Friday, 12 August 2022

Market Summary

Market Summary 12 August 2022

Bitcoin Price: US$ 23,934.39 (-0.08%)
Ethereum Price: US$ 1,880.19 (+1.44%) 

 

Has Inflation Peaked?

  • Those that believe peak inflation is behind us received welcome news on Wednesday. For the first time in over two years, month-over-month (MoM) inflation remained unchanged. Considering the Fed’s main goal is to slay the beast that is inflation, yesterday’s CPI prints marked a pivotal moment in the Fed’s flight versus inflation.
  • As discussed in our Market Insight report from last week, this is crucial, considering interest rates have now reached levels of perceived neutrality, meaning any further hikes will shift policy into restrictive territory. And historically speaking, when restrictive policy is in place, recessions tend to materialize. However, for a conceivable Fed pivot to actually be on the table, inflation needs to be tamed. Yesterday was a good start, but we’re not out of the woods just yet.
  • It’s not just MoM inflation that offered some relief, year-over-year prints for both headline and core CPI came in 0.2% below expectations. The latter is arguably more important at this juncture. If we look back at the 1970-80s, headline inflation peaked ahead of core, but both tend to move in the same general direction.
  • Following June’s 40-year high print of 9.1%, headline CPI fell to 8.5% last month, while core CPI came in at 5.9% (the median estimate was 6.1%). Although MoM inflation didn’t show negative growth, the decline from June’s 1.3% to July’s 0% is the largest month-over-month decrease since 1973.
  • History shows that when inflation peaks, this may be the case, with two caveats: jobless claims and PMI. Historical peaks in CPI have led to market bottoms only when jobless claims and PMI became inverted. If inflation has plateaued, then all eyes should shift to the labor market, rendering the trends in unemployment and jobless claims more important. Claims tend to be a lagging economic measure and, historically, when they continue climbing after a peak in CPI, further downside in equities has followed.
  • With that being said, the jury is still out as to whether the bottom is in or if this is just a bear market rally in risk assets.

 

Ethereum whale transactions peak at 2-month high amid Goerli testnet merger

  • The Goerli testnet was successfully merged to the proof-of-stake (PoS) network, marking the final step before Ethereum’s mainnet transition. The triumphant final testnet merger means the mainnet transition slated for Sept. 19 could go as scheduled.
  • Goerli is the third and final testnet after Ropsten and Sepolia that makes Ethereum’s final rehearsal before its official transition to the PoS network.
  • ETH price surged over $1,919 on Thursday along with the rest of the crypto market after the government released consumer price index data, which turned out to be lower than expected.
  • ETH outperformed Bitcoin (BTC) in terms of daily gains registering a double-digit surge. Data from crypto analytic firm Santiment revealed that the price momentum was aided by whale transactions valued at $100,000 or more. The increase in whale transactions comes amid a growing accumulation of whales.

 

Interlay launches trustless BTC stablecoin bridge on Polkadot

  • Interlay, a London-based blockchain firm, launched a Bitcoin (BTC)-based cross-chain bridge on Polkadot (DOT). Named interBTC (iBTC), the bridge allows the use of Bitcoin on non-native blockchains for decentralized finance (DeFi), cross-chain transfers and nonfungible tokens (NFTs), among others.
  • interBTC operates as a BTC-backed stablecoin, secured by a decentralized network of overcollateralized vaults, which according to Interlay, resembles MakerDAO’s DAI token, a stablecoin on the Ethereum blockchain.
  • The iBTC vaults use mixed-asset collateral to insure BTC reserves, making iBTC redeemable 1:1 with BTC over the Bitcoin blockchain. As a preventive measure during unforeseen vault failure, the collateral is programmed to get slashed and reimburse the BTC depositors. Sharing the thought process behind the initiative, Interlay co-founder and CEO Alexei Zamyatin stated:
  • “Bitcoin is the driving force behind global crypto adoption, while Polkadot, Ethereum & co. is where technological innovation is happening. With interBTC, we combine the best of both worlds while preserving the trustless nature of Bitcoin.”

