Crypto Market Forecast: Week of April 10th 2023

The price of Bitcoin (BTC) remained largely flat this week, falling by just under 1.0% to ~US$27.9K. Ether (ETH) rose by 2.2% to ~US$1.8K. Binance-coin (BNB) dropped by under 1% to ~$311.

As OPEC’s oil production is reduced, CPI numbers will reflect the price increase as an indicator of inflation, and this makes Bitcoin more attractive. A week ago, Saudi Crown Prince Mohammed bin Salman (MBS) urged OPEC members to collectively reduce their productive output by 1 million barrels per day. This pushed the price to $85 per barrel.

Saudi Arabia and indeed the greater Gulf Cooperation Council (GCC) has leaned more towards China and to a certain extent away from the United States – especially after Chinese President Xi Jinping’s visit to the region in December.

While the Consumer Price Index (CPI) is not a measure of inflation in any absolute sense, it measures a basket of consumer goods which includes energy. Inflation, and even expectations of inflation, increase the value proposition for hard assets like Gold and Silver as a store of value. With Bitcoin’s supply hard cap of 21 million coins (currently at 19+ million and counting), we are likely to see more interest in it – especially if inflation remains high or worsens.

Energy prices are just one factor in the overall CPI calculation, so it is possible that higher energy prices can be countered by falling prices elsewhere.

State-level push back against the United States’ traditional financial system has reached new heights as two Texas legislators introduced their own respective (but identical) bills to establish a gold-backed digital currency within the State of Texas.

Senate Bill 2334 (introduced by Senator Bryan Hughes) and House Bill 4903 (introduced by Representative Mark Dorazio) read that the gold backing of the state-level digital currency would be on a fractional reserve basis (not backed 1-to-1). The Texas comptroller would have the power to work with a private vendor to establish and manage the currency.

The bills read that the comptroller’s role would be “to ensure that a person who holds the digital currency may readily transfer or assign the digital currency to any other person by electronic means” and that (upon redemption), the comptroller must “redeem for an equal fractional number of troy ounces of gold from the pooled depository account”.

In light of recent political push back against CBDCs for the financial censorship that they could facilitate as well as a heightened consciousness of fractional reserving of demand deposits (in light of recent bank runs in the United States), this is one worth watching.

The Ethereum blockchain is set to do its next major hard fork this week on April 12th. The ‘Shanghai’ fork will allow validators, for the first time since staking their ETH, to withdraw.

As the roughly 17 million ETH become available for withdrawal, we would expect downward price pressure – especially given staked ETH being locked as far back as 2020. However, given that many validators are sitting on unrealized losses, this serves as a strong incentive for many of them to hold, awaiting a better future price point before selling.

Crypto news for the weeks ahead

April 12
The Consumer Price Index data for March 2023 will be released – one of the indicators the Federal Open Market Committee (FOMC) watches when considering interest rate hikes.

April 12
Ethereum’s next major upgrade since the Merge, the ‘Shanghai’ hard fork, will allow validators to withdraw staked ETH.

May 2-3
The FOMC will be meeting. Further rate hikes are likely to be minor (or nonexistent) due to the present banking crisis but worth watching here.

Top 10 Crypto Summary

Brave New Coin’s top 10 digital assets by market cap largely traded sideways this week. DogeCoin (DOGE) finishing the week off with a humble ~6% rise (albeit down from a larger spike) makes it the biggest winner this week. Its price increase follows Elon Musk’s delivering on a dare to “just buy twitter… and change the bird logo to a doge”.

Bitcoin Price Chart

GLASSNODE this last week looked at what it called “structural shifts” in Binance’s BUSD stablecoin as the market responded to the US Commodity Futures Trading Commission’s regulatory pressure against the exchange itself and its CEO Changpeng Zhao (“CZ”). Binance’s analysis of BUSD on the Ethereum blockchain notes net stablecoin outflows of $295 million per day: the largest net outflow in its history.