail sales excluding auto and gas came out to -0.3% versus the expected -0.6% showing increased spending. There are concerns tighter lending standards will slow consumption, but there is little evidence of accelerated tightening so far. This may be because most credit cards still have unused credit available, tighter standards do not immediately stop spending. This creates an effect where consumers use spare credit and continue running off the edge of the cliff before economic gravity sets in. 

Equities, Fixed Income, FX and Commodities


Last week, a good showing from tech stocks on the last trading day managed to help US equities recoup some losses despite the ADP jobs report warning about a weakening labor market. For the week, the Dow rose 0.6%, the S&P lost 0.1%, while the Nasdaq fell 1.1%. This week’s earnings are kicking off again this Friday April 14th with JPMorgan, Citi bank, Wells Fargo, and BlackRock all reporting . Investors are curious to see how mega banks performed considering the failure of Silicon Valley Bank.

Fixed Income, FX & Commodities

Last week, gold managed to climb higher breaking into the $2,000 barrier after gaining 2.56%, while Silver fared even better on talks of a physical supply shortage, rising 4.8%. Oil rallied after OPEC+ announced an unexpected production cut of 1.16 million barrels per day, a move that oil traders were not expecting. The voluntary cuts by countries in the oil cartel are set to start in May and last till the end of 2023. Both Saudi Arabia and Russia will trim oil production by 500,000 barrels per day until the end of this year, while other OPEC members like Kuwait, Oman, Iraq, Algeria and Kazakhstan are also reducing output. Brent rose 8% and the WTI rose 8.2%. With both distillates breaking back into the $80s, talks of $100 oil have resurfaced even amidst threats of a global recession.

News we’ve been reading

  • Crypto financial services provider Paxos is withdrawing from Canada. The company announced it will disable accounts of Canadian residents beginning June 2nd. It also said it ‘will continue to assess its readiness to re-enter the Canadian market in cooperation with the [Ontario Securities Commission] at a future date.’ – link – @Paxos
  • VC firm a16z outlines its view of the current state of the crypto space in a broad report. The report has been shared with executives all over the industry and gives a great view on what is in store for crypto in 2023 –link @a16z
  • The Bank of England plans to build a central bank digital currency, according to a report from The Sunday Times. In February, the HM Treasury and the Bank of England launched a consultation on developing a CBDC and opened the topic to comments from the public. – link – @TheSundayTimes
  • The Central Bank of Montenegro is partnering with Ripple to create a strategy and pilot for a central bank digital currency (CBDC) or ‘national stablecoin.’ Central Bank governor Radoje Žugić said the project will ‘analyse the advantages and risks that CBDCs or national stablecoins could pose concerning electronic means of payment availability, security, efficiency, compliance with regulations, and most importantly, the protection of end users’ rights and privacy.’ – link – @Businesswire
  • FTX’s bankruptcy attorney claims the group of debtors have recovered over USD 7.3B in cash and liquid crypto. During a court hearing yesterday, the exchange’s counsel added that its current recovery value based on prices at the time of its bankruptcy filing is USD 6.2B. The lawyers have also discussed restarting the exchange, and plan to make a final decision on that possibility by next quarter. –link– @Reuters

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