Friday, 18 March 2022

Market Summary

Market Summary 18 March 2022

Bitcoin Price: US$ 40,917.90 (-0.48%)
Ethereum Price: US$ 2,811.92 (+1.37%)

 

Market Insights – Ripping Off The Rate Hike Band-Aid

  • The equity market’s recent underperformance isn’t too surprising given the shift in rhetoric – both from policymakers and investors – over the last several months. This week, we watched the Fed fulfill its prophecy as it kicked off a fresh rate hike cycle. Fed officials unanimously voted for at least a 25 bps increase in the target Fed funds rate (the only dissenter was St. Louis Fed President James Bullard who voted for a more aggressive 50 bps increase).
  • In theory, higher rates should weigh on risk assets. All else held equal, higher discount rates should lead to lower valuations, especially those with volatile or uncertain cashflows that may not manifest for years.
  • If equities outperform, we’d expect crypto assets to follow suit. If we avert a deep recession, and instead find ourselves in a stagflation environment, stocks should perform well. Especially higher growth sectors like tech.
  • In the case of inflation, the best deterrent for higher prices is…higher prices. At a certain point people will just stop shelling out for expensive goods and services. If wage increases were outpacing inflation, then we could sustain higher prices because people would still wind up with more money in their pocket. But they’re not. So at a certain point, higher prices will weigh on demand because people have less consumption firepower. They simply can’t afford to buy as much “stuff”. This would naturally curb demand, which in turn would put pressure on companies to reduce costs to retain business. And if they don’t, people will forego what they have to offer (or they’ll simply go elsewhere).
  • Every cycle has its differences, so it’s far from guaranteed we see a similar reaction in markets this time around. But if stocks rebound and dollar strength wanes, it could spark a fire under crypto assets. This market is more reflexive than any other, so if crypto can regain momentum it may be able to decouple from risk assets. The fundamental value of crypto assets is materially different from your average stock. Another bull run would put crypto back in the limelight, waking up the rest of the world to what we already know.
  • LUNA is currently consolidating just beneath the $100 price level after its fresh all-time high print.
  • Similar to LUNA, AVAX has been holding up well despite choppy market conditions. AVAX continues to put in a series of higher lows while holding high time frame market structure support. AVAX is also on the brink of breaking out from the key trendline connecting all previous local highs.
  • We’ve seen a few privacy tokens outperform BTC by several percentage points over the last two trading sessions. The standout movers at the moment are ZEC (maybe Barry is planning another big week?), DCR, ROSE, SCRT. XMR continues its streak of underperformance.

 

Australian competition regulator takes Meta to court over fake crypto ads

  • The Australian Competition and Consumer Commission (ACCC) is taking Meta Platforms, Inc. (formerly Facebook) to the Federal Court, alleging that the firm and its Irish branch engaged in “false, misleading or deceptive conduct” by publishing scam celebrity crypto ads.
  • Some users have lost hundreds of thousands of dollars to the sophisticated and long-running scams tied to the ad.
  • The spotlight on Meta has heated up in Australia since the start of February, with Cointelegraph previously reporting that the ACCC was investigating the firm over allegedly fraudulent crypto ads. Aussie mining billionaire Andrew Forrest also took legal action against the company for hosting ads that allegedly used his name to defraud victims.

 

GameStop looks toward NFT marketplace launch after big Q4 loss

  • Much loved retail video game store chain GameStop (GME) is looking ahead to its long-awaited NFT marketplace and Web3 gaming unit after suffering a net loss of $147.5 million during Q4 2021
  • GameStop quietly built a barebones NFT website in mid-2021 but has significantly ramped up efforts this year after unveiling an NFT and Web3 gaming division in January along with penning a major partnership with Ethereum (ETH) scaling solution Immutable X the following month to build an NFT marketplace.
  • As part of the Q4 results — ending on January 29 and published on March 17 — GameStop revealed that it intends to launch its NFT marketplace by the end of Q2 2022.
  • The firm also highlighted that the Immutable X deal is set to fetch the firm $150 million worth of IMX tokens upon the “achievement of certain milestones,” and noted that it has hired “dozens of additional individuals with experience in areas such as blockchain gaming, e-commerce and technology, product refurbishment and operations.

 

Optimism saves users $1B in fees, raises $150M in Series B

  • Popular Ethereum scaling solution Optimism has announced a $150 million Series B funding round co-led by Andreessen Horowitz (a16z) and Paradigm at a total valuation of $1.65 billion. 
  • According to a blog post from Optimism, the layer 2 (L2) solution has saved users of the Ethereum network over $1 billion in gas fees. The funding will be used to expand the Optimism team and go toward working on reducing network fees even further.
  • Fees on the Optimism network were reduced by a cumulative 30% last year. The team is now contributing work toward an Ethereum Improvement Proposal (EIP-4844) for Shard Blob Transactions, which may potentially reduce Ethereum network fees by up to 100x in the near future.

 

US lawmakers introduce bills that could force crypto exchanges to cut ties with Russian wallets

  • Representative Brad Sherman will be introducing a bill in the House aimed at cracking down on United States businesses handling crypto transactions for Russian banks and individuals.
  • Speaking at a hybrid markup meeting with the House Financial Services Committee on Thursday, Sherman said he will be introducing a companion bill to Senator Elizabeth Warren’s legislation that would give the Biden administration “explicit authority to require that crypto exchanges that are subject to U.S. law stop facilitating transactions with Russian-based crypto wallets.” Warren first announced the legislation on March 8, later saying during a Senate Banking Committee hearing she will be introducing the bill on Thursday.

 

Central Bank of Russia issues digital asset license to Sberbank in apparent policy reversal

  • Less than two weeks after the Central Bank of Russia, or CBR, reiterated its position proposing to ban the issuance, mining and circulation of cryptocurrencies in Russia, it appears to have reevaluated its policy. In a press release published on Thursday, the CBR added the country’s biggest lender, Sberbank, to its register of information system operators for digital financial assets. As reported by local news outlet Tass, the CBR stated: 
  • “Inclusion in the registry allows companies to issue digital financial assets and exchange them between users within their platforms.”
  • Sberbank’s blockchain platform is based on a distributed ledger technology, which can, theoretically, protect against information tampering. Legal entities on Sberbank will soon be able to issue digital financial statements certifying monetary claims, acquire digital assets allocated in Sberbank’s system and conduct crypto transactions. Sergey Popov, director of Sberbank’s transactional business division, gave the following remarks regarding the development.

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