Tuesday, 12 December 2023

Market Summary

Market Summary 12 December 2023

Bitcoin Price: US$41,253.40 (-5.79%)
Ethereum Price: US$ 2,225.12 (-5.41%)

Crypto exchange HTX, formerly Huobi, has witnessed significant outflows totalling over $258 million following an exploit on November 22 that led to a temporary pause in services and a $30 million loss. Data from DefiLlama indicates that between November 25, when HTX resumed services, and December 10, the exchange experienced net outflows of $258 million. HTX’s reserves include 32.3% Bitcoin and 31.8% Tron. The exchange, currently the 16th largest by daily trading volume, has faced multiple hacks in recent months, raising concerns about its security. In a separate development, Goldman Sachs predicts that the U.S. Federal Reserve could cut interest rates twice in the next two years, beginning as early as the third quarter of 2024, which could impact investor behaviour, potentially influencing the cryptocurrency market. Meanwhile, Immutable, a Web3 gaming company, is integrating Transak as the primary payment service provider for its Immutable zero-knowledge Ethereum Virtual Machine (zkEVM), facilitating fiat and Web3-based payments in gaming environments, particularly in Immutable’s flagship games like Guild of Guardians, Gods Unchained, and Cross The Ages. Transak is known for its robust payment infrastructure and is used by over 350 applications, making it a valuable addition to the Web3 gaming space.

NFT platform Enjin has successfully migrated over 200 million NFTs from Ethereum and its sidechain, JumpNet, to its own Enjin Blockchain. The move aims to leverage the Enjin Blockchain’s NFT-focused features embedded in its foundational code, including built-in royalties and a new feature called “Fuel Tanks,” allowing developers to subsidise users’ gas fees. This transition comes amid the broader trend of blockchain gaming, with industry executives emphasising the importance of improved accessibility and user interfaces for attracting a wider gamer audience to Web3. The migration was executed with a unique approach, utilising a snapshot and allowing users to claim Enjin Blockchain NFTs without incurring gas fees by signing with their Ethereum wallet. However, this method leaves the original NFTs on their respective networks, requiring creators to encourage holders to consider the Enjin Blockchain versions as the official ones. In a separate development, the Financial Services Commission of South Korea has proposed rules for virtual asset service providers (VASPs) to protect customers, scheduled to take effect on July 19, 2024. The rules, part of the Virtual Asset User Protection Act, include measures such as monitoring abnormal transactions, imposing fees on VASPs for using customer deposits, and storing 80% or more of customer deposits in cold wallets. The regulations do not cover non-fungible tokens (NFTs) and central bank digital currencies (CBDCs). Additionally, Taiwan’s central bank, the Central Bank of the Republic of China, has completed a technical study on a wholesale central bank digital currency (CBDC) and is now focused on gathering public feedback on improving the CBDC platform’s design.

Binance, the world’s largest cryptocurrency exchange, has experienced a decline in its spot market share throughout 2023, starting the year with a 55% market share and dropping to 30.1% in December, according to data from CCData. The decline is attributed to a series of regulatory challenges, including charges against Binance and its CEO Changpeng “CZ” Zhao, who agreed to pay nearly $3 billion to settle a lawsuit by the U.S. Commodity Futures Trading Commission. Despite the decrease, Binance still holds the leading position among cryptocurrency exchanges, with Seychelles-based OKX in second place with an 8% market share in December, up from around 4% at the beginning of the year. OKX’s growth comes as Binance faced executive departures and regulatory scrutiny throughout the year. In other news, the U.S. Consumer Price Index (CPI) for November met economist forecasts, with headline inflation slipping to 3.1%, compared to 3.2% a month earlier. The core CPI, which strips out volatile food and energy items, rose 0.3% on a monthly basis versus 0.3% expected. The data is not expected to change the market’s belief that the U.S. Federal Reserve will keep its benchmark fed funds rate at the 5.25%-5.5% range in its next two policy meetings. Meanwhile, BlackRock’s proposed spot bitcoin ETF has changed its mechanics, allowing authorised participants to create new fund shares with cash, enabling Wall Street banks to play a key role. The change opens opportunities for banks like JPMorgan and Goldman Sachs, which cannot hold bitcoin themselves due to regulatory restrictions, to act as authorised participants in BlackRock’s ETF. This alteration in mechanics is seen as positive for the potential approval of spot bitcoin ETFs by the SEC, as it could attract a flood of money from retail investors.

Goldman Sachs has adjusted its prediction for the first interest-rate cut by the Federal Reserve, moving it forward to the third quarter of 2024 from its previous estimate of the fourth quarter. This adjustment aligns with the recent surge in the crypto market, driven by expectations of a spot ETF launch in the U.S., the upcoming Bitcoin mining reward halving, and the decline in the 10-year U.S. Treasury yield. Traders anticipate the Fed’s benchmark interest rate to decrease to a range starting at 4% by the end of the next year. Interest rate changes significantly impact the economy and financial markets, influencing risk-taking behaviour, including in the cryptocurrency market. In other news, decentralised exchange Uniswap has expanded to the Bitcoin sidechain Rootstock, marking a significant development in the decentralised finance (DeFi) landscape on the world’s largest blockchain. Uniswap version 3 (v3) has been deployed on Rootstock by GFX Labs, introducing a combination of Ethereum-based Uniswap’s smart contract capabilities with the security of Bitcoin’s proof-of-work network. This integration is expected to enhance liquidity and facilitate more DeFi use cases within the crypto industry.


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