Weekly Market Update: Stability After Last Week’s Drop

After last week’s quick price jolt, some stability has returned to the markets. Notwithstanding the drawback, there is still plenty to like about this week’s news.

An increasing number of institutions have put out price targets for BTC and the narrative that we are now in the early stages of a bull market is increasing, however, there are risks ahead. Binance made the news a lot this week as it seems to be fighting both a regulatory and debanking push with concerns about its laissez-faire attitude to compliance multiplying.

On the macro side, nearly every major economy saw their PMI’s retract and some are firmly in contractionary territory. On the whole, it looks like economic conditions are going to be harder going forward.

This week saw the annual central bankers conference at Jackson Hole. Markets were on edge and are looking for some signs that the tightening phase is over. Unsurprisingly though, the clear message is that inflation isn’t beaten yet and rates will be higher for longer.

After last week’s price dip,  the market sentiment remains in fear territory as we digest the ‘higher for longer’ rhetoric from our central bankers.

Trend highlights this week: 

• A sharp correction overnight off the back of the Greyscale ruling meant that the majority of the top 30 assets posted solid weekly gains. 
• BTC and ETH are both up 7 % this week.
• Bitcoin Cash (BCH) was our best performing asset, up 23% on last week. 
• KuCoin (KCS) was our biggest loser of the week, down 6%. 

View all top gainers: Visit the top gainers page to find out more. 

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Highlights from the crypto space

A late addition to this week’s newsletter; judges have ruled that the SEC must review Grayscale’s petition for a BTC ETF.

Markets seized on a key quote from the filing which is good news for any other BTC ETF applications: “…evidence that the spot and futures markets for bitcoin are 99.9 percent correlated, nor suggested that market inefficiencies or other factors would undermine the correlation.”

Last week’s rapid jolt in prices wiped nearly $3bn of open interest from the futures market.

Panerra capital, a $4.8 bn hedge fund is predicting $148k BTC by 2025 🚀

Some Satoshi era BTC has been moved. Anorak wallet watchers track this sort of stuff and boy are there some rumours flying around. 

CryptoQuant is saying that BTC trading volume is at its lowest in 4 years. Macro cycle anyone?

Raoul Pal’s Global Macro Investor reports that in 2022, the total number of crypto wallets grew 40%…. While prices were down 75%.

Blockworks has a good article discussing the potential impacts of Spot BTC ETfs and what an ETH futures ETF could do. 

The large fall in NFT volumes Nansen reported last week has caught out Recur, who is shutting up shop only 2 years after raising $50m.

Othe notable highlights from the crypto space:

• Coinbase has plans to decentralise Base using OP labs.
• In response to more demanding regulation across Asia, key exchanges like OKX and KuCoin are strengthening their KYC requirements. 
• Binance is facing claims it hasn’t been enforcing sanctions against Russians and their banks. A few days later, Binance announced they were discontinuing the use of sanctioned Russian banks for its P2P service. Binance is also discontinuing their Connect product due to ongoing banking issues allowing Moonpay to step in to fill the void. Mastercard has also discontinued its programs with Binance. 
• Defi provider Balancer has disclosed a critical vulnerability that has the potential to impact some liquidity pools, it’s only 4% of their TVL and they think they have mitigated it. However, they are saying get your stuff off the pools just in case. Well played. 
• Central banks think crypto has amplified financial risks in emerging markets. 
• Staying with central banks, the RBA says that the CBDC trial had mixed results and they are years away from going live. 
• Solana Pay has integrated its plug-in with Shopify to allow USDC payments.
• The founders of Tornado Cash have been charged with money laundering following last week’s court decisions.
• Management of defunct exchange FTX have asked Mike Novogratz’s Galaxy to manage the sale of its $3bn in crypto.
• Despite low volumes and volatility, Houbi, which is rumoured to be insolvent, has managed to buck the trend. 

• Exchanges, brokers and payment processors will have to report new information to the IRS under proposed new rules designed to tackle tax evasion. 
• Impact Theory, a US based media company, is being sued by the SEC for selling NFT’s which they claim are unregistered securities.

That’s the summary of the crypto world, so now let’s look at other macroeconomic news and dev elopments from around the globe.

Starting off with global news 

In response to surging domestic food prices which are driving up inflation, India, the world’s largest exporter of onions, has put a 40% tariff on all onion exports with immediate effect in an attempt to keep the vegetable available locally to keep a lid on prices. India is reportedly thinking on more rice export controls too. 

Weather related events have meant that the Panama Canal Authority has reduced ship weights and numbers per day leading to big delays and increased costs. US-China spot freight costs spiked 36% in response. 

The IMF has agreed a $7.5bn disbursement to Argentina, we wonder what the hooks are. 

The BRICS nations, which are trying to establish a balancing force to the west’s influence, are looking to expand their membership. Geopolitically, the addition of major oil producing countries and former US allies should make you take notice.

🌎 Macro news TLDR: Declining PMI’s show a softening global economy.

U.S. economic news

The Leading Economic Index has now declined for 16 straight months with the Conference board forecasting a recession in Q4. Supporting this view, US Flash PMI for August declined to 50.5 from 52 in July. 

Higher returns on low risk US treasury yields have led to widespread pull backs in all risk assets including crypto. This is the impact of interest rates being higher for longer. 

US home sales continue to fall, and are now at January levels, which was historically low. 

Speaking from the Central Banker conference at Jackson Hole, Fed Chairman Powell reiterated that more rate hikes are a possibility if required. Higher for Longer is the meme of the day.

And in Europe….

Flash PMI’s for Europe dropped to 47 in August, down from July’s 48.5. Their largest economy, Germany, fared particularly poorly, with their PMI at 44.7; even their services sector is now in contraction. All measures are below the magical 50 number and indicate economic contraction. 

The cost of the Ukraine war in Russia is reportedly starting to bite and this is flowing through into the wider Russian economy. 

And in Asia Pacific…

Bucking the PMI trend, Japan posted small growth and is still in expansionary levels at 52.6.

China ‘s government departments are doing their best to stimulate domestic consumption. However the measures appear to not be working as the population buckles up. The property sector in China isn’t improving and there is another major developer who is in distress. 

In other parts of Asia, the central banks of both South Korea and Indonesia left their rates unchanged, while inflation in Singapore has eased to 4.1%. 

Following similar trends seen around the world, Australia’s flash PMI declined to 47.1 in August, down from July’s 48.2 and setting a 19 month low.

And in New Zealand, Q2 retail sales declined 1% for the quarter. This actually beat the forecast. And finally the IMF has concluded that the NZ Government needs to reign in its spending. 

That’s a wrap for this week. Thanks for reading!

Stay tuned for the next update.

Did you miss the last weekly update? Catch-up on the previous market update.