Crypto News

Sam Bankman Fried Trial: Star Witness Takes The Stand

Caroline Ellison, the former ex-girlfriend of Sam Bankman-Fried, has provided testimony in court that can only be described as highly significant. In a comprehensive and damning statement presented before the court, she openly acknowledged her involvement in a scheme to divert billions of dollars from FTX customers to support Alameda, another business owned by Bankman-Fried. In an emotionally charged admission, Ellison, who previously served as FTX's co-chief executive, confessed to her complicity in Bankman-Fried's efforts to defraud investors. She further revealed that she had been under considerable fear and duress while complying with his directives. She expressed profound remorse for the damage inflicted upon FTX customers, the anxiety she experienced regarding disclosing the truth, and her eventual relief when the company eventually folded.

During the trial, a pivotal moment emerged as the court was presented with a recording of a meeting convened by Ellison with Alameda Research employees on November 9, 2022, a few days before FTX's collapse. The recording demonstrated her intimate understanding of the financial predicaments faced by both companies. In this recording, Ellison disclosed that FTX had 'essentially always allowed Alameda to borrow user funds.' Moreover, she claimed that Bankman-Fried had permitted her to borrow over $8 billion from FTX to offset Alameda's losses. In addition to these revelations, other serious allegations emerged against the former FTX chief, including accusations of a $150 million bribery attempt aimed at Chinese officials from local exchanges in an endeavour to unlock funds. This key evidence undoubtedly poses a significant challenge to Bankman-Fried's legal defence.

Conversely, in defence of these allegations, Ellison faced accusations of being the chief architect behind FTX's collapse, accused of making high-risk wagers that led to Alameda's financial demise, and allegedly pressuring Bankman-Fried to divert funds from FTX customers. Furthermore, she was criticised for inconsistent statements, with some suggesting that she may be cooperating with the prosecution to safeguard herself from imprisonment. On Friday, Zac Prince, the former head of BlockFi, appeared in court and provided a comprehensive account of how his company incurred losses exceeding $1 billion, ultimately leading to its bankruptcy, all attributable to unpaid loans to Alameda Research. The legal proceedings continue, marked by an intense examination of the evidence presented.

UK Crypto Exchanges Brace for Impact as New Regulations Take Center Stage

Last Monday, The Financial Conduct Authority(FCA) issued 146 alerts as Cryptocurrency Exchanges were officially put on standby. In an announcement published on their official website on October 9, 2023, the FCA cautioned that it is essential to safeguard UK consumers from illicit promotions. These alerts were directed at various entities, including social media platforms, app stores, search engines, domain name registrars, payment firms, and cryptocurrency exchanges. The message emphasised the critical need for unwavering compliance with the new regulations, making it their most significant statement to safeguard public welfare from their perspective. In the wake of this development, Binance, the world's largest cryptocurrency exchange, promptly informed all its users of its commitment to comply with the FCA's directives. Users were also asked to complete a verification process and answer brief questions. 

The FCA went on to say that promotions must be “clear, fair and not misleading”, and that it should be “labelled with prominent risk warnings”. They also stressed that these changes will bring crypto assets in line with other high-risk investments. The FCA emphasised the importance of enhancing consumer awareness regarding potential legal breaches in promotions. Not all companies will be included immediately, but the list will evolve gradually. This approach allows the FCA to assess which firms may violate the law. The FCA initially brought this issue to the forefront in February of this year when they issued their initial warnings to firms regarding these regulatory modifications.

SEC Opts Against Appealing Grayscale ETF Court Ruling

On Friday, October 13th, the cryptocurrency space breathed a huge sigh of relief when the Securities Exchange Commission (SEC) decided not to appeal a pivotal decision made in August by the D.C Circuit Court of Appeals. This decision ruled that the SEC had acted arbitrarily and capriciously when rejecting Grayscale's application for a Bitcoin Spot ETF. This move has raised optimism that Grayscale will likely secure approval for a Bitcoin ETF shortly.

The SEC's non-appeal stance conveys clearly that they may no longer obstruct Grayscale's efforts to transform their Bitcoin Trust (GBTC) into a Bitcoin ETF. If this transformation occurs, investors can trade shares in a fund tracking Bitcoin's price without directly owning the cryptocurrency. This would mark a groundbreaking development in cryptocurrency, potentially leading to a surge in cryptocurrency investments. Notably, Bitcoin's value experienced an upturn in response to this news.

It is crucial to understand that the SEC's decision doesn't guarantee the automatic approval of Grayscale's Bitcoin ETF. Nevertheless, the odds of approval are now significantly higher. Additionally, rumours are circulating that the SEC might concurrently green-light multiple ETFs from various investment firms. Such a move would be exceptionally positive for the overall cryptocurrency landscape.

In Other News

• Innovative BitVM Proposal Could Revolutionise Bitcoin with Ethereum-Style Smart Contracts

• DeFi 2.0 Unveils DeFiGPT, Cutting-Edge L2 Chain Integration

• Tokens.com Introduces Innovative Monopoly Edition Featuring Cryptocurrency Integration

Crypto Analysis

Bitcoin

Following the analysis from the previous week, where the price encountered resistance at the $28,000 mark, the current week reveals a decisive rejection, positioning the price squarely within the middle of its trading range at the time of this writing. While breaking through this level proved challenging, it remains premature to determine whether this rejection will drive the price back down towards the weekly support threshold of around $25,100, as indicated on both the daily and weekly charts. Notably, the rapid oversold condition of the Stochastic RSI could be seen as a potential positive for Bitcoin, and a rebound from this point could easily lead to a retest of the peak observed on October 2nd. The weekly and daily RSI indicators are hovering around the midpoint, signifying ample room for price movement in either direction.

