Crypto Market Forecast: Week of January 30th 2023

The price of Bitcoin (BTC) rose by 3.2% since last week and currently sits at ~US$23.6K. Ether (ETH) dropped by 2.0% over the week, and currently trades for ~US$1.62K. Binance-coin (BNB) climbed by 4.5%, presently at ~US$319.

Brazilian President Luiz Inácio Lula da Silva and Argentinian President Alberto Fernández published a jointly-authored article in Spanish-language newspaper Perfil this week. The article addressed various ways the two governments could work together – but of interest was a single paragraph expressing a new agenda on currencies.

The first issue addressed in the paragraph was about encouraging the use of local currencies (alluding to the greater de-dollarization movement that BNC has written about in previous weeks). But perhaps more interesting was the announcement that the governments would advance talks on the possibility of “a common South American currency”, which the article stated, could “be used for both financial and trade flows, reducing operating costs and our external vulnerability”.

The article did not hint at what the new common currency might look like: whether CBDC, more traditional common fiat currency (such as the Euro), asset-backed (similar to the USD’s gold backing under Bretton Woods), or cryptocurrency (as El Salvador did with Bitcoin).

Coinbase CEO Brian Armstrong tweeted that Bitcoin “would probably be the right long term bet”. In terms of cryptocurrency adoption, both countries rank highly by global standards. Brazil ranks 7th, and Argentina 13th on Chainalysis’ 2022 Global Cryptocurrency Adoption Index. USD stablecoins, for example, are used widely in Argentina as a convenient way of transfering value while maintaining a stable store of value, relative to the peso.

As for a potential CBDC version of this South American common currency, both nations have already flirted with the idea of launching CBDCs for themselves independently. In 2020, the Brazilian Central Bank launched what might be thought of as a predecessor to a CBDC through Pix, which enables users to send instant, 24/7 payments throughout the country using the real currency. CBDCTracker.org also shows Argentina having reached a “research” stage.

Whether the two (or more) nations could come to agreeable terms on some form of a common currency is another story. It would likely be a challenge for Brazilian politicians to sell their population on the idea of a common currency with Argentina — a country whose peso suffers a much higher inflation rate than that of the Brazilian real.

Gibraltar based crypto lending platform Lendingblock’s website disappeared sometime last week and is now serving a DNS error. The platform’s twitter page remains live, with its last tweet sent on November 8th. Lendingblock was still accepting deposits as recently as the 7th of January. Unlike other recent crypto lending closures, to date there has been no annoucements from Lendingblock to its customers about paused withdrawals or bankruptcy filings. Prior to its disappearance the company operated under a Distributed Ledger Technology Provider licence issued by the Gibraltar Financial Services Commission.

Crypto news for the weeks ahead

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 yet another 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.

Q1 2023

The Cosmos Hub network expects to launch various upgrades in Q1 pertaining to security, fee structure, multi-sig, etc.

Top 10 Crypto Summary

After a significant upward climb since the start of the year, BNC’s top ten digital assets by market cap finished the week largely stable versus this time last week. Binance-coin (BNB) was the biggest winner, up 4.5%. BNB’s spike follows a scheduled “burn” of its token, which BNC covered in detail last week.

Bitcoin Price Chart

Glassnode this week looked at profitability for both short and long-term holders as well as miners. With the recent surge above $23K, we have seen “one of the sharpest spikes in profitability compared to prior bear markets”. Over 90% of short-term holders are sitting on profits, and Glassnode’s ‘Spent Volume Age Bands’ (SVAB) indicator shows that these short-term holders are also spending. Long-term coins (aged five months or longer) are “in the process” of approaching profitability now that Bitcoin has reached the $23K price point.