 

BlackRock announces the launch of a new private spot Bitcoin trust

  • According to a blog post published on Thursday, BlackRock — the world’s largest asset manager, overseeing over $10 trillion in total assets — has launched a new private spot Bitcoin (BTC) trust. The fund is only available to U.S. institutional investors and seeks to track the performance of Bitcoin, less the expenses and liabilities of the trust. In explaining the decision, BlackRock said: 
  • “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities. Bitcoin is the oldest, largest and most liquid digital asset and is currently our clients’ primary subject of interest within the digital asset space.”
  • Private investment trusts that do not solicit investments from retail investors do not need to register with regulatory authorities in the United States. But others, such as the Grayscale Bitcoin Trust, can still become publicly traded — though not Securities and Exchange Commission-registered — on the over-the-counter markets.

 

dYdX confirms blocking (and unblocking) some accounts flagged in Tornado Cash controversy

  • The platform said it has used compliance vendors to scan for and flag accounts potentially associated with illicit activities, including sanctions lists for many countries.
  • Cryptocurrency derivatives trading platform dYdX said it blocked some users’ accounts with funds linked to Tornado Cash, including mistakenly suspending some that never directly engaged with the controversial mixer.
  • In a Wednesday blog post, dYdX said it had “unbanned certain accounts” that the derivatives platform had blocked in response to the Office of Foreign Assets Control of the United States Treasury Department adding Tornado Cash to its list of Specially Designated Nationals, or SDNs. According to dYdX, its compliance provider flagged many accounts believed to be linked to Tornado Cash, which the platform subsequently blocked — despite the fact some had never dealt with the crypto mixer. The platform said it has used compliance vendors to scan for and flag accounts potentially associated with illicit activities, including sanctions lists for many countries.
  • “This sudden influx of flags affected many account holders that never directly engaged with Tornado Cash, and often such users do not realize the origin of the funds transferred to them during various transactions prior to interacting with our platform, but we must nevertheless maintain certain restrictions,” said dYdX.

 

Indian law enforcement accuses WazirX exchange of aiding in laundering of $130M

  • India’s Enforcement Directorate (ED), the agency responsible for financial crimes, is looking at cryptocurrency exchanges suspected of processing transactions that sent more than 10 billion rupees, or about $130 million, from firms under investigation to international wallets. At least ten crypto exchanges are allegedly involved, according to an official who spoke to The Economic Times, and bank accounts of exchange WazirX have been frozen, the newspaper reported.
  • Transactions of up to 1 billion rupees, or $1.3 million, were allegedly made in the names of people with no connections to the money by companies under investigation in a case involving instant loans. Thes companies often had ties to China. Even though Know Your Customer/Anti-Money Laundering (KYC/AML) procedures showed the transactions to be suspicious, no enhanced due diligence was performed and no suspicious transaction reports were filed with the ED, the agency claimed.
  • The ED froze WazirX bank accounts, containing about 647 million rupees or $8.1 million last week, alleging that the exchange had assisted about 16 fintech companies under investigation for money laundering. WazirX released a statement on its blog Tuesday “on behalf of Zanmai Labs Pvt. Ltd,” which, it said, co-operates with WazirX along with Binance, saying that all users are subject to KYC/AML processes and the exchange cooperates fully with law enforcement. “For every transaction, we are able to produce the KYC details of the relevant user,” the blog post said.

 

Over 1,900 block-producing nodes in the Solana ecosystem, new report reveals

  • Solana released its first-ever, “Validator Health Report” which revealed information on its network operators. According to the report the network has over 1,900 block-producing nodes with nearly 1,688 (88.14%) of those run by independent entities. 
  • Solana says the health and strength of its validators is critical to the long-term health of the ecosystem. Previously, the network has faced backlash for both a lack of decentralization and expensive validator hardware. 
  • Though this new report highlights the 3,400 validators across six different continents.
  • Moreover, the report shows how activity on the network has risen in the last year. On average the network has seen 95 new consensus nodes and 99 RPC nodes join every month since June of last year.

 

Glassnode: The #Bitcoin Accumulation Trend Score has started to soften during this rally.

This follows a near perfect two months of aggressive balance increases after the LUNA collapse, and again in June, primarily driven by the Shrimp and Whale cohorts

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