This Week in Crypto: 19th January 2023

By BTC Markets

Bitcoin Fear & Greed Index

Bitcoin Fear and Greed Index is currently at 45 in the Fear zone, up 15 points from this time last week. The index reached a high of 52 on Wednesday and a low of 30 on Thursday last week.

TLDR

• Bitcoin, Ethereum, and XRP reach highs upwards of 30% from the start of 2023.
• Markets rise on signs of cooling inflation and decreased bond volatility.
• Dynamic macro drivers from the US, Japan, and China impact markets.
• Europe’s Markets in Crypto Assets (MiCA) scheduled for April 2023.

Market reflections

The US consumer price index report (CPI) was released this past week, in what was likely the most important piece of economic data this year so far. Markets rose sharply as investors anticipated cooling inflationary pressures and likelihood of the Fed dialling back on aggressive interest rate hikes.

Consumer prices declined 0.10% month-over-month in December and year-over-year CPI decreased from 7.1% to 6.5%, marking the sixth consecutive month of lower inflation, albeit well above the Fed’s 2% target.

Jurrien Timmer, Director of Global Macro at Fidelity Investments, commented that “gains in the market, combined with better inflation reports, have renewed talk of a soft landing, and therefore the prospect that the bottom may be in for stocks and that risk assets will rally from here. The challenge for the soft-landing narrative: The yield curve is the most inverted since 1981 and the Fed is poised to get deep into a restrictive zone that in past cycles always led to recession. Nonetheless, based on the current valuation, a soft landing is the consensus.”

According to Alfonso Peccatiello, Founder and CEO of The Macro Compass, reduced bond market volatility has been another primary driver of the recent rally. With less volatile bond markets, “it’s easier for investors to add risk to their portfolio.”

On Tuesday, the Chinese economy released relatively weak economic growth data, however, the report exceeded market expectations and was bolstered by China’s post-Covid reopening and messages of international conciliation in Davos at the World Economic Forum.

On Wednesday, the Bank of Japan surprised market expectations and left its yield curve control policy unchanged. By unanimous vote, the BOJ maintained yield curve control targets of -0.1% for short-term interest rates and would continue to purchase the necessary amount of Japanese government bonds for the 10-year yield to remain around 0%.

Following the unexpected decision, hawkish expectations were disappointed and investors defensively unwound positions causing the yen to decline against major currencies.

The week ahead will continue to provide a number of high impact economic data releases, including US producer prices and year-over-year inflation rates coming from Australia, Japan, and Canada. Additionally, month-over-month consumer confidence will be handed down in the United Kingdom and in Germany.

State of crypto

The broader crypto market continued to exhibit strength. Bitcoin pressed to highs upwards of US$21,600 and Ether saw highs above US$1,600. Supported by improved sentiment, indications of cooling inflation, and a shift in short-term market regime, the rally showed little signs of slowing.

In a technical trading display, Bitcoin broke out of a mid-term trend and pressed above the 200 daily moving average. In the series of a week, Bitcoin lifted 21.95%.

At the time of writing, Bitcoin was up 25.38% at US$20,676 and Ether was up 26.54% at US$1,511 from the start of 2023.

The chart above shows the relative performance of Bitcoin, Ether, ETH/BTC, Bitcoin dominance by market cap, and total crypto market cap in 1hr increments from 1st January 2023.

Bitcoin dominance by market capitalisation was up 3.21% in 2023, positioning Bitcoin at 43.43% dominance by market cap.

As observed in Ether’s continued outperformance relative to Bitcoin, the ETH/BTC pair was up 1.16% at $0.073.

From 1st of January 2023, crypto market capitalisation was 21.31% higher at US$917.26 billion.

Relative Strength Index (RSI) is a commonly used indicator used in technical analysis. Often utilised in conjunction with price action, this momentum oscillator measures velocity and magnitude of price movements. One data point we found interesting in the daily RSI was that on 24th January 2023, RSI measured 89.24, which indicated high levels relative strength not seen since 7th January 2021.

Note the above chart which illustrates the daily fluctuation of relative strength from January 2020 to January 2023.

Crypto news

Avalanche and Amazon Web Service.

Ava Labs, the company behind the Avalanche layer-1 blockchain, is teaming up with Amazon Web Services (AWS).

