Feb 24
Newsletter Volume 16
Article 1 — The Market This Week
The world of cryptocurrency is never short of surprises, and every week, investors and traders brace themselves for potential market upheavals. Amidst the chaos, Bitcoin has emerged as a popular choice among investors, experiencing a surge of 2% in its price. The cryptocurrency’s unprecedented growth has made it the talk of the town, with investors eagerly waiting for its next move. Unfortunately, however, Bitcoin’s price took a hit recently, leading to market uncertainty and a sense of panic among investors.
The recent dip in Bitcoin’s price can be attributed to the release of the FOMC minutes, which shed light on the US Federal Reserve’s plan to increase interest rates. The January Consumer Price Index report revealed higher-than-expected inflation rates, causing the Federal Reserve to raise the benchmark fed funds rate by 25 basis points. This unexpected move has left investors reeling, with many now analyzing the minutes of the Federal Reserve for clues on what’s next.
The cryptocurrency market has witnessed a downturn in recent times, with BTC/USD and other cryptocurrencies correcting following the release of the FOMC minutes. Investors are now bracing for further interest rate hikes if inflation remains high. It remains to be seen how the cryptocurrency market will react to the Federal Reserve’s move and how Bitcoin will fare in the long run. Nonetheless, one thing is for sure, the world of finance is never short of surprises, and investors must always be prepared for the unexpected.
Recently, Hong Kong has allocated $6.4 million (HK$50 million) to Web3 ecosystem development in its annual budget for 2023–2024. The funds will be utilized for organizing international seminars, cross-sectoral businesses, and workshops for young people. Gate.io, a crypto exchange, plans to apply for a crypto license to launch Gate HK after allocating $6.4 million towards Web3 development in the 2023–24 budget.
In addition, DZ Bank, the second largest bank in Germany, has partnered with Metaco, a digital asset firm, to offer digital assets management services. This collaboration will enable the bank’s clients to securely access and manage digital assets.
Kratos Studios, an Indian Web3 gaming startup, recently raised $20 million in a seed funding round with a valuation of $150 million. The funding round was led by Accel, Prosus VC, and more and is expected to help the company expand its operations and develop new products. The cryptocurrency market’s future looks promising, and investors are optimistic about the potential growth opportunities in this dynamic industry.
Total Crypto Market Cap: $1.14 T
Bitcoin Market Cap: $460.51 B
Ethereum Market Cap: $198.67 B
ETH/BTC Ratio: 0.07
Ethereum Gas Price: 30 gwei
DeFi TVL: $75.14 B
Fear and Greed Index: 53 (Neutral)
Federal Reserve Balance Sheet: $8.38 T
Article 2 — Weekly Review of IC15
Cryptocurrencies are constantly evolving, with new developments and changes occurring daily. Recently, the IC15 benchmark index for cryptocurrencies experienced a significant drop of 895 points, leading to a 2.56% decrease to 34,063 just before the release of the FOMC meeting minutes. Most coins in the index, including Solana, Polygon, Chainlink, and Uniswap, saw their prices in the red, with significant losses ranging from 3–7%. Despite this downturn, the total market capitalization of cryptocurrencies remains high at $1.094 trillion.
Amidst this volatility, various companies and institutions actively explore and invest in cryptocurrency. The Central Bank of Nigeria (CBN) is partnering with R3, a New York-based blockchain firm, to develop its software and manage its CBDC, the e-Naira. eToro, a Social investing and trading platform, has obtained a BitLicense from the New York State Department of Financial Services (NYDFS), allowing it to offer crypto services in New York.
In other news, Bosch, an electrical company, and Fetch.ai, an AI-based crypto protocol, have joined forces to create the Fetch.ai Foundation. With an impressive $100 million in funding, the foundation aims to develop Web3, artificial intelligence (AI), and decentralized tech. Meanwhile, Chaos Labs, a cloud platform, has raised a whopping $20 million in a seed funding round led by Galaxy Digital and PayPal Ventures.