An intriguing pattern is emerging on the weekly chart as a complex Head & Shoulders pattern, albeit not a perfect setup, as the left shoulder appears slightly higher than desired. Nevertheless, it's a pattern worth noting. A breakout and subsequent closure below the neckline would set a target of around $19,879. This calculation involves measuring the distance from the pattern's peak to the neckline and deducting that amount from the neckline's breakout point. One notable challenge when considering a short-side trade is the substantial support structure extending to below $20,000, as delineated by the rectangular boxes and the black and blue arrows on the weekly chart. A break above the $28,000 resistance level could easily take the price up to the $31,804 July high as very little resistance stands in its way. We will continue to monitor Bitcoin's performance every week.

Ethereum

Ethereum finds itself at a pivotal juncture in its trajectory. A significant confluence of weekly support currently envelops the entire area just below it. This support zone encompasses the 0.618 Fibonacci level derived from the entire price swing between the November 2022 lows and the April 2023 highs, marked at $1481.51. Notably, the repeated instances of support, as indicated by the black arrows, underscore the steadfastness of this area since the start of the year, casting a positive light on Ethereum's prospects. Moreover, the daily Relative Strength Index (RSI) is approaching oversold territory, and the daily Stochastic RSI has also entered oversold conditions, suggesting the potential for a short-term rebound. Nonetheless, the sustainability of such a rebound remains uncertain.

On the flip side, a concern arises regarding how long this support can endure under the persistent testing it has endured. A minor support area at the 0.786 level, located at $1302.08, is worth noting, with some additional support convergence highlighted by the blue arrows on the weekly chart. Beyond this, there appear to be few obstacles preventing a retest of the November 2022 lows. Conversely, if Ethereum manages to stage a sustained upward move from these lows with robust trading volume, it could pave the way to revisit this month's highs at $1751. Furthermore, should Ethereum surpass this level, it will encounter resistance at the July high of $2029.11, followed by the April monthly high of $2141.54. We will revisit this chart should we witness further signs of either an upswing or a downside breakthrough.

Tron

Tron's price performance in 2023 has been astonishing, diverging significantly from the broader altcoin market. However, we may be approaching a potential turning point. Examining the daily chart to the left, the price could continue its upward trajectory, bouncing off the $0.085 support level, as indicated by the horizontal line and blue arrows denoting multiple support instances. Yet, a different narrative emerges when we broaden our perspective and analyse the weekly and monthly charts. The weekly chart on the right displays a concerning bearish rising wedge pattern, and even more disconcerting is the bearish RSI divergence on the weekly scale. Meanwhile, the monthly chart below clearly illustrates that the price is encountering significant resistance, marked by the rectangular box. We will closely monitor this asset in the upcoming weeks.

Macro News

Market Volatility Amid Geopolitical, Inflation Uncertainty

Sovereign bonds across the global debt market have been volatile as traders try to price developments around the Hamas/Israel conflict alongside mixed data on inflation. Oil and natural gas have also struggled to find a price, stoking fears of increased prices and what that means for central banks’ monetary policy and potential further hikes into 2024. Currencies, gold and equities have also seen big swings as traders grapple with risk on vs risk off headlines and sentiment.

Unfortunately, this looks set to remain for the foreseeable future as the situation in the Middle East develops and risks disrupting supply chains and, consequently, oil prices.

Mixed Start to Earnings Season

Early announcements included steel manufacturers, with disappointing earnings and lowered Q4 guidance. Friday’s big banks painted a brighter outlook, however, with earnings beats and, critically, reductions to loan loss provisions, signalling decreased fears of defaults and delinquencies.

This week sees the earnings pace pick up. Look for earnings guidance downgrades as this seems to be driving post-earnings price action.

Long and Variable Lags Still Exist

Looking at the timeline of unemployment following yield curve inversions, we can see this time is not different. We are right on track from a historical perspective:

Continued claims have ticked up again after remaining flat for a few weeks:

Anecdotal evidence shows consumers struggling with credit card debt increasing and savings falling. During JPMorgan’s earnings call, Dimon said consumers are spending down savings, but consumers and companies “generally remain healthy.” but looking at consumer-facing equities does show weakness in the retail sector:

China Risks Deflation, Continues Piecemeal Stimulus

Last week’s data out of China was mixed, with consumer prices nearing the point of deflation and producer prices falling quicker than expected. China’s export slump has slowed, with exports coming in at -6.2% vs forecast -7.6%, but imports dropped to -6.2% vs expected -6%. New loans came in lower than forecast as well, whilst total social financing beat expectations.

With the slowdown in China’s housing market continuing to curb consumer spending and economic activity not turning around, China is considering further stimulus but remains reluctant to do too much as government advisers are split between the effectiveness of fiscal easing and structural economic reform.

The yuan continues to weaken and whilst the Hang Seng index is holding up, the CSI 300 composite index is nearing last October’s lows:

Final Thoughts

With so much uncertainty, we can only be confident of continued volatility. Central banks, particularly the Federal Reserve, remain data-dependent, which only adds to the confusion in markets.

At a recent Dallas conference, Dallas Fed President Lorie Logan indicated that the bond market “could do some of the work of cooling the economy for us, leaving less need for additional monetary policy tightening”. But the bond market isn’t a monetary policy tool. So long as this vague approach from the Fed persists, so too will volatility in the bond market, which will continue to fuel volatility across all markets.

Everyone at the Fed is speaking this week, including Jerome Powell on Friday. The question remains whether they can provide any reassurance to markets, particularly during increased geopolitical tensions.