CoinLoan Weekly: Inertia, anticipation of inflation data, crypto in UK's reform package
Following a jump above $17,350, BTC tumbled to under $17,000 and fell steeply to a 7-day low of $16,781.78 on Wednesday, December 7. The next day, it rebounded above $17,250, gaining enough momentum for a 7-day peak of $17,258.85 on Friday, December 9. By the weekend, the coin had slid to approximately $17,150, a level it fluctuated around until Monday pushed it back below $17,000.
On Tuesday, December 6, BTC dipped along with equities following recession forecasts by JP Morgan Chase and Morgan Stanley's announcement of layoffs. Paramount Global, Amazon, Meta Platforms, and Nvidia also weighed in on the grim predictions of a hard landing in 2023. Following the drop, The Fear and Greed Index was back in the fear territory, indicating a slight improvement since late November.
As of this writing, BTC is changing hands at $17,028.25, with a 24-hour slip of -1.1% and a 7-day dip of -0.7%.
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ETH continued to echo BTC, falling below $1,250 after rising to $1,300 on the first day. Following gloomy economic forecasts, the price bottomed out at a 7-day low of $1,225.02 on Wednesday, December 7. Then, ETH sprang sharply to $1,286 the next day and descended from a 7-day high of $1,288.22 on Friday, December 9. Sunday's return to $1,280 was short-lived — Monday morning (December 12) pushed the price below $1,250.
As ETH struggled to stay above resistance at $1,300, on-chain exchange data suggested negative net flows. On December 8, the market saw outflows worth $1.6 billion — a sign of holders' confidence in the price of ETH. Whales and sharks continued to increase their holdings, which is typically a bullish trend. The key addresses holding between 100 and 1 million ETH now own over 65% of the total supply.
As of now, ETH is worth $1,253.64, with a 24-hour loss of -2% and a 7-day loss of -2.2%.
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XRP showed an uptick above $0.395 before dipping to roughly $0.386 on Monday, December 5. The descent continued, pulling it to $0.382 the next day and $0.377 on Wednesday, December 7. After recovering to nearly $0.389 on Thursday, December 8, XRP hit a 7-day high of $0.395087 on Friday, December 9. The price mainly stayed below $0.39 during the weekend and fell to $0.373874 on Monday, December 12.
Last week, Whale Alert detected several significant transfers, including 500 million XRP moved from Bittrex to a wallet on December 7. The next day, 40 million XRP similarly left Bitso. According to some analysts, the transfers may indicate redistribution or an effort to prop up the price in the short term. Meanwhile, both Ripple Labs and the SEC have requested that the Court set a deadline of January 4, 2023, for the filing of sealing arguments by non-parties ahead of a summary judgment.
As of now, XRP is trading at $0.379231, with a 24-hour drop of -2.4% and a 7-day fall of -3.4%.
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Financial markets anticipate November inflation data
Last week's sideways phase gave the crypto market some much-needed respite. Yet after three days of trading above $17,100, BTC dove down on Monday, December 12. These latest dynamics may reflect anxiety ahead of another FOMC (Federal Open Market Committee) meeting and FTX hearing.
On Friday, December 9, both BTC and ETH were merely .005% and .006% above the last recorded price on December 2. The volume also remained mostly flat, while trading activity for both coins dropped slightly below the 20-day moving averages. On Monday, December 12, they fell alongside other top 10 cryptos, except Litecoin.
Investors are waiting with bated breath for November CPI (consumer price index) data and another interest rate hike by the Fed. Crucial for inflation, this indicator is scheduled for release on Tuesday, December 13. The following day, another FOMC meeting is due to establish the subsequent increase in the benchmark interest rate.
Beyond crypto, the US stock markets also closed the trading day on Friday in the red. The S&P 500 and the Nasdaq Composite both shed 0.7%. The Dow Jones Industrial Average declined by 0.9%, with a 2.8% loss, marking the worst trading week since September.
High chances of a softer rate hike
So far, the Fed's adherence to 75-basis-point hikes has failed to tamp down on inflation. In November, US wholesale prices rose by 0.3%, close to the 0.2% projected by many economists. Yet according to the latest US Labor Department report, they are up 7.4% from a year earlier, far from the target range of 2%.
The FOMC meeting ending on Wednesday, December 14, is expected to introduce a milder rate hike of 50 basis points. According to the CME FedWatch tool, the probability of this decision, which should raise the target range to 4.25-4.5, is over 72%. The past four raises added 75 basis points each.
In a series of tweets last week, FTX founder Sam Bankman-Fried announced he would testify before the House Financial Services Committee at a hearing about his company's implosion on Tuesday, December 13. His remote testimony would become his first public appearance before US lawmakers. SBF explained his decision to remain in the Bahamas, where FTX is based, by the desire to avoid "the paparazzi effect."
However, on Monday, December 12, authorities in the Bahamas arrested the former CEO based on a sealed indictment. Earlier that day, he had said he was "not currently scheduled to testify" before the Senate Banking, Housing, and Urban Affairs Committee. At the same time, the committee leaders revealed in a joint statement that he had refused to testify "in an unprecedented abdication of accountability." He has also rejected service of a subpoena.
UK includes crypto in new reform package
On December 9, the UK government announced its Edinburgh Reforms package, which includes an extension of tax breaks to cryptoassets. One of the 30 reforms to financial regulation, this measure aligns with Prime Minister Rishi Sunak's ambition for the country to become a crypto hub.
The Edinburgh Reforms, designed to replace parts of the existing EU regulation, include a formal response to the consultation on expanding the Investment Manager Exemption to cryptoassets. This change should facilitate the inclusion of crypto into the portfolios of overseas funds managed in Great Britain by eliminating the risk of UK taxation.
According to Chancellor of the Exchequer Jeremy Hunt, the government intends to implement this change by the end of 2023 through HM Revenue & Customs regulations. The package also includes the creation of a financial market infrastructure sandbox in 2023 to enable firms to test and implement new technologies like a distributed ledger.
UK officials expect the new reforms to create jobs, help businesses, and drive growth across the country. "Our regulatory framework for financial services must support innovation and leadership in emerging areas of finance," explained Hunt. Financial services are among the five priorities for Rishi Sunak's government in its review of EU laws. It aims to make the sector "globally competitive" through technological advancement, helping it act "in the interests of communities and citizens."
The UK government is also expected to bring forward a consultation on the case for “a sovereign digital pound.” The Bank of England should publish a paper establishing technology considerations for the potential build of a CBDC (central bank digital currency) in the coming weeks. Last year, Rishi Sunak expressed support for the digital pound initiative, noting that it could "offer businesses and consumers new ways to pay."
As the UK's Chancellor of the Exchequer, Sunak revealed his ambition to make the UK "a global hub for crypto asset technology" in April 2022. This vision also included bringing stablecoins "within regulation" to make them a recognized form of payment. The Financial Services and Markets (FSM) Bill unveiled on December 9 will create a safe regulatory environment for these assets while giving the government "the necessary powers to bring a broader range of investment-related cryptoasset activities into UK regulation."