CoinLoan Weekly: Steady BTC, crypto lending boom, crucial weeks ahead
BTC's jump to a 7-day high of $20,296.07 on Tuesday, September 27, fizzled quickly as the coin dropped to $18,548.96 the next day. It held above $19,000 the rest of the week, with an uptick to nearly $19,870 on Friday, September 30, following Lael Brainard's speech. BTC spent the weekend below $19,500 and headed upward again on Monday, October 3.
The coin failed to make a robust run in either direction, and the Fear and Greed Index remained in a tight extreme fear range. Brainard's words triggered a brief rise as the Vice Chair reiterated the Fed's commitment to "avoiding pulling back prematurely." Yet on Monday, October 3, the US ISM Manufacturing PMI offered faint hope for the regulator's retreat.
As of this writing, BTC is trading at $19,533.69, with a 24-hour gain of +1.5% and a 7-day climb of +3.8%.
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After a peak of $1,393.48 on Tuesday, September 27, ETH sank to a 7-day low of $1,270.59 on Wednesday, September 28, trailing BTC. It then see-sawed above $1,300 before dipping lower on Sunday, October 2. Compared to BTC, ETH's reaction to Brainard's speech was less pronounced — on Friday, September 30, it barely rose over $1,350.
Over the past ten days, ETH has been on a relatively flat trajectory, trading comfortably above $1,300 with an average change of 1.2%. On Monday, October 3, the price was still 20% lower since the Merge, but ETH gained over 3% amid the decline of the manufacturing PMI.
As of now, ETH is trading at $1,316.87, with a 24-hour climb of +1.0% and a 7-day rise of +1.8%.
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XRP peaked on Thursday, September 29, reacting to new developments in the SEC vs. Ripple Labs legal saga. After rebounding to $0.498463 from a 7-day low of $0.406844, the price fluctuated around $0.48 and dipped below $0.46 on Sunday, October 2. The following day, XRP bounced back from $0.44, following BTC.
Progress in the legal battle fueled the latest run of price volatility. XRP supporters are hoping for a court victory that could send the price up by at least 50%. On Thursday, September 29, Federal Judge Analisa Torres ordered the regulator to deliver the Hinman document requested by Ripple, important evidence in establishing its argument that XRP is not a security.
As of now, XRP is trading at $0.456116, with a 24-hour loss of -1% and a 7-day drop of -7.6%.
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Latin America is seeing a crypto lending boom
Crypto lending is flourishing across Latin America as soaring inflation and bank rates make conventional credit prohibitively expensive. Despite incomes similar to Eastern Europe and South Africa, the region has far fewer credit facilities and poor financial inclusion. At the same time, it offers significant incentives for crypto businesses.
Latin American central banks have hiked their reference rates repeatedly since 2020, pushing the annual cost of some conventional loans above 200%. Meanwhile, up to half of the workforce work informally and lack a sufficient credit score.
These conditions favor crypto platforms with zero maintenance fees and modest interest rates compared to private banks. Companies like Ledn help residents get credit without selling their crypto holdings.
In mid-2022, Argentinians got access to crypto loans via the NuArs stablecoin, a digital asset on Binance's blockchain pegged to the Argentine peso (ARS). NuArs must be collateralized with DAI, a USD-pegged asset. Thus, users keep their US dollars and get hold of pesos.
This service was launched by a Buenbit, a Latin American crypto exchange. The total amount borrowed has grown by a whopping 70%, while the borrowing limit has increased fivefold to 5 million ARS ($18.518), according to CoinDesk. Buenbit's clients include individuals and businesses, both medium and small. The annual interest rates approach 70%.
In August, Num Finance launched its own crypto loans in NuARS and NuPEN in Peru and Argentina. NuPEN, a stablecoin it developed, is pegged to the Peruvian sol. The loans can be fully collateralized with BTC, ETH, DAI, and some other cryptocurrencies, while the interest rates vary geographically. For example, in Argentina, users can borrow NuARS at 59% and NuPEN at up to 5%.
Over the past month alone, the platform has lent over $250,000. As its CEO Santiago Migone noted, the region offers "a great incentive for crypto products that bring new modalities to help expand credit in several ways."
In September 2022, Argentina's central bank brought the reference rate to a startling 75% (the highest in the world). Its largest private bank, Banco Santander, offers loans with interest rates reaching 230%. Brazil's interest rate of 13.75% is the second highest on the continent, while its leading private bank Itau offers annual rates of over 170%. In August, Mexico saw its tenth consecutive monthly rate hike push the interest rate to an all-time high of 8.5%.
Even residents of countries with relatively strong economies, such as Peru or Chile, are turning to crypto as an inflation hedge. The average inflation rate on the continent — 11% year-to-year — is among the highest worldwide. As conventional loans become impossible to repay, crypto offers a solution, particularly for the unbanked.
Next few weeks could prove crucial for BTC, according to analysts
This year's sell-off of risky assets could have a silver lining for crypto. Despite BTC's failure to become an inflation hedge, it may have already bottomed out. Still, macro pressures remain evident, prompting predictions of crucial weeks ahead.
Although the total crypto market cap halved in the second quarter, it is now up by 7% since July. David Hollerith of Yahoo Finance regards this as evidence that "despite how volatile crypto has been, it's been primarily stagnant over the last three months." According to Messari's senior market analyst Thomas Dunleavy, "We may have hit the ultimate bottom months ago because of cascading liquidations [...] Most of the sellers seemed to have left."
As an asset class, crypto has started to outshine stocks. In Q3, BTC climbed by +1%, as opposed to falling stock indices. The Nasdaq lost 2.7%, the S&P 500 fell 4%, and the Dow fell 5.4% as of Friday, September 30.
On Tuesday, September 27, the plunge of the British pound coincided with the highest trading volumes for BTC/EUR and BTC/GBP since March 2020. Hollerith described the phenomenon as "a little bit of a wider move to risk assets during that time." Crypto is gradually becoming a leading indicator for investors' risk appetite, partly because trading happens 24/7.
The general market performance feels less existential. VanEck portfolio manager Pranav Kanade noted that during the crises of 2018 and 2019, it was unclear if crypto would survive. "This time around, during the drawdown from the market's peak in December, there's a feeling of inevitability in the ecosystem."
Cryptocurrencies are still among the biggest losers among risk assets, with some of them faring worse than BTC's 60% year-to-date drawdown. Globally, risk markets are being affected by fears of recession, and the next few weeks could prove critical.
According to Alessio Rastani, forex trader and crypto analyst, the stocks will show if a short-term or a long-term recession is ahead. Speaking to Cointelegraph, Rastani underscored the S&P dynamics in Q4. "If that bounces or rally fails and drops back down again, then very likely, we're entering a long-term recession and something very close to 2008." This scenario may last until 2024, and the BTC price is bound to be affected.
The long-term prospects of crypto investing, particularly speculation, also depend on blockchains' ability to scale and attract more daily active users. The current size of the audience (around 2.5 million users) is meager compared to over 4 billion smartphone owners. Underscoring the importance of throughput, Kanade concluded, "For market caps to grow, daily active users need to grow."