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Crypto Market Forecast: Week of September 26th 2022

A curated weekly summary of forward-focused crypto news that matters. This week, generationally high-interest rates turn investors away from risk markets, the SEC and Ripple Labs legal battle appears to be approaching an endgame, and Nasdaq launches a cryptocurrency custody service.

The Bitcoin price (BTC) dipped down just under US$19K – a 4.3% drop in the last week. Ether’s (ETH) price took another hit this week, down 8% to ~US$1.3K despite the successful “Merge” on September 15th. Binance-coin (BNB) remains nearly on par with last week, currently sitting at ~US$275.

Last week’s Federal Open Market Committee (FOMC) interest rate hike brought the target range to 3.0% – 3.25% — making this the third consecutive 75 bps hike. It was the first time that the effective federal funds reached 3% since 2008. In Wednesday’s press conference, Fed Chair Jerome Powell emphasized the central bank’s goal to bring inflation down to 2% and the possible necessity to increase rates further depending on incoming data over coming months.

CME Group’s FedWatch Tool shows that markets are already projecting another 73% probability of yet another 75 bps hike for the FOMC’s next November meeting. If this projection turns out to be correct, it would bring the funds target range to 3.75 – 4.0%.

As crypto asset prices remain, for now, still coupled to Nasdaq tech stocks, trading as a risk asset, the near future continues to look, for now, still gloomy.

The US Securities and Exchange Commission (SEC) and Ripple Labs have requested an immediate ruling by a federal judge to conclude a (nearly) two-year legal battle. In December 2020, the SEC alleged that Ripple Labs and its executives raised US$1.3b in selling XRP tokens as unregistered securities. Securities in the United States are determined by the so-called Howey test.

Nasdaq quoted Stuart Alderoty of Ripple’s general counsel as saying “My hot take – after two years of litigation, the SEC is unable to identify any contract for investment (that’s what the statute requires); and cannot satisfy a single prong of the Supreme Court’s Howey test. Everything else is just noise”.

Blockchain Association Executive Director Kristin Smith argued in an interview last week that “…the outcome of this [Ripple’s] case could very much have an impact for the broader ecosystem”.

Nasdaq plans to launch a cryptocurrency custody service that would allow the exchange to compete against the likes of major exchanges like Coinbase, Kraken and Binance. However, the target would be institutional customers (not retail). The custody services are pending regulatory approval.

The announcement of an institutional custody service follows news from May this year that Nasdaq partnered with Brazil’s largest broker XP to launch the Xtage trading platform to allow XP’s 3.6 million customers in the South American country to gain exposure to Bitcoin.

Crypto news for the weeks ahead

2 November

The Federal Open Market Committee (FOMC) will be meeting. Markets are already projecting a 73% 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

BNC top 10 market cap - 25 Sept

Yet another tough week for most top-10 crypto assets by market cap, yet Ripple (XRP), for the second week in a row, managed to pull off strong gains while most of the others struggled. XRP’s 32% gain over last week comes as its nearly 2-year legal battle with the US Securities and Exchange Commission (SEC) looks to have a conclusion on the horizon. But, more generally, most assets (other than XRP) have dipped following the Fed’s announcement for further interest rate hikes following last Wednesday’s FOMC meeting. ETH also took a dive for the second consecutive week in a row despite positive news of a successful Merge to proof-of-stake.

Ethereum Price Chart

BNC ELX - 25 Sept

Glassnode looked at the Ethereum blockchain in its special report this last week to assess the blockchain’s present state and the transition of the “Merge” to proof-of-stake itself. As evidence of the successful Merge, data showed a ~99% “participation rate” (referring to aggregate network performance) — meaning that only ~1% of validators had one issue or another. As for the validator distribution, Glassnode noted that of the known staking providers, Lido, Coinbase, Kraken, and Binance collectively make up over 81% of total value staked. (Note that this excludes ETH staked outside of staking providers).


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