Crypto News

Cryptocurrency Markets Rise To New All-Time Highs Then Crashes

Last week witnessed a significant downturn in the cryptocurrency markets, with Bitcoin experiencing a sharp decline from its recent all-time highs. The plummet was attributed to several factors, notably the unexpected rise in inflation data and widespread liquidations across the market. Bitcoin, in particular, suffered an 8% plunge in just one day, tumbling from its pinnacle of $73,794. Altcoins such as Ether, Ada, Bnb, and XRP also endured substantial losses during this period. Shiba Inu saw a notable 13% decrease, while Near Protocol experienced a staggering 25% decline over a two-day trading span. Remarkably, Solana emerged as an outlier, defying the typical cryptocurrency market trends. Despite the downturn, many markets have since managed to recoup some of their losses as of the time of writing on Sunday evening.

FCA Greenlights ETN Issuance: Institutions Brace for Possible Explosive Market Surge

The Financial Conduct Authority (FCA) has approved the launch of Bitcoin and Ethereum Exchange Traded Notes (ETNs) for professional investors, marking a significant development in the UK's regulatory stance on cryptocurrency investment. ETNs are investment instruments that mirror the performance of cryptocurrencies, providing a vehicle for profit exchange among professional investors, firms, and credit institutions.

This move represents the FCA's initial step towards facilitating a regulated market for such products. While the regulatory body has expressed reservations about the risks associated with cryptocurrency markets, it has opted to permit their issuance to professional investors. Notably, retail investors will be prohibited from accessing these products, reflecting the FCA's cautious approach to safeguarding this segment of the market from potential risks.

Despite the restriction on retail investors, the authorisation for institutional investors to launch these products signals a positive shift toward broader acceptance of cryptocurrencies. The London Stock Exchange is expected to implement stringent controls to mitigate fraud and market manipulation, aligning with the FCA's focus on investor protection.

The recent approval of a Bitcoin Spot ETF by the US Securities Exchange Commission on January 11 may have influenced the FCA's decision to greenlight these ETNs. The London Stock Exchange has confirmed that applications for Bitcoin and Ethereum ETNs will be accepted in the second quarter of this year, underscoring the growing momentum towards the acceptance of cryptocurrencies all-be-it solely at the professional investing level.

UK Judge's Verdict: Craig Wright's Bitcoin Creator Claim Crumbles

Craig Wright, the Australian computer scientist and businessman who has been claiming to be Satoshi Nakamoto, suffered a significant defeat in his recent month-long court case. The legal battle revolved around Wright's assertion of ownership and control over Bitcoin and its technology, as he argued that he authored the Bitcoin whitepaper. However, The Crypto Open Patent Alliance (COPA) contested Wright's claims, seeking to prevent him from monopolising the world's leading digital currency.

UK judge James Mellor presided over the case, meticulously evaluating the evidence presented. Ultimately, Judge Mellor concluded that Wright's claims were baseless and prohibited him from pursuing legal action based on those claims. COPA, which initially filed the lawsuit against Wright in April 2021, welcomed the court's decision as a victory for truth and justice. The ruling prohibits Wright from publicly asserting his identity as the originator of Bitcoin or Nakamoto. Violating this restriction could result in severe legal consequences, including a lengthy prison sentence.

The legal battle, which finally reached trial in January 2024 after several delays, including a change in judges and Wright's involvement in other legal disputes, concluded with Judge Mellor definitively stating that Wright was not Satoshi Nakamoto and did not invent the Bitcoin system or draft the original whitepaper. COPA anticipates that the court's decision will curb Wright's attempts to intimidate developers within the Bitcoin community. Despite the outcome of the case, Wright has chosen not to comment on the court's ruling, maintaining his silence regarding the proceedings.

In Other News

Democratic Senators: SEC Pressured to Slam the Brakes on Future ETPs

Bankman-Fried: U.S Prosecutors Urge Massive Fine & Decades Behind Bars 

El Salvador Surprises With Stash of Bitcoin Beyond Expectations

Crypto Analysis

Bitcoin (BTC)

Bitcoin surged to its 3rd all-time high within just a week reaching a high, followed by a significant sell-off which saw $650M in liquidations take place right across the board. Last Thursday's peak at $73,794 was swiftly met with a 12% plunge over the subsequent three days. Signs of a downturn were evident beforehand, with bearish divergence apparent on the daily chart leading up to the top. It's worth noting that sharp sell-offs are typical during bull cycles, often exceeding 20%, and this decline might not deviate from the norm and could very well be short and sharp. With the market in an extremely overbought state, a correction was long overdue. Analysing the chart prompts us to ponder whether this is merely a minor retracement or the beginning of a more substantial pullback.

