At the time of writing, Bitcoin is trading at $17,500 USD and Ethereum at $1,341 USD. Crypto markets are infamous for their volatility, however in spite of this, the holiday break was exceptionally quiet. Realized volatility over December for BTC declined to multi-year lows of 24.6%, of which there are very few instances with similar levels. However, all prior examples preceded much higher volatility environments on the road ahead, with most trading higher, and just one (Nov 2018) trading dramatically lower.
On-chain activity for Ethereum and Bitcoin remain low. Bitcoin inflow volumes to exchanges are currently between $350M and $400M/day, which are a far cry from the multi-billion dollar levels seen throughout in 2021-22.
Despite BTC being ~75% below record high prices set in 2021 and the lack of on-chain activity, long-term BTC holders have not been deterred. The percentage of BTC which has remained unmoved for over a year has remained high. At the beginning of 2022 it was at 57%, and increased to 66% by the end of the year.
BTC finally managed to peek above $17,000 on Sunday, while ETH and altcoins fared better. ETH rose 7% for the week, unaffected by news that crypto giant Digital Currency Group (DCG) is being investigated by the US Department of Justice over dubious financial transfers between itself and its subsidiary, Genesis Trading.
Last Friday’s non-farm payrolls beat gave stocks a great positive start to the year 2023 as US indices rallied in the first trading week of the year. The December nonfarm payrolls report showed the US economy added 223,000 jobs last month, slightly higher than the expected 200,000 jobs economists expected. In addition, wages grew slower than anticipated, increasing 0.3% on the month where economists expected 0.4%, which the markets cheered.
Investors appeared to like opening the year with optimism as even the slowdown in the ISM services PMI was viewed as a positive instead of a negative as fears of recession were put on the backfoot. Experts chose to see this as a sign that the Fed’s past rate hikes was showing its impact instead of viewing it as a sign of economic slowdown.
US December CPI data will be released tomorrow at 8:30am est (Thursday January 12). The latest CPI reports released showed that inflation is slowing down both for the US as well as in Europe to the relief of market participants who feel that global central banks will have reason to slow down their rate hikes going forward. Investors are hoping that tomorrow’s CPI report will show a continuation of this trend.
Equities, Fixed Income, FX and Commodities
Last Friday saw the best gains for both the Dow and S&P since November 30 as every Dow component ended up. For the week, the Dow and S&P each rose about 1.5%, and the Nasdaq gained 1%. Investors may be speculating that inflation will continue to slow down in the coming months which could explain the recent optimism.
Fixed Income, FX & Commodities
Oil fell for the first trading week in the new year due to the effect of the surge in China’s COVID cases and fears of a global recession even in spite of a weaker dollar. Brent Crude fell 8% and the WTI fell almost 10% as the fear of demand destruction sent prices tumbling.
USD weakened after the jobs report sending DXY, the US dollar index, back down to the 103 level after a brief rally earlier in the week which sent it above 105. Gold rose 2.4% because of the weaker dollar while Silver was pretty much unchanged.
New’s we’ve been reading
- Digital Currency Group (DCG) founder and CEO Barry Silbert published a shareholder letter and Q&A on the firm’s operations and current financial position. Silbert attempted to describe the firm’s relationship with its portfolio companies, including Genesis, as well as failed crypto companies such as Three Arrows Capital, Celsius, and Terra (LUNA). Separately, Gemini terminated its loan agreement with DCG’s subsidiary Genesis, and ended its Earn program. Gemini Co-founder Cameron Winklevoss claims Genesis defrauded 340k Earn customers, and called for DCG’s board to remove Silbert as CEO. – link – @DCG
- Toronto-based Coinsquare terminated its agreement to purchase fellow crypto trading platform Simply Digital from CoinSmart (NEO: SMRT). The deal, announced in September 2022, was a cash and stock purchase worth USD ~26M with a potential USD 20M cash, USD 4.9M stock earn-out for CoinSmart. – link – @CoinSmart
- Coinbase (NASDAQ: COIN) is laying off 950 employees, representing ~20% of the exchange’s workforce. In a blog post shared this morning, CEO Brian Armstrong said the change is part of an effort to reduce operating expenses by ~25% compared to last quarter. Coinbase previously laid off ~1,200 employees last spring, and ~60 in the fall. – link – @Bloomberg
- BlockFi said it expects to file information on its assets and liabilities in bankruptcy court tomorrow. The filing will also ‘disclose certain payments made by BlockFi to insiders and other parties prior to the bankruptcy filing.’ The company also claims it has contacted 106 potential buyers, and will seek approval for bidding procedures later this month. – link – @BlockFi
The fine print
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