Crypto Market Forecast: Week of January 9th 2022

The price of Bitcoin (BTC) ends the week with a 2.4% price higher than the previous week and currently sits at just under US$17K. Ether (ETH) has had a 5.7% spike and currently sits at ~US$1.27K. Binance-coin (BNB) rose by 8.2% and presently trades for ~US$265.

After the FTX implosion, many of us ask ourselves “Is there more leverage to be flushed out of the system? How low can the bear market bottom go?” Coinbase CEO Brian Armstrong discussed FTX’s contagion risk in a podcast after FTX’s fall, and his points remain relevant if we are to answer the above questions.

First, there were firms within the crypto industry that had (now lost) funds “sitting in FTX” (rather than self-custodying). Second, there were firms “that Alameda may have had loans with”. Armstrong also divulged that Coinbase has received phone calls from firms seeking emergency financing. Lastly, people or firms may have used their own funds that they used as leverage to purchase crypto assets.

All of the above factors point to an industry in stress, and the aftermath of such stress could manifest itself in the months to come.

Bitcoin could find itself considered legal tender in the island nations of Tonga and Fiji if (at least) one politician has his way. Lord Fusitu’a, a former member of Tonga’s Parliament and Bitcoin bull himself, has pushed Bitcoin as a way of facilitating remittances to Tonga, where those remittances make up a significant portion of the nation’s GDP. Fusitu’a has also pushed for Bitcoin as legal tender, for mining, and national treasuries. He forecasted that Bitcoin could come online as legal tender as early as February 2023.

Fusitu’a also went to Twitter to announce that Fiji’s new Prime Minister Sitiveni Rabuka, who took office on December 24th, is “pro-#Bitcoin”. “Let’s go 2 for 2 – BTC Legal Tender Bills for the Pacific in 2023”, Fusitu’a tweeted.

Fusitu’a advised that “[Fijian Prime Minister Sitiveni Rabuka] asked to meet with me which we did via zooms since last year to walk him through step by step, how he could adopt bitcoin legal tender.”

Russian majority state-owned bank Sberbank has launched a gold-backed digital financial asset (DFA) on its proprietary blockchain. As the word “backed” suggests, the DFA can be redeemed for physical gold.

An announcement by the bank stated that the DFA’s value will be dynamic, allowed to move up and down freely with the market price of gold that it is pegged to.

Alexander Vedyakhin, First Deputy Chairman of Sberbank’s Management Board was quoted in the press release declaring that the new financial product could “become a good alternative to investments as part of the de-dollarization of the economy”.

Crypto news for the weeks ahead

12 January

The US Bureau of Labor Statistics will release its Consumer Price Index (CPI) numbers for the month of December. This is a key indicator the Fed will look to when it considers even further rate hikes going forward.

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.

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

Stablecoins aside, it was a steady upwards climb across the board for Brave New Coin’s top ten digital assets by market cap. Cardano (ADA) was the biggest winner, up 16.5% versus the previous week. Binance-coin (BNB) was the second biggest winner, up 8% over the same time period. Bitcoin (BTC) continues to hover just under the $17K price point since mid-December.

Bitcoin Price Chart

Bitcoin’s market dominance compared to other digital assets has ebbed and flowed over the last 14 years. In January 2009 at Bitcoin’s genesis, the digital asset occupied 100% of the crypto asset market. In fact, Bitcoin maintained an 80%+ dominance in market capitalization until March 2017, but as the famous 2017 bull market took place, something of a “Rise of the Alt-Coins” took place. By June that same year, Bitcoin’s market cap dropped to under 38%. Although Bitcoin momentarily regained a 71% market cap in January 2021, it has maintained a steady ~40% since May 2021, bouncing about five percentage points above and below. None of the events of 2022 (the Terra-LUNA debacle, the series of bankruptcies, Ethereum’s “Merge”, FTX’s collapse, etc.) noticeably put a dent in Bitcoin’s market share versus all other crypto assets. (Note also that the total number of alt-coins steadily declined since mid-2022).