Crypto News

JP Morgan CEO Jamie Dimon Takes a Stance on Cryptocurrency: 'I'd Close It Down'

Jamie Dimon, a vocal critic of Bitcoin, reiterated his strong disapproval of cryptocurrency during a recent Senate Banking Committee hearing on Capitol Hill. As the CEO and Chair of JP Morgan, the largest U.S. bank by assets, Dimon expressed concerns about the potential misuse of crypto for illegal activities such as crime, drug trafficking, money laundering, and tax evasion. In a scathing testimony, he went so far as to assert that, if given the authority, he would advocate for the shutdown of cryptocurrency altogether.

Interestingly, Dimon's critique coincided with JP Morgan's active exploration of blockchain technology, a foundational element of the broader cryptocurrency sphere. This apparent contradiction underscores the ongoing debate within financial institutions about the role and future of digital assets.

During the hearing, Senator Elizabeth Warren, a previous critic of the banking industry, questioned Dimon and other CEOs, leading to a consensus among them. The banking leaders agreed that digital asset companies should be subject to the same rigorous anti-money laundering policies as traditional financial institutions. Despite their diverse views on various financial matters, they found common ground in advocating for increased regulation within the crypto space. Their shared concern revolved around national security risks and the potential exploitation of digital assets by rogue nations, prompting a unified call to address these issues promptly. 

Blackrock Files New ETF Application Update, Raising ‘Securities’ Concerns

Amid growing anticipation for the potential launch of a Spot Bitcoin Exchange Traded Fund (ETF) in January 2024, BlackRock has recently updated its application, expressing deep concerns about the implications if the U.S. government deems Bitcoin a security. As the world's largest asset management company, BlackRock highlights the potential impact on trading, clearance, and custody of Bitcoin in the United States, potentially diverging from the established channels for non-security digital assets. Such a classification could adversely affect the value of the Spot ETF share price, influencing liquidity and complicating exchanges for traders and investors seeking U.S. Dollar transactions.

In their filing, BlackRock cites the ongoing legal battle involving Ripple, currently being sued by the Securities Exchange Commission (SEC) under Gary Gensler's leadership. The rationale behind this is the SEC’s belief that Ripple's native token, XRP, is, in fact, a security and the profound effect this would have on a Spot Bitcoin ETF if the same posture were to occur with Bitcoin.

This example underscores the potential consequences, as the market cap of XRP’s plummeted from over $100 billion to below $10 billion shortly after the SEC's complaint. The SEC proposes a risk disclosure for any ETF issued by BlackRock, cautioning investors that Bitcoin might be considered a security.

Observers interpret the SEC's request for a disclaimer as a potential signal for green-lighting the Spot Bitcoin ETF. Some argue that this move signifies Gensler's acquiescence to major institutions having their own Spot Bitcoin ETFs. This stance contrasts with the SEC's prior assertion that Bitcoin is not a security. Gensler's motivations remain enigmatic, leaving observers speculating on the outcome of his evolving stance in the ongoing battle with digital currencies.

El Salvador Unleashes Financial Revolution with 'Freedom Visa': Pioneering Bitcoin Program Marks Historic Shift

In September 2021, grappling with soaring inflation and challenging exchange rates against major world currencies, El Salvador embarked on an unprecedented journey by becoming the world's first nation to embrace Bitcoin as legal tender. In a daring move orchestrated by the treasury, they invested in over 2700 Bitcoin, a decision that has since translated into a remarkable $3 million in profits. Now, breaking new ground again, El Salvador has unveiled a pioneering initiative that could potentially spur cryptocurrency adoption throughout Central America.

Introducing the "Freedom Visa" program, El Salvador is set to permit up to 1000 non-residents annually to make a non-refundable payment of $999 in either Bitcoin or Tether (USDT). Remarkably, this groundbreaking endeavour will be facilitated by Tether Global itself. In exchange for this unique fee, individuals from outside El Salvador will gain the opportunity to secure long-term residency in the country. While similar programs exist globally, typically involving traditional currencies, this marks the first instance of such a scheme being executed with Bitcoin.

If successful, the "Freedom Visa" initiative is anticipated to generate an impressive $1 billion for El Salvador, showcasing a pioneering cryptocurrency application on the global stage. This exemplifies the potential of cryptocurrencies when strategically integrated into national frameworks. At a time when other countries are at loggerheads with cryptocurrency, this instead shows an excellent example of how, when done correctly, cryptocurrency can be used to great effect in a global setting.

Crypto Analysis

Bitcoin (BTC)

This week, we are going to delve into an assessment of the overall cryptocurrency markets to understand our current position. For the second consecutive week, Bitcoin underwent a sudden overnight shift, experiencing a near 10% decline from its Friday peak of $44,700. Bitcoin had consistently held its position near recent highs for the past five days until last night, reaching a 20-month pinnacle, following a substantial price surge earlier in the week. Typically, the consolidation indicated a potential continuation of the ongoing upward trend. This descent may could be attributed to institutional profit-taking following deflationary data out of China on Saturday. 

