Crypto Market Forecast: Week of August 28th 2023

The price of Bitcoin (BTC) ticked upwards by 0.4% to ~US$26.2K in the last week. Ether (ETH) dropped by ~1.0% to ~US$1.7K. Binance-coin (BNB) rose by ~1.3% to ~US$220.

Fed Chair Jerome Powell announced over the weekend at Jackson Hole that the FOMC is “prepared to raise rates further if appropriate and intends to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective”. He said despite “navigating by the stars under cloudy skies” the FOMC would continue working to “[restore] price stability to achieve a sustained period of strong labor market conditions that benefit all”.

As economist Peter St. Onge noted over the weekend, the American consumer is now running out of pandemic-era savings and is now raking up credit card debt, and businesses are starting to reduce starting salaries for newly-hired employees.

With a series of banks failing at the start of the year, the FOMC surprised some by continuing to raise rates from that point. Normally, however, when the economy struggles, central banks push up rates until things break, and some important elements (some banks) certainly broke.

A perspective worth noting from economist William J. Luther is that the Fed could declare a victory on inflation already, as what is more important is not the 12-month rolling measure of inflation (the past 12 months up until now) but rather (1) what inflation has been more recently and (2) what inflation is likely to be going forward. Luther notes that whether you measure inflation using the Consumer Price Index (CPI) or by the Personal Consumption Expenditures Price Index (PCEPI), we are already under the Fed’s stated 2% inflation target. In other words, yes, inflation has been high these past three years, but it has more recently been contained.

Forbes announced this week that the Omani government, under the support of the country’s Authority for Public Services Regulations, embraced private Bitcoin mining facilities. Discussions about whether Bitcoin and the mining of it are permitted under Islamic law have been conducted, and it was determined that Bitcoin is halal (so to speak).

The company Exahertz obtained a license to operate in September 2022. The project will pilot with 11 MW capacity and with eventual ambitions to achieve 800 MW thanks to a $1.1 billion budget.

Across the Gulf, fellow Gulf Cooperation Council (GCC) neighbor Kuwait recently took a radically different, and hostile stance on crypto assets. A press release from the Kuwaiti Capital Market Authority (CMA) announced in July various outright prohibitions on utilizing “virtual assets. Including use as a currency, as an investment medium, mining them, or providing any services pertaining to them. An exception is any asset considered a regulated security Central Bank of Kuwait or “other securities and financial instruments” regulated by the CMA.

Crypto news for the weeks ahead

August 31

The US Bureau of Economic Analysis’ (BEA’s) release of July’s Personal Consumption Expenditures (PCE) numbers will be released. This is the primary indicator used by the FOMC to measure inflation and is considered carefully when considering interest rate levels.

September 13

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

September 20

The FOMC will be meeting. Futures markets are strongly leaning towards a prediction of no further rate hikes for the September meeting, thus leaving the federal funds rate target at 5.25 – 5.5% – for now. Fed Governor Christopher Waller, however, hinted in mid-July of the possibility for additional rate hikes in coming months, and Fed Chair Jerome Powell did likewise in late-August.

Top 10 Crypto Summary

BNC’s top 10 assets by market cap largely traded sideways again this week – with not a single asset finishing the week off at even 3% higher or lower than the previous week. This month, we have observed a “leverage flush-out in derivatives market”. Beyond the “flush-out”, the market still deals with a looming uncertainty around the SEC’s possible approval or rejection of Bitcoin spot ETFs.

Bitcoin Price Chart

Bitcoin’s price dropped from $31.4K to under $26K just two weeks ago. Last week, Brave New Coin noted the “long squeeze” event as a primary driver. GLASSNODE’s special report this week referred to it as a “future market deleveraging” – with Long-Term Holders (over 5 months) largely unphased, while Short-Term Holders (fewer than 5 months) presently holding almost 90% of their supply at unrealized losses.