Crypto News

CZ Sentenced: Ex-Binance Chief Lands 4 Months Behind Bars

Changpeng Zhao, also known as CZ, the former chief executive of Binance, the world's largest cryptocurrency exchange, has been sentenced to four months in prison. In November, Zhao entered a guilty plea to charges related to money laundering activities. This sentencing marks the culmination of a long-standing investigation by the U.S. government, concluding with a plea agreement. Additionally, Zhao was handed a personal fine of $50 million. Binance faced severe repercussions, receiving a hefty $4.4 billion fine for mishandling customer assets and operating without the necessary legal registrations.

Previously, Zhao had admitted to failing to implement adequate anti-money laundering measures within Binance. This failure allowed for illegal transactions to occur within regions that are under international sanctions. Although U.S. prosecutors initially sought a 36-month sentence for Zhao, the sentencing guidelines recommended a period of 12 to 18 months. Subsequently, the judge opted for a lesser sentence within these guidelines.

In the aftermath of these events, and following Zhao's exit from the company, Binance has reported significant improvements in its compliance procedures. The company asserts that it has tightened its compliance measures and now operates in strict adherence to the laws and regulations of the various jurisdictions in which it functions. This step is part of Binance's effort to rebuild its reputation and ensure more robust and secure operations for its customers globally.

Bitcoin Spot ETFs Hit by Unprecedented Withdrawals

Last week, Bitcoin Spot Exchange Traded Funds (ETFs) experienced substantial outflows, marking a notable shift as ETF share sales exceeded purchases. Among the impacted, BlackRock, the largest investment company globally, recorded its first-ever day of outflows since the inception of its BlackRock Bitcoin Spot ETF on January 11th, with investors withdrawing $36.9 million. Similarly, Fidelity’s FBTC Bitcoin Spot ETF faced significant net outflows totalling $191 million, signalling a growing trend in this specific market sector.

Surprisingly, this shift occurred during a week when Jerome Powell, the Chairman of the Federal Reserve, moderated expectations of an interest rate increase, adopting a relatively dovish stance. Although Bitcoin’s price initially rose following the news from the Federal Open Market Committee (FOMC), it soon declined as the market reacted negatively. This reaction was not isolated to Bitcoin; the broader financial markets also showed negative trends after the FOMC meeting, reflecting a general loss of confidence.

Additionally, other ETFs like Grayscale’s GBTC and ARKB, managed by Ark Invest, also reported significant outflows, further illustrating the widespread cautious sentiment among investors across various Bitcoin-related investment products.

Hong Kong's Bitcoin Spot ETF To Great Success

The launch of the Hong Kong Bitcoin and Ethereum Spot ETFs last weekend marked a significant milestone, amassing $292 million in assets under management (AUM) on their first day alone. This rapid accumulation surpassed 25% of the projected $1 billion they were expected to reach over two years in a single day. This robust initial uptake will be viewed positively by investors and seen as a major step toward mainstream adoption globally, despite the restriction on Chinese nationals from trading in these funds.

Particularly, the Ethereum ETFs accounted for 15% of the total funds collected, demonstrating a strong demand for both cryptocurrencies. Among the top performers were the ChinaAMC Bitcoin ETF, which gathered $124 million, followed by the Harvest Bitcoin Spot ETF with $63 million, and closely behind was the Bosera Hashkey Bitcoin ETF with $61 million.

Since their inception on January 11th of this year, the U.S. Bitcoin Spot ETFs have seen remarkable success, accumulating around $25 billion in AUM, despite experiencing significant outflows in the past two weeks. On Friday, Grayscale’s Bitcoin Trust (GBTC) reported a net increase of $63 million, bouncing back after a significant sell-off and surpassing BlackRock’s IBIT fund in terms of AUM.

At the time of writing, Bitcoin's price has reached $65,513, a surge that many attribute to the positive reception and performance of these new ETFs. This indicates a strong correlation between the success of the ETFs and the upward trajectory of Bitcoin's value in the market.

Crypto Analysis

Bitcoin (BTC)

This week, Bitcoin's market behaviour was remarkably volatile, experiencing significant fluctuations that caught the attention of investors. In the early part of the week, Bitcoin plummeted to new multi-week lows, only to rally robustly in the latter half. The price action is looking strong at the time of writing on early Monday morning UK time, with my only concern being the reducing volume as the price is rising.

The old adage, "What a difference a day makes," was exemplified last Thursday when Bitcoin surged back up, reclaiming a crucial support level at around $61,300. This support line had been steadfast for nearly two months, surviving several attempts to break below it, until last Tuesday. On that day, the price fell sharply to a low of $56,500. Those holding long positions, and potentially facing liquidation, would understandably have anticipated a further decline, doubting any immediate recovery.

However, contrary to those fears, the market demonstrated resilience. The adage that the best buying opportunities come during times of market fear seemed applicable here. With Bitcoin dropping below both the 10 and 100-day moving averages, buying at this dip would have required considerable courage. Yet, the market's bulls made a strong comeback, effectively absorbing all the liquidity from bearish traders and driving the price upward once again.