Analysing the daily chart unveils a price moving just below the 10-day EMA, which is following an upward path, mirroring the trends observed in the 100 and 50-day EMAs. The Stochastic RSI is presently correcting its overbought condition. When reflecting on the late October to early to mid-November period, a distinct pattern emerges, where the Stochastic RSI transitions from overbought to oversold while prices continue their ascent. A comparable robust pattern might be unfolding at the current juncture if we manage to sustain this uptrend.

The only drawback on the daily chart that may give clues of a possible top as was reiterated from last week is the bearish divergence on the RSI. However, overcoming this condition is plausible, and a drop is not guaranteed unless there's evidence of a bullish topping price pattern, a bearish weekly candle close, or a breach of a swing low that has not appeared so far. The sell-off in the early hours of Monday morning cannot be conclusively considered, given that it marks the beginning of the week, and the weekly chart has already displayed a bullish candle. It is premature to determine if this decline signifies the initiation of a significant correction, as there is a possibility that the market could recover throughout the rest of the week. The first line of support lies at the horizontal trendline on the chart at approximately $38,400.

Moving to the monthly chart, following this latest abrupt decline, prices are spiking the 50% level of the significant swing from the all-time high of $69,000 to the November 2022 lows at $15,476, reaching $42,261 on a robust green bullish candle. This marks the fourth consecutive positive month, although it's essential to note that we are only a week and a half into the current month. While the volume appears relatively low compared to the post-November 2022 lows, it doesn't necessarily indicate a reversal. Price can continue to rise even on low volume. As mentioned in recent newsletters, the current focal point for observation is the 0.618 retracement level at $48,596. This level appears increasingly probable to be reached, given the consistent and robust price movements, although it is not an absolute certainty. 

As we wrap up our analysis, I'd like to integrate the Visible Range Volume Profile indicator. This tool aids in identifying significant high and low levels of interest at various price points on a chart. A noticeable difference emerges when examining recent historical data, especially during the previous monthly decline to lower levels, such as when the price hit the November 2022 bottom. The volume at higher levels from the current price is notably low and gets lower as price increases. This observation hints at the possibility that Bitcoin could encounter a more unhindered ascent towards all-time highs and more buying interest the lower price heads. We will continue to monitor Bitcoin on a weekly basis.

BTC Dominance (excluding Stablecoins) and Stablecoin Chart

Bitcoin dominance, which tracks the world's largest digital asset against altcoins excluding major stablecoins, stands at a pivotal juncture as we embark on a new week, potentially heralding the onset of a significant altcoin bull market. Despite witnessing a notable surge in various altcoins over recent weeks, the prevailing uptrend in Bitcoin's (BTC) dominance since January 2022 prompts us to ponder whether the best is yet to unfold.

Examining the current price action on the daily chart, we find ourselves precisely aligned with a lower trendline. This alignment follows a distinct double-top pattern discernible on the daily chart, dating back to October 25th at 59.96%, with a subsequent peak on December 6th at 59.82%. This occurrence might signal a potential waning of momentum in the overarching trend. The last four consecutive days saw a downward trajectory up to this morning at the time of writing, where a conclusive break and closure below this trendline could precipitate a further decline in dominance, bringing altcoin prices even closer to a general surge.

Analysing the Relative Strength Index (RSI), the momentum indicator hovers in the mid-range, suggesting that price movements could unfold in either direction. Furthermore, the Stochastic RSI has yet to enter oversold territory, indicating that there is room for potential developments in the market. Monitoring these indicators closely could offer insights into the evolving dynamics of Bitcoin dominance and its potential impact on the broader cryptocurrency landscape.

Looking at the weekly chart, we can see the primary trend is very much up since dominance bottomed in May 2021. However, over the last few months, it can be seen that the price is slowly contracting, as shown by the two black trend lines that are gradually moving closer together. This could signify a possible weakening of momentum and a potential impending topping.

Whether this pattern is going to form a meaningful top depends on whether we get a strong bounce off the lower trendline where we currently sit. Additionally, it hinges on whether we can break through the upper trendline with any decent price action. I've placed a blue trendline to indicate the next level of interest if we do break to the upside.

The RSI momentum indicator is mid-ranging, and the Stochastic RSI is oversold and crossing upwards. This suggests that we may be at a point where the price could move up. There is no doubt that we are at an extremely important juncture, and we could be on the verge of a major altcoin surge at any time if we see any further downside in dominance.

