At the time of writing, Bitcoin is trading at $21,710 USD and Ethereum at $1,538 USD. According to Glassnode, Bitcoin prices have been rejected from a series of psychological on-chain levels, related both to investors from the 2021-22 cycle and also for the whale cohort of investors. Profit-taking and capital flows have started to take place, although they remain low by historical standards.
A classic sign of growing adoption within a constructive transition phase is the attraction and inflow of new capital to the market. One may further explore this change in momentum through the lens of Transfer Volume, which tends to fluctuate with the aggregate level of capital in the market. Since early January, the monthly Transfer Volume has increased by 79% to $9.5B per day. However, this remains significantly below the yearly average, although this longer-term average is heavily influenced by an unfortunately large amount of FTX/Alameda-related wash volumes.
Troubles at Silvergate bank, which used to be one of two crypto friendly banks in the USA supporting fiat on and off ramps for crypto exchanges, were confirmed after the bank said that it had to delay its annual financial report filing due to the impact the FTX fallout had on the bank. This immediately led to Coinbase terminating its relationship with the bank, which intensified fears amongst the crypto community. Sentiment on the ground has already been soured after a series of warnings by the US SEC on various crypto projects as well as US senators’ continuous pursuit to drag Binance into muddy waters.
This week brings more Fed talk as we move one week closer to the Fed meeting scheduled for March 21-22. On Wednesday, Federal Reserve Chair Jerome Powell testified at the Semi-Annual Monetary Policy Report before the House Financial Services Committee which is keenly watched by investors as they try to get an early preview of what is to come from Powell in the upcoming Fed meeting. During the testimony, Powell scaled back expectations for a more aggressive March rate hike in his comments.
Over the last twelve months, the Fed’s tightening policy has been its most aggressive pace in over 40 years. The Fed’s tightening actions include raising the Fed Funds rate by 4.50% in twelve months and performing $95 billion monthly quantitative tightening. The increase in Fed Funds occurred at nearly double the rate of those in the last forty years. Despite the Fed’s aggressiveness, inflation is still high, and economic activity is brisk.
The latest US housing activity was weak (it is sensitive to the relentless rate increases). However, latest consumer demand data for leisure travel has been so resilient that vacations may have to be considered a consumer staple, not a cyclical purchase. Today at 8:30am EST we got US initial jobless claims data which came in at 211k versus 195k expected (highest since late Dec 2022) and continuing claims at 1.72 million versus 1.66 million (highest in 13 months). The last economic data remaining to be released this week will be US non-farm payrolls employment numbers which will be released on Friday 8:30am EST
Equities, Fixed Income, FX and Commodities
Last week, US stocks finished positive as bond yields started to drop after Atlanta Fed President Raphael Bostic said he thinks the central bank can keep its interest rate hikes to 25-bps rather than the half-point increase favored by some other officials. As a result, the Dow posted a 1.75% gain and snapped a four-week losing streak, while the S&P closed higher by 1.90%, its first positive week in the last four. The Nasdaq ended the week 2.58% higher, while the DXY dipped by around 0.6%
Fixed Income, FX & Commodities
The more positive outlook from China’s better than expected manufacturing data released over the week also promoted a more risk-on trading approach, leading oil prices higher. Brent rose by around 3.5% and the WTI ended the week 4.2% higher. Gold also benefited from the better sentiment out of China, gaining 2.43%, while Silver edged up by 2.24%.
News we’ve been reading
- Fed Chair Jerome Powell said the central bank has ‘been watching what’s happening in the crypto space,’ and added that he sees ‘quite a lot of turmoil.’ During his testimony before congress yesterday, Powell explained that the Fed has seen ‘quite a lot of turmoil’ but that it doesn’t intend to stifle the industry’s innovation. – link – @CoinDesk
- Grayscale Investments and the SEC presented their arguments in federal court over the agency’s rejection of Grayscale’s application to convert its GBTC product into an ETF. The SEC rejected Grayscale’s application in June last year, and has rejected applications from several other investment managers to launch a BTC spot-based ETF. The agency argues the applications fail to meet the standards of protecting investors and preventing fraud. – link – @Reuters
- Acting Comptroller of the Currency Michael J. Hsu said crypto firm’s can’t be trusted until a clear regulator is set for the industry. During a speech at the IIB Annual Washington Conference. Hsu drew comparisons between the collapse of FTX and the Bank of Credit and Commerce International (BCCI) in 1991. Hsu also said the industry should establish ‘regulatory capital requirements that align with the final set of Basel III standards.’ – link – @OCC
- FTX affiliate prop trading firm Alameda Research has filed a lawsuit against Grayscale Investments, the manager of Grayscale Bitcoin Trust (GBTC). The company claims Grayscale charged excessively high management fees and prevented redemptions from its BTC and ETH trusts. FTX CEO John J. Ray III said the lawsuit is part of the debtors’ goal to maximize recoveries for FTX customers and creditors. – link – @Bloomberg
The fine print
Click here for the fine print