A glance at the volume indicates that it is slowing down and Saturday's downturn even witnessed lighter volume than the prior down day, hinting at a potential exhaustion among sellers. Notably, the price found support around the 0.236 Fibonacci level, stemming from the significant January 23 swing low to the all-time high at $65,466, leading to a modest rebound. However, a more critical area lies at the 0.382 Fib level at $60,314, if indeed we find ourselves coming down to that level, supported by a confluence of support, including a daily swing low from March 5th, we must monitor this area closely. A breach and close below this point could signal a bearish trend shift.

Subsequent Fibonacci levels, particularly the 0.618 Fib level at $51,985, offer additional support zones if further declines occur. On the RSI momentum indicator, the mid-range position suggests room for price movement in either direction. While the upward slope of major EMAs is positive, it's important to note that these are lagging indicators, with price often reacting ahead of them. Currently, the price rests below the descending 10-day EMA for the first time since late January, it is sloping down. 

Examining the 4-hour chart reveals clear bearish divergence leading up to the all-time high, accompanied by a sequence of lower lows. However, amidst this downward trend, a hidden bull formation has emerged at recent lows, signalling potential for a bullish reversal, which aligns with the ongoing uptrend we're currently witnessing.

To establish a bullish outlook on the short-term chart, a crucial breakthrough of the swing high from March 15th at $70,606 is necessary. Additionally, attention is drawn to the 0.618 Fibonacci level, derived from the recent all-time high down to the most recent swing low on March 17th. This level, coinciding with resistance marked by a green shaded horizontal pattern, stands at $70,278, making it a key level to monitor closely in the coming week.

Should the price approach this level, it could serve as both an area of interest and resistance. Observing the price action around $70,278 will provide valuable insights into the market's sentiment and potential future trajectory.

The recent large downward momentum suggests a possibility of large players capitalising on liquidity before the upcoming halving in April, potentially leading to a market-wide correction. Until a definitive break below the March 5th swing low occurs, the prevailing trend remains upward, albeit with a cautious outlook compared to previous weeks. Monitoring Bitcoin and its path is very important in the coming week.

Bitcoin Dominance (BTC.D Excluding Major Stablecoins)

Bitcoin Dominance (BTC.D), excluding major stablecoins, is nearing a point of heightened interest. Since late October 2023, the price has oscillated between the upper and lower trendlines, occasionally experiencing false breakouts both above and below. As we once again approach the lower boundary of the channel, attention is drawn to a crucial level and pattern on the weekly chart.

Bitcoin Dominance analysis is conducted every two to three weeks, particularly when reaching pivotal moments. This recurring pattern underscores the perpetual anticipation of a significant market shift. However, just as such a shift appears imminent, the chart often reverses course, leading to further uncertainty and an outpacing of Bitcoin against altcoins. Presently, there's potential for a huge downside break where altcoins may surpass Bitcoin.

Despite the overall downward movement within the channel, price action has been erratic, chopping above and below the moving averages, indicative of market indecision. A sustained break below the trendline, coupled with downward-sloping moving averages, could signal a deeper decline. A solid break and move below the 10-day Exponential Moving Average could be the first sign of an alt-season.

The RSI momentum indicator hovering mid-range implies price movement could go either way. Of greater significance is the weekly chart, particularly as we approach the neckline of a Head & Shoulders pattern. Although such patterns historically exhibit moderate success rates, the context is crucial. This formation emerges following a prolonged uptrend and resides within a significant, large consolidation zone, devoid of further highs. Consequently, there's a strong possibility of a breakdown.

A move and close below the neckline, situated just above 55%, could propel altcoins higher, potentially surpassing Bitcoin's dominance. This scenario marks a pivotal moment in the cryptocurrency market, warranting close observation in the coming weeks.