Despite the current market downturn, these developments illustrate the growing interest and investment in cryptocurrencies. With various institutions and companies exploring new technologies and possibilities, the future of cryptocurrencies remains promising and exciting.
On 23rd February 2023, the cryptocurrency market experienced a much-needed recovery following the FOMC meeting minutes. As a result, the IC15 Index, the benchmark for cryptocurrencies, rose by 406 points to 34,469 at 4 pm. The major gainers in the IC15 Index were Chainlink, Solana, Polkadot, and Polygon, which experienced increases in the 2–8% range. On the other hand, Dogecoin and Avalanche were the losers in the Index. The total market capitalization of cryptocurrencies remains at $1.1 trillion.
Article 3 — Battle of Bull and Bear
The financial market has been experiencing a battle between the bulls and the bears due to the US Federal Reserve’s recent announcement about gradually increasing interest rates in response to surging inflation. As a result, the US dollar has gained strength, reflected in the upward movement of the DXY index, an indicator of the dollar’s value against other major currencies worldwide. The index is currently hovering around 104.50 and heading towards its weekly high, indicating that the dollar’s value is rising. This surge in the dollar’s value has caused concern among investors about its potential impact on other markets, including the cryptocurrency market and other global currencies. The current situation creates a challenging environment for investors and traders, who must carefully monitor the market to make informed decisions.
The cryptocurrency market, in particular, has shown a strong correlation with the DXY index in the past. As the value of the dollar increases, the value of Bitcoin and other cryptocurrencies tends to decline. This trend has been observed several times in the past, and the current situation is no different. The rise of the DXY index has put BTC under immense pressure, with the cryptocurrency struggling to maintain its momentum in the market. The correlation between the two markets is strong, and investors are closely monitoring both to understand how the situation may play out in the coming days.
The current situation highlights the interconnected nature of financial markets and how a single decision can domino affect other markets worldwide. The rise of the DXY index and its impact on BTC is a testament to this fact, and investors must remain vigilant and prepared for any potential market upheavals in the future.
Article 4 — Weekly Spotlight
This week’s attention has been brought to the Canadian Securities Administrators, who have taken a strong stance against crypto asset trading platforms (CTPs) operating without proper registration with the agency. As a result, CTPs that still need to register have been given a deadline of March 23 to complete the pre-registration process or cease operations within Canada. The latest guidance builds upon previous rules outlined in December and includes a series of new “commitments” that exchanges must make to complete the pre-registration and eventual registration process.
These commitments include the practice of segregation in crypto custody, the appointment of a chief compliance officer, the elimination of leveraged trading, and the cessation of the sale and holding of stablecoins. In addition, exchanges not adhering to the new policies may only serve Canadian customers if granted permission.
The Canadian agency has cited recent market turmoil in the crypto space as a driving force behind the updated policies. In addition, current events have highlighted the significant investor protection risks associated with trading crypto assets, mainly through unregistered CTPs outside Canada.
In light of these concerns, the Canadian Securities Administrators have taken a firm stance to protect investors by setting strict guidelines for CTPs to operate in the country. Those who comply with the new policies will be allowed to serve customers in Canada. The agency’s proactive measures signal the growing recognition of the importance of protecting investors in the rapidly evolving world of cryptocurrency trading.
In the US, regulatory action related to the classification of tokens has been increasing in recent weeks. The Securities and Exchange Commission (SEC) settled with the exchange Kraken for $30 million over complaints regarding its staking product, which the regulator claimed was security. In addition, Terraform Labs and its former CEO were charged in the US for allegedly engaging in cryptocurrency securities fraud. As the popularity of digital assets continues to grow, federal regulators are expected to ramp up their efforts to regulate the industry. Lawmakers are gathering to discuss the role of digital assets in the current financial system. In addition, they recently heard from legal and economic experts to determine the best approach for preventing future market collapses, such as the one that occurred with FTX. With increased regulatory scrutiny, the US cryptocurrency market will likely experience significant changes as regulators attempt to balance innovation and investor protection in the coming years.
