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Macroeconomic factors continued to drive the markets during the past week. Just as bitcoin seemed to be picking up a bit of steam, last week’s jobs report put a damper on that trend. As is often the case in the markets, good news is bad news for investors. The report showed the addition of 263,000 jobs in the U.S., illustrating the relatively stable strength of the U.S. economy. For the markets, however, this mostly suggests further interest rate hikes, creating downward pressure on asset prices. Bitcoin has been no exception to the trend.
This is another critical week for price direction in the coming weeks. Starting today, investors are eagerly awaiting the September Wholesale prices, a gauge of wholesale final demand prices (NLDR: It was higher than expected, which is bad news for a drop in inflation). Later today, the minutes of the Federal Reserve’s September meeting will also be released, providing further insight into the Fed’s year-end stance. More importantly, the September Consumer Price Index will be released tomorrow, which will provide a check on whether inflation is finally starting to slow. This will be the last piece of data in this sense before the Fed decides on the next rate hike in November. In short, if the consensus on the height of this hike is not yet established, it is likely to become much clearer over the next 48 hours. Add to that the earnings season is upon us and we will soon know if we are reaching a pivot point, or if more bearish action is likely to be on the menu.
We mentioned just last week that this could be a possibility with the new consensus proof-of-stake mode. This has been confirmed over the past few days. The supply of Ether tokens is now officially deflationary. This is a startling statement when it is rather inflation that has been on everyone’s lips for a year! As of Saturday, the cost and volume of gas fees began to burn more ETH than was being created simultaneously by staking – the post-merger process by which ETH is now generated. Since then, the total amount of ETH in circulation has declined by 4,001 ETH – and continues to decline – as the rate of burning persists in exceeding the rate of ETH creation. In a more positive global environment, this reality will undoubtedly be seen as attractive by investors. In the short term, however, the price has remained stagnant.
On the side of the forked network that tried to keep the proof-of-work consensus mode, we cannot say that things are getting better. After peaking at over $45 at the project’s launch, the price of the ETHW token is stagnant, down by… 83%. All indications are that we will see a repeat of Ethereum Classic in terms of price balance against the ETH main chain.
Interesting news that shows that despite the sluggish markets, the implementation of cryptocurrencies continues to grow. Google now provides data on Ethereum addresses via its search engine. The world’s largest website now tells you how many ETH certain wallets hold when you type an Ethereum address into the search bar directly. This new feature works via the Etherscan block explorer, a website that provides data on the Ethereum blockchain.
Google actually seems to be truly on the verge of integrating the world of cryptocurrencies. The company has just selected Coinbase to make cloud-based payments in cryptos and will use its custodial tool. Coinbase, which derives the majority of its revenue from customer transactions, will move its data-related applications to Google from the market-leading Amazon Web Services cloud, which Coinbase has relied on for years. Coinbase’s shares consequently rose 8.4 percent in Tuesday’s trading.
The U.S. Securities and Exchange Commission has once again blocked the launch of a Bitcoin Spot Exchange Traded Fund in the United States. Specifically, the SEC ruled that the exchange had not demonstrated that its WisdomTree Bitcoin Trust would be “designed to prevent fraudulent and manipulative acts and practices” while protecting investors and the public interest. This follows two postponements of the decision on the company’s application in March and August, and the denial of an earlier application by WisdomTree in December for the same reasons. Grayscale received a similar explanation in May after the commission rejected its lengthy appeal to convert its trust to a spot ETF. CEO Michael Sonnhenshein then decided to take action against the SEC. “The SEC is not applying consistent treatment to similar investment vehicles and is therefore acting arbitrarily and capriciously, in violation of the Administrative Procedure Act and the Securities Exchange Act of 1934,” Grayscale’s legal counsel said at the time. In short, it is becoming increasingly clear that 2022 will not be the year for the launch of such a product, no matter how much it is anticipated!
The European Union has tightened restrictions against Russia with the eighth round of sanctions introduced late last week. What on earth does this have to do with cryptocurrencies? The new measures have actually tightened the bans on cryptocurrency assets and transactions. Now, the EU bans all crypto wallets, accounts and custody services. Previously, wallets and accounts could hold up to $9,701 in cryptocurrencies.
Thirteen years ago – and we should write just 13 years ago – the New Liberty Standard website became the first to allow the buying and selling of bitcoins. Transactions were made possible through the PayPal payment processor. The exchange price was simply based on the average cost of mining one bitcoin. It was then possible, as this old screenshot shows, to buy 1,579 BTC for $1USD. A dollar that would be worth over $30M today. Sometimes it’s good to remember how far we’ve come since the early days of the decentralized project!
We’re already looking forward to next week’s update, when we should have many of the questions that are currently outstanding answered. In the meantime, we are back in a defensive position, with only half of the fund’s assets exposed to BTC.
Rivemont Investments, manager of the Rivemont Crypto Fund.
The presented information is as of October 12th, 2022, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