Vechain (VET)

Let's delve into our final chart analysis for today, focusing on Vechain (VET), currently ranked 44th in MarketCap with a capitalisation of $2.4B at the time of writing. Vechain has been chosen due to its positioning at a critical support area, as highlighted by the blue arrows and the black horizontal line on the daily chart, showing promising price action as of Sunday evening.

Similar to other assets discussed, warning signs emerged with the formation of bearish daily divergence. Although the short-term trend appears downward, evidenced by the breach of the initial horizontal line at $0.0435, there's potential for a temporary rebound from current levels, buoyed by the support line. A close back above $0.0435 could pave the way for a resurgence towards the recent high of $0.0550 reached on February 28th. Notably, price remains above the 200-day EMA, albeit with a flattening trajectory, while attempting to reclaim the 50-day EMA and volume is average on this down-move. With the current RSI reading slightly below mid-range, there's flexibility for price movement in either direction.

Turning to the weekly chart, a significant confluence of resistance is observed around the 0.236 Fibonacci level, derived from the major swing high in November 2021 to the intervening swing low in June 2023, coming in at $0.0544. Multiple tests of this level have occurred, highlighting the importance of a daily close above this threshold to sustain the bullish trajectory. The Visible Range Volume Profile (VRVP) reveals an area of interest, indicating a combination of price and volume dynamics from past instances, aligning with the aforementioned Fibonacci level.

While Vechain currently experiences a short-term downtrend, a decisive close above the previous support line turned resistance, accompanied by above-average volume, could signal a resurgence of the uptrend. Conversely, a breach below the lower horizontal line on the daily chart may trigger a more extensive retracement. Monitoring these key levels and volume dynamics will provide valuable insights into Vechain's future price action.

In Summary

The volatility in the cryptocurrency markets over the past week serves as a stark reminder of its dynamic nature. From reaching new all-time highs to quickly plummeting through daily support levels, with altcoins dropping as much as the landscape can change rapidly. Despite the turbulence, the overarching trend still remains upward.

Bitcoin maintains its position above major moving averages and crucial daily support levels. While the sudden drops can be unsettling, it's important to note that as long as these key areas that we have mentioned above hold, the primary trend remains bullish. However, a decisive break and close below these levels would necessitate a broader reassessment, potentially leading to the identification of further retracement levels on the weekly chart.

As we navigate the uncertainties of the market, it's essential to remain vigilant and adaptable. Wishing you a successful week ahead and good fortune in your endeavours.

Macro News and Analysis

It’s been another busy week for markets so in this week’s newsletter I’ll be writing about more subjects, but keeping each story brief and include references.

Market Outlook

Last Friday 15th saw Q1 options expiry (OPEX) which I unfortunately missed last week, but does go some way to explain the declines seen into Friday.

Longer term the outlook for the year is still very positive from what I’m reading. Mike Howell from CrossBorder Capital was on Adam Taggart’s Thoughtful Money, saying he expects some volatility near term but overall, the global liquidity outlook is still bullish.

Options expert Cem Karsen of Kai Volatility appeared on Schwab Network Thursday and remains bullish for this year into the US election. Cem does see potential for volatility over the next 2 weeks though, following Friday’s OPEX and until share buybacks start after earnings reports are released. Cem sees potential for a 3-10% correction but thinks 20% is unlikely.

FOMC, BOE, BOJ Rate Decisions

The outlook for the week ahead is uncertain with the FOMC interest rate decision on Wednesday and BOE rate decision on Thusday. We also have a potentially significant event with the Bank of Japan interest rate decision – more on that below.

This month’s FOMC rate decision comes along with an updated summary of economic projections (SEP), where each board member submits their “projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation” for the next 4 years and “over the longer run”. This will be studied closely for any changes from the previous quarter’s SEP, giving insight into when and how likely rate cuts (or hikes?) will be.

Hot US PPI Data Pushes Probability of No Cut to 99%

The US producer price index (PPI) rose higher than expectations last week, on every metric. PPI feeds into the personal consumption expenditure (PCE) index which the Fed’s preferred inflation measure.

