Crypto Market Forecast: Week of January 16th 2022
A curated weekly summary of forward-focused crypto news that matters. This week, Bitcoin surges as the first CPI print of the year reveals a dropping inflation rate, SBF publishes a new blog that expounds his innocence, and onchain metrics send mixed signals.
The price of Bitcoin (BTC) had skyrocketed by 23% in the last week and currently sits at about US$21K. Ether (ETH) similarly, is up 22% over the same time period, and currently trades for ~US$1.55K. Binance-coin (BNB) also had quite a week, up 13.6%, and presently trades for ~US$301.
On Thursday of last week, the US Bureau of Labor Statistics released its Consumer Price Index (CPI) numbers for December. December’s update puts CPI at 6.5% over a 12-month rolling period. This shows the Fed is still a long way off from its previously-stated 2% target, yet still well down from June 2022’s 9% post-COVID high.
Although the CPI does not encompass the full scope of inflation, it is one measurement that the Federal Reserve frequently looks to when considering interest rate adjustments.
After the 2008 Global Financial Crisis, the Fed kept the Effective Federal Funds Rate well under 1% for roughly nine years, then maintained it between a ~1% to 2.45% range for the three years prior to COVID-19. In an effort to keep the economy from completely tanking, it was dropped in March 2020 and stayed well under 1% until 2022 once it became clear that inflation was not “transitory” as Fed Chairman Jerome Powell had stated in 2021.
Whether January 31st’s FOMC meeting will indicate a further rate hike remains to be seen. Markets are still expecting a minor 25 basis point increase given CPI numbers are still far from the Fed’s stated 2% target.
How this will affect crypto asset prices over the coming months also remains to be seen, especially if the Fed’s rate hikes nudge the economy into a recession. Crypto asset prices wwre tightly correlated with thingslike Nasdaq tech stocks as they did through most of 2022.
Historically, Bitcoin has experienced bull runs every four years — give or take a few months — coinciding with its “block reward” supply halving (with the next one scheduled for around May 2024). The alt-coins follow. Until then, prepare some popcorn and enjoy the show.
Sam Bankman-Fried engages in yet another attempt to shape hearts and minds in the court of public opinion. On Thursday of last week (January 12th) SBF published a single blog post from what looks like a newly-created Substack account.
In SBF’s post, entitled “FTX Pre-Mortem Overview”, he argues that “I didn’t steal funds, and I certainly didn’t stash billions away.” The post contains SBF’s record (partially from memory?) of FTX US and Alameda’s balance sheets.
Notably, the post concludes with SBF arguing that if FTX had been allowed “a few weeks to raise the necessary liquidity” that it could have made customers whole and that “pressure to instate Mr. Ray [FTX’s new CEO] and file Chapter 11” only “quashed” such efforts.
Crypto news for the weeks ahead
17 January
The Polygon network will undergo a hard fork, aimed at user experience improvements.
31 January
The Federal Open Market Committee (FOMC) will be meeting. Possible further additional interest rate hikes will be announced. Markets are presently leaning towards a sixth interest rate hike, currently expected at 25 bps.
March 2023
Ethereum’s next major upgrade since the Merge, the ‘Shanghai’ hard fork, will allow stakers to withdraw staked ETH, which presently remains locked.
Top 10 Crypto Summary
It was a bullish week for most assets in Brave New Coin’s top 10 list by market cap. Bitcoin (BTC) was the biggest winner with a 23% climb since last week. Ethereum (ETH) and Cardano (ADA) followed shortly behind Bitcoin — both with ~22% improvements versus the previous week.
Bitcoin Price Chart
With a 23% spike in Bitcoin’s price since last week, Glassnode took a deep dive at various on-chain metrics to see if there is confluence across them. Glassnode notes that despite the drop in BTC’s price, there was a slight uptick in Bitcoin creation of new BTC addresses since FTX’s collapse. However, transaction fees remain low, indicating that there is still low demand for block space. Realized profit-loss ratio still remains below zero (meaning that most bitcoins are still being sold below cost).
The RHODL Multiple metric shows a recent uptick, meaning there is a spike in 1-week old coins. Glassnode concludes that when looking at all the metrics together, there is still a lack of confluence across them to suggest that the fundamentals could sustain a bear market recovery.
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