Bitcoin faced a new challenge as it approached the 50-day EMA, but again, at the time of writing, it has been confidently broken. The RSI momentum indicator is also in a mid-range position, suggesting there is potential for further price increase. 

The 8-hour Bitcoin chart highlights a critical juncture at the 0.618 Fibonacci retracement level. This key level, which sits at $66,914, represents the Fibonacci retracement from the all-time highs of March 14th down to the significant swing low on May 1st. A breakout above this convergence of resistance could signal a highly bullish shift in Bitcoin's market dynamics, potentially paving the way for a surge towards new all-time highs.

Conversely, a decline below the daily support line indicated in the daily chart could serve as a crucial bearish indicator. Such a move would significantly increase the likelihood of Bitcoin retracing back to the lows observed on May 1st. This pivotal point serves as the 'line in the sand' that could dictate the cryptocurrency's short-term trajectory.

I am eager to analyse further developments on the Bitcoin chart in next week's update, as these movements will provide greater clarity on the future direction of Bitcoin's price.

Bitcoin Dominance (excluding major stablecoins) 

Upon reviewing the Bitcoin dominance chart, excluding major stablecoins, we observe a notable movement in line with last week's analysis. The dominance percentage briefly dipped, then rebounded off the upper boundary of what appears to be a crude parallel trend channel at approximately 57.98%. This channel isn't perfectly defined; it shows occasional spikes both above and below its boundaries but generally maintains its trajectory.

It's important to note that this recent bounce does not necessarily indicate a sustained surge in Bitcoin's dominance over altcoins. The possibility of the dominance rate falling back into the trend channel could signal a bearish trend for Bitcoin vs. altcoins. Up until Wednesday, the chart was characterised by a strong downtrend, dominated by large and frequent red candles, with smaller and sporadic green candles.

The appearance of a large red bearish candle right at the upper trendline, followed by two bullish green candles, does provide some food for thought. However, the overall bearish momentum that preceded this suggests that the recent bounce could be short-lived, potentially leading to a further decline back into the channel and a sustained move up for altcoins vs. Bitcoin.

If Bitcoin dominance were to move back up towards the 0.618 Fibonacci level from the swing high on April 13th to the recent swing low—a level coinciding with last Wednesday's bounce, which stands at 59.50%—my perspective might shift more favourably towards Bitcoin's strength. Such a move could suggest a stronger, more bullish scenario for Bitcoin's dominance over altcoins in the near term.

At the current time of writing on early Monday morning UK time, we are producing another red candle, yet again, heading towards that upper trendline.

Total 3 (Excluding major stablecoins)

Analysing the Total 3 chart, which excludes major stablecoins, we observe notable price movements from mid-April to early May. A classic double bottom pattern is apparent, identified by points 1 & 2 within a green-shaded rectangular zone. This pattern signals a potential reversal as prices rallied off the lows of early May.

Currently, the market has broken the 0.786 Fibonacci retracement level, calculated from the early May low (Fib 0) to the April high (Fib 1), which is positioned at $516.784 billion. This point also aligns with a confluence of resistance indicated by a black horizontal line and blue arrows, adding significance to this level.

The odds are now highly stacked for a move towards the next key target, the (Fib 1) level at $538.69 billion. Surpassing this level would break the interim swing high and the neckline of the double bottom pattern, potentially catalysing further price increases.

However, it is important to note a zone of resistance marked by the upper green shaded area and green arrows. While this could temporarily halt the price advance, breaking the double bottom's neckline suggests it might just be a brief pause before attempting to reach the highs of March 31st at $634.513 billion.

Conversely, a bearish scenario would unfold if the price begins to exhibit strong negative momentum with prominent red candles, potentially retreating towards the May lows. Although the Total 3 chart is currently showing signs of bullish behaviour, it remains critical to monitor upcoming price actions to confirm these trends.

In Summary

As we head into the new week, it's crucial to keep a close watch on the support and resistance levels that have recently been established. Based on the market dynamics observed over the last few weeks, there's a growing indication that the prolonged accumulation phase may be drawing to a close, potentially heralding the resumption of the primary trend.

However, the market remains unpredictable. While current signs point towards bullish momentum, there's always the possibility that this could be a deceptive move—a "double bluff" that might culminate in a breakdown through support levels, leading to another retest of the lows and perhaps further accumulation.

Despite these uncertainties, the bullish price actions we're witnessing currently suggest a more optimistic outlook. I encourage everyone to approach the upcoming trading week with vigilance and a strategic mindset. Wishing all traders and investors a happy and successful week ahead in the markets. May your decisions be informed and your trades profitable!

Macro News & Analysis

Last week, whilst once again volatile, closed on a bullish tone with market sentiment confirming the previous week’s switch to risk on. There’s been some rotation and positive signals, with US small caps and bitcoin leading the price action. The UK’s FTSE 100 was by far the strongest European index, gaining for a second straight week vs a negative week for Eurozone indices. Gold, silver, US dollar and yields dropped. The most notable volatility has been significant swings in the Japanese yen, particularly following Jerome Powell’s FOMC press conference speech which was unexpectedly on the dovish side. Rates markets have moved back to expecting more than 1 cut this year.

