Crypto Market Forecast: Week of March 6th 2023

The price of Bitcoin (BTC) fell by ~3.2% this week and currently sits at ~US$22.5K. Ether (ETH) dropped by ~2.1% and currently trades for ~US$1.6K. Binance-coin (BNB) fell by 4.1%, presently at ~US$292.

Silvergate Bank published an announcement at the top of its homepage that it “has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational”. Silvergate was a popular banking partner for North American crypto companies and concerns surrounding its troubles pushed markets downwards.

In January, Senators Elizabeth Warren, Roger Marshall and John Kennedy put the spotlight on Silvergate for its dealings with FTX and Alameda, alleging that the bank’s due diligence processes “failed miserably”. Coinbase and Galaxy Digital have since terminated ties to Silvergate.

Reuters described the Silvergate Exchange Network as “one of the bank’s most popular offerings, enabled round-the-clock transfers between investors and crypto exchanges, unlike traditional bank wires, which can often take days to settle”.

TBD, a subsidiary of Block (currently run by former Twitter CEO Jack Dorsey), announced on Thursday that it had launched a new company called “c=”. The new company, according to its website, will focus on providing “liquidity, services, and infrastructure” for the Lightning network.

The c= website presently has scarce information about the project, but Bitcoin Magazine published a summary of a c= press release sent to them stating that “c= will build infrastructure using the bitcoin it is committing to the network so that businesses and wallets can make their Lightning transactions more reliable and dependable… Through c=’s LSP, any business or individual running a Lightning node can gain efficiencies and make their transactions via Lightning with minimal effort and investment without having to rely on an intermediary to custody their bitcoin”.

Beijing appears to have taken an interest in allowing Hong Kong to serve as a regional crypto hub just as long as activities remain off the Chinese mainland. Bloomberg recently reported that various mainland government officials have been attending crypto events within the Special Administrative Region, and public statements from these officials appear to be supportive of Hong Kong’s development as a dominant player in the region.

Beijing’s acceptance of crypto (again, at least for Hong Kong) comes after a series of crackdowns and bans on the mainland in 2017 and 2021. In 2021, when Beijing outlawed proof-of-work mining, Bitcoin’s global hashrate went from one dominated by China (by two-thirds in April of that year) to one dominated by the United States.

To cite just one reason why Beijing may be willing to tolerate an industry it might otherwise despise, consider last year when the Biden administration delivered a strategic blow to Beijing – when it effectively blocked China’s access to mid and high-end semiconductors. While U.S. regulators ramp up crypto regulation by enforcement and with companies within the industry already leaving the U.S. as a result, Beijing’s motivations for crypto in Hong Kong might best be characterized as not of any love for crypto but for geopolitical and economic competitive advantage.

Crypto news for the weeks ahead

**March 14th **

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

21-22 March

The 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.

Top 10 Crypto Summary

It was a bearish week almost all the way down with DogeCoin (DOGE) and Cardano (ADA) sitting as the biggest losers. Digital asset prices have been impacted by a multi-front regulatory crackdown detailed last week.

Bitcoin Price Chart

GLASSNODE’s “Percent Supply in Profit” indicator shows that despite the present bear market, roughly 70% of bitcoins in circulating supply presently remain in profit. Meanwhile, miners are pushing through all-time highs with Bitcoin’s difficulty level, and the total hash rate also sits at a record high. On the second layer, Lightning continues to grow in terms of network capacity and average channel size.