Nick Timiraous posted on X that February’s core PCE index likely rose 0.3%, “according to the forecasters who translate the CPI and PPI into the PCE”

Hotter than expected PPI points to sticky inflation, confirming the market’s expectation the Fed is unlikely to cut rates on Wednesday:

China

China’s property market remains an absolute disaster with China high yield bond losses in many cases trading at single digit cents on the dollar:

Kao expects the PBOC will be more dovish than the Fed, quoting an article from the FT confirming his take on the situation, which says if Chinese exports don’t pick up quickly, and the consumption remains low, stimulus of up to RMB2-3 trillion could be delivered in Q3, if not by the end of Q2:

This correlates with Michael Howell’s 2024 outlook for global liquidity remaining stimulative and Cem Karsen’s view of continued fiscal spending by the US government.

Bank of Japan to End Negative Interest Rate Policy?

The Bank of Japan (BOJ)’s next monetary policy decision will be announced overnight at 3am Tuesday morning (4pm Tuesday Tokyo time). Market participants and pundits didn’t believe Jerome Powell would be able to hike rates as aggressively as he did, and now BOJ Governor Kazuo Ueda is facing the same scepticism as the Bank has been discussing ending their 8 year long negative base rate of -0.1%

However, former Goldman macro trader and Tokyo-based macro analyst Weston Nakamura has a strong case for believing the BOJ. Weston hosts the podcast Across the Spread and has spoken with experienced macro trader Grant Williams over three episodes, where they discuss BOJ policy changes and, as this transition to positive interest rates happens, what it means for global financial markets.

Weston quotes the Nikkei news article which has been even more reliable an insider as WSJ’s Nick Timirous has for the FOMC.

Nikkei clearly states in a March 16th headline “BOJ to end negative rates, marking 1st hike in 17 years”. It doesn’t get much clearer than that. And according to Weston, Nikkei has a flawless record of predicting BOJ policy decisions.

What does this mean for markets? That goes far beyond the scope of this newsletter so if you want to learn more, follow the links in this story and visit Weston’s Substack. More to follow in future newsletters, I’m sure.

Bitcoin Overtakes Silver, Meta; US Bitcoin ETFs Catching Up with US Gold ETFs

Keeping up with the rapid success of US spot bitcoin ETFs has been quite a task since their launch on January 10th this year. In under 10 weeks, as of 15th March, US spot bitcoin ETFs including Grayscal’s GBTC (GBTC) held $56.9bn in assets under management (AUM). That’s more than half the dollar value held in US spot gold ETFs which hold $103bn AUM. Globally, spot gold ETFs hold $206bn AUM so that puts US spot bitcoin ETF holdings alone at over 25% of the global gold ETF market. That’s incredible!

At the time of writing, bitcoin’s market cap stands at $1.33 trillion, down 8.3% from last week’s peak of $1.45 trillion. Silver’s market cap is $1.43 trillion which means bitcoin briefly flipped silver. Another flippening happened last week, with bitcoin surpassing Meta (META) by market capitalisation on Monday 4th. So far that has held, with bitcoin rising whilst Meta remained flat to down on the week:

Meta is the laggard when it comes to US mega cap stocks which all have market caps of over $1 trillion. But that’s no small thing given the next largest stock is Eli Lilly (LLY) at $717 billion, followed by Broadcom Inc (AVGO), Visa (V), JP Morgan Chase & Co (JPM) and Tesla (TSLA) all in the $500 billion range.

Looking at the mega caps, bitcoin has a bit more work to do to catch up with Google (GOOG) and Amazon (AMZN) but if the past 2 months are anything to go by, this may happen sooner than most expect:

This Week’s Events

Monday

• China industrial production, retail sales, unemployment

• Eurozone balance of trade, CPI

• US NAHB housing market index

Tuesday

• Australia rate decision

• BOJ interest rate decision

• EU ZEW economic sentiment index

• Canada inflation

• US housing starts, building permits

• China YTD foreign direct investment

Wednesday

• China loan prime rates

• Indonesia rate decision

• UK CPI

• ECB President Christine Lagarde speaks

• EU consumer confidence flash

• US rate decision and summary of economic projections, press conference

• Brazil rate decision

• Japan balance of trade

Thursday

• Australia employment change

• New Zealand GDP

• Taiwan rate decision

• Switzerland rate decision

• Norway rate decision

• UK rate decision

• Mexico rate decision

• European Union summit in Brussels

Friday

• Japan CPI, Friday

• UK retail sales

• Canada retail sales

• Richmond Fed President Tom Barker speaks

• Atlanta Fed President Raphael Bostic speaks

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