Crypto Market Forecast: Week of October 17th 2022

Bitcoin (BTC) dropped by 2% this week, it currently trades for ~US$19.2K. Ether (ETH) and Binance-coin (BNB) both fell by 3% and sit at ~US$1.29K and ~US$271 respectively.

The Bureau of Labor Statistics (BLS) released its September Consumer Price Index (CPI) numbers on Thursday of last week, which came out at 8.2%. The BLS’s official CPI numbers for the past decade prior to 2021 never reported a single month higher than 2.9%.

As the Fed seeks to regain confidence in its ability to control inflation after unprecedented levels of monetary expansion in the wake of COVID, consumers now struggle to get by with soaring prices of food, shelter, and energy. Commodity prices are also through the roof. Meanwhile, investors are treating equities and Bitcoin as risk assets rather than safe havens. Adding to all of this, the IMF and UN are now warning that further interest rate hikes could instigate a global recession.

If the economy does plunge into a recession, global central banks reverting back to quantitative easing appears likely. If this happens, crypto assets, particularly Bitcoin with its supply cap and decentralized governance model, may once again be seen as a safe haven in a new round of monetary expansion.

Bitcoin’s mining difficulty reached an all-time high this past week. Network difficulty in Bitcoin’s proof-of-work model refers to the difficulty level necessary to successfully mine a block (making transactions possible and securing the network). Every 2,016 blocks, roughly every two weeks, an adjustment is made — making successfully mining blocks either more easy or difficult — in order to keep average intervals between blocks at 10 minutes. With more so-called “hash power”, difficulty goes up; the reverse is also true when hash power drops.

Ethan Vera, COO of Luxor Technologies, stated that the recent difficulty spike was due to “[a] combination of high-efficiency machines such as the S19XP getting delivered, cooler temperatures heading out of summer, lower power costs in the U.S. and old ETH-mining power capacity being reallocated [to mine Bitcoin]”.

Despite Iran having green-lit cryptocurrencies for use in cross-border payments in August, the Iranian government appears to be cracking down on another front.

Iranian Bitcoin advocate and YouTuber Ziya Sadr is reported to have been detained along with thousands of others following large-scale protests against the killing of a woman named Mahsa Amini. Coindesk reported that Sadr was active in translating content into Farsi and teaching viewers how to use Bitcoin in privacy-preserving ways. The cause of his arrest is not publicly known.

Crypto news for the weeks ahead

18 October

Avalanche Banff v1.9.0 has been released and will be activated on 18 October.

2 November

The Federal Open Market Committee (FOMC) will be meeting. Possible additional interest rate hikes will be announced.

10 November

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

Top 10 Crypto Summary

The top ten crypto assets by market cap almost across the board took a dive this week following the US Bureau of Labor Statistics’ release of September’s high CPI numbers — suggesting a high probability of further Fed rate hikes. Hardest hit this week was Cardano (ADA) — with a nearly 14% drop — as it continues to undergo development directed at addressing scaling issues. Solana (SOL), and Ripple’s XRP were next hardest hit, dropping by ~10% and ~9% respectively.

Bitcoin Price Chart

We have seen some so-called “sideways trading action” as of late with Bitcoin’s price — ranging from US$18.4K to US$20.4K over the past month (which was relatively quiet by its own historical standards). On-chain analytics service Glassnode calls this a “calm before the storm” in its video report for this week and compares the tranquility to what preceded the 50% selloff of November 2018 and the rally of April 2019.