Crypto Market Forecast: Week of October 3rd 2022

The Bitcoin price (BTC) remains in-line with last week at US$19.1K – rising by a moderate 1%. Ether (ETH) dropped by 1.3% and currently sits at US$1.3K. Binance-coin (BNB) fell by 2.3%, at ~US$282.

Software company MicroStrategy takes a step beyond acquiring bitcoins and now looks to become a developer on the asset’s second-layer Lightning Network. A job listing by MicroStrategy has appeared on SmartRecruiters.com for “Bitcoin Lightning Software Engineer”. The listing states that the successful candidate would “build a Lightning Network-based SaaS platform, providing enterprises with innovative solutions to cyber-security challenges and enabling new eCommerce use-cases”.

BuyBitcoinWorldwide.com’s “Treasuries” page tracks bitcoin whales and their holdings and currently lists MicroStrategy as holding 130,000 bitcoins — making it the largest holdings of any publicly traded company: with 3.25 times the holdings of the next largest publicly traded company.

As the US approaches the midterm elections, Coinbase has launched a “Crypto Scorecard” called Crypto Action Network to help voters understand where political candidates stand on issues related to cryptocurrencies. The website ranks candidates by the US’s standard A to F grading scale, with A being the highest score (implying a crypto-friendliness) and F being the lowest (implying hostility to crypto assets).

As legislation seems to be around the corner for everything from stablecoins to DAOs, the candidates that make the cut are likely to shape the legal landscape for decades to come. Upon a quick look at the data, one can see that “crypto” is largely a bipartisan issue with a mix of both Democrat and Republican candidates holding high and low scores.

An odd series of bank robberies have occurred in Lebanon as those involved in the robberies are believed to be depositors who “rob” only to regain access to their own money after banks refused customer access to funds amidst an economic “meltdown”, dating back to 2019. Al Jazeera reported eight such incidents to date as of September 22nd.

The incident is reminiscent of Cyprus in 2013 in which bank depositors’ funds were confiscated. The Cyprus case has often been cited as a real world use case for crypto assets (“Not your keys, not your coins”) — protecting assets from easy confiscation. All this becomes particularly relevant in light of the US Treasury Department’s push against, what it calls, “unhosted wallets” — implying that custody (the private keys) should be held by third parties, leading to additional counterparty risk and potential easy seizure of assets.

Crypto news for the weeks ahead

13 October

The US Bureau of Labor Statistics will release its Consumer Price Index (CPI) numbers for the month of September. If CPI numbers are still perceived to be high, this could give the Fed higher confidence to announce yet another interest rate hike on November 2nd.

2 November

The Federal Open Market Committee (FOMC) will be meeting. Markets are currently projecting a ~57% probability of yet another (fourth consecutive) 75 bps hike.

Unknown date

Tether expected to release financial records of their stablecoin backing after a New York judge ordered the records be shared in a legal case alleging that Tether issued USDT to prop up the price of Bitcoin.

Top 10 Crypto Summary

This week finished off with prices for the top ten digital assets by market cap almost just as they were last week, with two exceptions: Ripple’s XRP and Cardano (ADA). XRP and ADA are down by 6.8% and 7.4% respectively versus last week. XRP’s drop follows quite a spike over the past month (from as low as $0.33 to as high as $0.54) as the US Securities and Exchange Commission’s case against Ripple Labs looked to be coming to an end.

Despite XRP’s price drop over the past week, a US District Court Judge concluded a nearly two-year legal battle on Thursday by ruling against the SEC and in favor of Ripple Labs.

Bitcoin Price Chart

The bear market continues on with long-term HODLers doing what they do best but with short-term holders in unrealized loss territory. Glassnode noted this week that “mature coins” (those accumulated in the more distant past) are at an all time low in their proportion to total transfer volume — suggesting that the price may have bottomed out.

However, despite indicators suggesting a Bitcoin “bottoming out” phenomenon, it is still worth watching for further rate hikes from the world’s central banks as further hikes would imply a downward push on equity prices and subsequently on digital asset prices as long as the two asset classes remain highly correlated.