US Labour Market Data

The big data point of last week, aside from and perhaps including the FOMC rate decision, was non-farm payrolls (NFP) report. The headline figure of 175k new jobs was a big miss compared to estimates of 240k job creations. Digging a bit deeper, average hourly earnings rose 3.9% YoY vs slightly lower than expected 3.8% but was countered by 0.2% MoM growth vs the slightly higher expectation of 0.3%.

Unemployment ticked 0.1% higher to 3.9% from 3.8% but revisions to the previous report’s payroll changes were adjusted up. Overall this was seen to be a weak report which of course, was welcomed by markets. Bitcoin surged immediately on the data release, yields fell, equity futures rallied and the dollar continued its decline from earlier in the week. Notably it was the Russell 2000 small cap index and bitcoin that led the move higher, with the 3 main US indices lagging behind.

The monthly Job Openings and Labour Turnover Survey (JOLTS) was also released last week which and shows the jobs market returning to its pre-covid levels:

The Employment Cost Index was also released last week and which rose to 1.2% from 0.9% vs expected 1%. Whilst on the surface this doesn’t appear to be what the Federal Reserve would want to see, immigration has also increased which, when taken into consideration alongside lower JOLTS numbers, supports the NFP numbers to give an overall evening out of the labour market. Regardless how each individual data point is read, overall market consensus is that that these reports suggest that, following Jerome Powell’s dovish speech on Wednesday, Fed cuts are closer than previously thought.

Did the Yen Just Signal the Cycle High for USD?

Last Monday the Japanese yen weakened to an intraday low against the US dollar of 160.209, down -1.22% from Friday’s close. On Friday the yen depreciated -1.69% from Thursday’s close, the biggest daily weakening since October 2023. The last time USDJPY broke 160 was over 30 years ago.

This is causing real problems for Japanese citizens with everyone feeling the pressure of a rapidly devaluing currency. Whilst not everyone realises why they’re struggling, everyone knows the are. Last week was Japan’s Golden Week, a “collection of four national holidays within seven days” and is “one of Japan’s 3 busiest holiday seasons”, according to japan-guide.com. Weston Nakamura has written on his Substack that some Japanese travellers were cancelling their trips on the spot at airport as they were so uncertain of how much things would cost whilst abroad.

Another statistic that confirms Japanese citizens are seeking safer assets than their currency is surging retail investments in gold:

Monday’s sudden move through 160 on USDJPY prompted Japan’s Ministry of Finance (MOF) to intervene in the currency market, strengthening the yen more than 3.5% against the dollar. FX intervention was repeated just after US markets closed on Wednesday. Bloomberg reports last week’s intervention by Tokyo was worth around ¥9 trillion ($58 billion).

The question is, despite Monday’s intervention matching the previous record set in 2022, will it hold? Opinion is mixed and perhaps this week will decide the near term direction of for the yen and US dollar.

IMF Warns US Over Spiralling Debt

The International Monetary Fund (IMF) recently stepped up their pressure on the US regarding its ballooning fiscal deficit levels, in an unusually direct criticism of US policymakers.

During its annual World Economic Outlook survey the IMF said that “exceptional recent performance of the United States is certainly impressive and a major driver of global growth” but “reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability”, according to Bloomberg.

The IMF warned “something will have to give”, as growing US government spending risks keeping inflation higher than the Federal Reserve’s 2% target.

While the IMF and high profile investors such as Warren Buffett and Ray Dalio grow increasingly concerned at perceived fiscal irresponsibility, US Treasury Secretary Janet Yellen continues to downplay the significance of growing US debt. During testimony in front of the US House Financial Services Committee on Ways and Means last week, Yellen said the Biden administration can reduce the deficit by $3 trillion over a decade “through a combination of smart savings and tax proposals” including a Billionaire Minimum Tax “so that the top .01 percent pay their fair share”.

The Week Ahead

Whilst a much quieter week on the economic data and earnings fronts, Fed speakers are back in full force.

Events This Week

Monday

• China Caixin Services PMI

• Indonesia GDP

• Eurozone S&P Global Services PMI, PPI

• Fed’s Barkin, Williams speak

Tuesday

• Australia rate decision

• UK retail sales, house price index, S&P construction PMI

• Eurozone retail sales

• Canada Ivey PMI

• US RCM/TIPP Economic Optimism Index

• Fed’s Kashkari speech

• BOC’s Rogers Speech

Wednesday

• Brazil rate decision

• Sweden rate decision

• US 10 year Treasury note auction

• Fed’s Jefferson, Collins, Cook speak

Thursday

• BOJ summary of opinions

• China balance of trade, imports, exports

• Malaysia rate decision

• Mexico CPI, rate decision

• BOE rate decision

• US 30 year Treasury auction

• BOE Bailey, Pill speak

• Fed Daly speech

Friday

• Canada unemployment

• UK industrial production, GDP, business investment, goods trade balance

• ECB monetary policy meeting accounts

• US Michigan consumer sentiment

• BOE Pill speech

• Fed Bowman, Goolsbee, Barr speak

Saturday

• China inflation, PPI, new yuan loans

Earnings Calendar