Interestingly, all of this is happening concurrently with Stablecoins moving downwards, indicating a point of risk on. This juxtaposition adds a layer of complexity to the current market dynamics.

Macro News

Strong US Jobs Data

The US jobs market remains tight with 199,000 new jobs added in November vs 150,000 last month and unemployment fell to 3.7% from 3.9%. Wages rose 0.4% MoM, or 4% YoY which will keep monetary policy more restrictive. Initial market reaction was risk off as the likelihood of Fed easing was priced further out although cuts are still priced as early as May. The strong figures were boosted by auto workers returning after strikes. Initial market reactions were short lived as the S&P closed higher on Friday. Prices moves may be muted this week though, ahead of the FOMC rate decision on Wednesday.

China’s Woes Continue

China’s leaders pledged increased fiscal support on Friday, emphasising the importance of economic progress. Saturday’s economic data saw YoY CPI of -0.5% and YoY PPI at -3%. Both prints were higher than previous numbers, highlighting China’s accelerating deflation problem and confirming the need for stimulus to stem the economic crisis. Consumer sentiment is low with household wealth being impacted by China’s real estate crash and uncertainty over government policy going forward.

Credit rating agency Moody’s cut its rating on China’s sovereign credit to negative on Tuesday, citing concerns over slower growth and rising government debt levels. The Financial Times reported last week Moody’s advised staff to work from home ahead of its rating cut, which staff believe was due to concern over Beijing’s potential reaction to the downgrade. Chinese authorities have raided offices and detained local employees of other due diligence firms this year.

In another blow to the world’s second largest economy, Italian prime minister Giorgia Meloni “formally notified China of its withdrawal” from Beijing’s belt and road initiative. According to a Guardian report, the required 3 month notice letter was likely sent ahead of last week’s turmoil, but timing may hinder China’s EU relations.

Bank of Japan Rate Hike?

BOJ officials hinted last week they may be nearing the end of their negative interest rate policy. The yen strengthened significantly during Japanese trading on Thursday and continued through European and US trading, at one point as much as 3.8%. Since its weakest level in November the yen has gained 6.87% vs USD and has seen similar moves against its other G10 peer currencies. JGBs experienced volatility as yields at the long end of the curve rose which also moved US Treasury yields.

Swap markets have repriced from 3.5% chance of a BOJ rate hike this month to 45% at one point during Thursday trading. Both the rate and currency repricing have corrected somewhat. The next BOJ policy rate decision is on Tuesday 19th December but given Governor Kazuo Ueda’s cautious approach it seems unlikely they change rates so soon. The next BOJ policy meeting is January 22nd to 23rd.

All Israel-Bound Ships Target of Houthis Escalation Warning

In an escalation of the Israel/Gaza war, a spokesperson for Yemen’s Houthis stated “[i]f Gaza does not receive the food and medicines it needs, all ships in the Red Sea bound for Israeli ports, regardless of their nationality, will become a target for our armed forces”. Whereas previous attacks on ships have been directed at vessels identified by the Houthis as being connected to Israeli owners, this new threat applies to any ship bound for Israel. Yemen’s intelligence however is somewhat out of date as one of the recent attacks was on a ship whose details have changed and no longer had the presumed link to Israel.

However this still means significant disruption to voyages between Asia and Israel, as the Red Sea and Suez canal will be blocked to these ships. Instead of shipments travelling west from the Malacca Strait to the Red Sea, affected voyages will now travel south, diverting around South Africa and through the Atlantic ocean – adding up to a month to transit times.

Whilst the extra fuel costs will be offset by not having to pay Suez canal tolls, the extra time taken will have an impact on supply chains as the number of annual round trips will be reduced. As discussed last week, the Panama canal drought persists which is causing grain shipment delays. Add rising insurance costs for any freight travelling the Red Sea route and we have a recipe for another round of supply chain bottlenecks and related price inflation next year.

The Week Ahead

It’s a busy week with interest rate decisions from the Fed, BOE & ECB, US CPI and a host of other. Of all the central bank activity, the FOMC summary of economic projections will be key as committee members signal their forward inflation and rate expectations.

Monday

• Argentina’s new president Javier Milei expected to call extraordinary congress session

• Australia Westpac Consumer Confidence

• RBA Bullock speech

• UK CBI economic forecast

Tuesday

• Australia NAB business confidence

• Japan producer price index

• India, Brazil, US inflation

• UK unemployment

Wednesday

• EU industrial production

• UK GDP

• Brazil rate decision

• Federal Reserve rate decision

Thursday

• China new loans

• Australia unemployment

• ECB rate decision

• BOE rate decision

• Norway rate decision

• US retail sales

Friday

• China 1-year medium-term lending facility (MLF) rate

• China retail sales

• China industrial production

• China jobless rate

• EU PMIs

• UK manufacturing PMI