Crypto Market Forecast: Week of September 11th 2023

The price of Bitcoin (BTC) has dipped by 0.9% this week and presently sits at ~US$25.8K. Ether (ETH) did similarly by falling by 1.6% to ~US$1.6K. Binance-coin (BNB) also dropped by 1.2% to US$213.

US Securities and Exchange Commission (SEC) seeks to overturn a court ruling from July that largely sided in Ripple’s favor against the SEC. It was concluded that XRP is not, in itself, a security when sold to retail investors; It was, however, when sold to institutional investors.

The SEC filed a document on Friday, September 9th, requesting that the court “grant the SEC’s motion for interlocutory appeal”. The document argued that the defendants (Ripple) have an interest in prolonging the case so that it may continue to sell XRP tokens, while the plaintiff (the SEC) “has an institutional interest in the efficient resolution of this case”.

“Indeed, Defendants themselves have argued that this case will supposedly affect the entire ‘U.S. crypto industry’ … while publicly celebrating the Order as a ‘landmark court decision’ that ‘sets a key precedent’” the SEC document reads.

Blockchain surveillance tool Chainalysis has come under scrutiny recently as the accuracy of the heuristics it uses has been challenged. In the ongoing case with the United States government Vs Roman Sterlingov, who is alleged to be the creator of the bitcoin mixing service Bitcoin Fog, Chainalysis’ Government Solutions head Elizabeth Bisbee testified that she was “unaware” of the scientific accuracy of Chainalysis’ Reactor software.

In Sterlingov’s case, the Chainalysis blockchain forensics are the only piece of evidence used against him. An expert report filed in the case, produced by Jonelle Still, Director of Investigations and Intelligence at CipherTrace by MasterCard, analyzed the various heuristics used by Chainalysis and referred to one of them as “reckless”. The report concludes that “Blockchain forensics should only be used to generate investigatory leads. Standing alone, they are insufficient as a primary source of evidence”. Still’s report also calls for Chainalysis to be independently audited and argues that “The blockchain forensics and tracing tools used in this case were misused to erroneously conclude that Mr. Sterlingov was the operator of Bitcoin Fog when no such evidence exists on-chain”.

Sterlingov’s defense lawyer Tor Ekeland has labelled Chainalysis “the Theranos of blockchain forensics”.

Note that the US Federal Procurement Data System (FPDS) website lists what the author sums up to be nearly $68 million dollars of payments from various US federal government agencies going back as far as 2015, that have been claimed based on Chainalysis forensics.

Among the agencies listed are: FBI, DEA, IRS, SEC, ICE, Department of State, Air Force, and Navy. Note that this does not include US state and local government agencies, or governments outside the United States. It is also reasonable to assume that federal agencies such as the CIA and NSA would also have an interest in Chainalysis services but may not be listed on FPDS for national security reasons. Reuters reported in 2022 that Chainalysis’ valuation was at $8.6 billion.

Crypto news for the weeks ahead

September 13

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

September 20

The FOMC will be meeting. Futures markets are strongly leaning towards a prediction of no further rate hikes for the September meeting, thus leaving the federal funds rate target at 5.25 – 5.5% – for now. Fed Governor Christopher Waller, however, hinted in mid-July of the possibility for additional rate hikes in coming months, and Fed Chair Jerome Powell did likewise in late-August.

September 29

The US Bureau of Economic Analysis’ (BEA’s) release of August’s Personal Consumption Expenditures (PCE) numbers will be released. This is the primary indicator used by the FOMC to measure inflation and is considered carefully when considering interest rate levels.

Top 10 Crypto Summary

BNC’s top 10 assets by market cap finished the week off – yet again – basically where they started, with Cardano (ADA) being the “biggest loser” at only a 3% drop versus the previous week. These past few weeks of relative price stability follow last month’s leverage “flush out” in derivatives amidst the ever-looming pending SEC decision on Bitcoin spot ETF applications.

Bitcoin Price Chart

Bitcoin’s network difficulty and accompanying hash rate have been, since late August, at all-time highs. Said another way, the Bitcoin network has never been so secure from attack. Meanwhile, miner revenue, USD value from block rewards plus transaction fees, have been on a downward trend since two all-time peaks during the bull market of 2021. They are, however, still recovering upward from the bear market lows of 2022.