In a significant step forward in making blockchain technology more mainstream and accessible for developers, the partnership aims to scale blockchain for businesses, large organisations, and governments. AWS will support Avalanche’s infrastructure and decentralised application ecosystem and will make it easier for people to launch and manage nodes on Avalanche. Ava Labs will join the AWS Activate program, which helps start-ups and early-stage entrepreneurs get started on the AWS platform.

Trade AVAX now.

Solana rallies over 150%.

Following an eventful end to 2022, Solana saw a flood of new interest and impressive price action in 2023. In its first three weeks of trading, SOL rallied over 150% to highs of US$25.01. Solana is a blockchain platform that is designed to bring blockchain technology to the masses. It is fast, decentralised, scalable, and energy-efficient, making it the perfect choice for developers and users alike.

One of the most striking features of Solana is its speed and low fees. With block times of just 400 milliseconds, Solana can process transactions much faster than most other blockchain networks. This is great news for users, who no longer have to wait for long periods of time for their transactions to be processed.

Another important aspect of Solana is its decentralisation. The network is validated by thousands of nodes that operate independently of each other, enabling data which remains secure and resistant to censorship. This is a crucial feature for any blockchain network, as it ensures that no single entity has the power to control or manipulate the network.

EU crypto asset regulation.

The European Union’s landmark regulatory framework, Markets in Crypto Assets (MiCA), has been delayed until April 2023. While MiCA’s content remains final and no further changes are expected, the 400-page text needs to be signed off by lawmakers and national governments and translated into the EU’s 24 official languages.

MiCA’s overall goal is to foster innovation and responsible development of digital assets, whilst maintaining their stability and consumer protection. Creating a proper legal framework for crypto-assets to be regulated, supporting and promoting the development of crypto-assets and the use of distributed ledger technology, establishing appropriate levels of consumer protection, and ensuring financial stability relating to stablecoins are all top areas of focus.

Stablecoins in 2023.

Bitwise Asset Management CCO, Katherine Dowling, shared her thoughts that stablecoin regulation will be a top-priority item for US general counsel in 2023. According to Dowling, stablecoin reserves, reporting, and liquidity are all likely top candidates for Congress’ focus.

While lacking single-pointed consensus, several digital asset professionals and enthusiasts see regulatory clarity as being a net positive for the industry. Dowling maintained that “right-sized legislation in the space will be a huge boon to the industry and while there may be some pain points in the short term around preparing and organising, over the long term we will all benefit from clear rules of the road.”

BTC Markets Updates

BTC Markets in The AFR.

Our CEO, Caroline Bowler was featured in an exclusive piece by The Australian Financial Review which covered Ripple and cross-border payments. Caroline discussed Ripple’s high trading volume on the exchange due to BTC Markets’ position as a Ripple on-demand liquidity (ODL) partner for Australia.

When addressing Ripple’s high liquidity and trading volume with BTC Markets, Caroline stated that “effectively, ODL helps companies manage cross-border payments without requiring correspondent banking and pre-funding costs. It uses XRP to help facilitate part of this process, hence the trading volumes on our platforms.”

Trade XRP now.

Staying safe – protect yourself online.

Scams are on the rise in Australia, and some of them are targeting BTC Markets clients. We want to remind you of the importance of safe online practices, so that you can avoid falling victim to these scams.

The most common scams right now include fake websites and social media posts that attempt to steal your personal information. Scammers may pose as representatives from companies that you interact with such as BTC Markets, and they use these fake sites to trick you into handing over your personal information. These sites often look like real websites with logos and addresses that make them appear like they’re legitimate.

You should never give out your personal information or provide credit card information over email or social media messenger chats. We have a dedicated page on how to ‘Protect Yourself Online’, which we encourage you to read. Being informed and taking simple measures is the best action you can take to protect yourself and your account while online. The Australian government’s ‘Scam Watch’ website provides the latest information on how to recognise, avoid and report scams.

Disclaimer: The information provided in this email is for general purposes only. It should not be construed as professional financial advice from BTC Markets Pty Ltd. BTC Markets is not a financial adviser, and you should consider seeking independent legal, financial, taxation or other advice to ensure that the information relates to your unique circumstances. BTC Markets is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this information contained with this email.

Prices are accurate as of 11:00 AM EST, on 19/01/2023