Crypto News

Massive Ledger Hack Sends Shock-waves Through Financial Security

Top hardware wallet provider Ledger, a key player in the cryptocurrency space, faced a major security breach last week, exposing investors to major hacks. The breach targeted the widely-used 'Connect kit,' software, a crucial web3 connector for integrating third-party decentralised applications (d'apps)such as Sushi into Ledger's platform. Unfortunately, this vital component fell victim to a phishing attack orchestrated on a former Ledger employee by injecting malicious code into the kit.

The injected code enabled hackers to manipulate the application's front end, deploying a deceptive pop-up targeting users engaged in fund transfers to another wallet. Operating under a legitimate wallet connection, the attacker persuaded users to link their wallets, resulting in the siphoning of their funds. Responding promptly, Ledger swiftly removed the compromised code and warned users against interacting with third-party applications.

Notably, Tether commendably intervened, freezing the hacker's wallet to mitigate potential damages. The consequences of this exploit extended beyond Sushi, affecting other decentralised platforms like Zapper and RevokeCash. In response, Sushi cautioned users to exercise vigilance and avoid unexpected 'connect wallet' prompts on their platform.

In October, Ledger underwent scrutiny when they introduced their new software "recovery assistant", providing users with the means to recover funds in case of device loss. Ledger will be hoping to win back the trust of their users quickly after this latest issue. Importantly, Ledger and Sushi are attempting to minimise the fallout from this security incident, emphasising their unwavering commitment to enhancing overall platform security and safeguarding user assets.

El Salvador Erupts Financial Markets with 'Volcano Bonds' Launch

In a groundbreaking move, El Salvador has once again made waves in the cryptocurrency space by securing regulatory approval for the issuance of Bitcoin bonds. The National Bitcoin Office of El Salvador announced on the social media platform 'X' that they have received the green light for the "Volcano bonds" program from the Digital Assets Commission (CNAD), a confirmation later echoed by the country's president. This marks the first instance globally where a nation has offered such a financial instrument, a plan set in motion since El Salvador's historic decision to adopt Bitcoin as legal tender in September 2021.

The "Volcano bonds" will be accessible on the Cryptocurrency trading platform Bitfinex Securities. This development follows El Salvador's recent introduction of the innovative 'Freedom Visa,' which permits foreign citizens to reside in the country in exchange for $1 billion in Bitcoin or Tether (USDT). The primary objective behind the "Volcano Bond" initiative is to raise $1 billion to bolster the Bitcoin mining industry. Notably, El Salvador has a track record of relying on renewable energy, with renewables constituting a substantial 64.3% of its total installed electricity generation capacity in 2019. This achievement is attributed to the abundance of over 20 volcanoes scattered across the country. El Salvador's continuous embrace of Bitcoin and cryptocurrency showcases its commitment to pioneering advancements in the digital financial landscape.

Falling Star: Meme Coin Facemoon Files For Bankruptcy 

In the heady days of 2021, Safemoon, the crowned monarch of meme coins, soared to unprecedented heights. Its ascent from a nano cap listing to the pinnacle of a billion-dollar valuation, unfolded as a breathtaking drama. With a community rallying behind it, Safemoon's meteoric rise seemed almost mystical, given its scant utility and reliance on fervent support. At its zenith, the coin boasted a staggering $1 billion valuation, a testament to its perceived worth as an asset. However, the narrative took a harrowing twist when the Securities Exchange Commission (SEC) leveled charges of fraud against its key figures: founder Kyle Nagy, CEO John Karony, and chief technology officer Thomas Smith.

In an abrupt and ominous turn, Safemoon recently filed for Chapter 7 liquidation bankruptcy, a desperate move to settle mounting debts by liquidating its assets. The aftermath was as swift and brutal as the coin's rise, with a 31% plummet in its value. The fallout extended beyond financial markets to the beleaguered employees left unpaid for their toil in the current month due to the bankruptcy filing predating their salaries. Now, these employees find themselves navigating the complex terrain of the bankruptcy court, filing individual claims in a bid to recover their overdue wages.

From the lofty pinnacle of a billion-dollar empire, Safemoon now languishes at a mere $34 million valuation. The looming question echoes: can this once-mighty asset salvage itself from the depths of insolvency and regain enough credibility to endure the shattered confidence of the average crypto investor? The drama of Safemoon unfolds in a tragic chapter of highs and lows, leaving the crypto world in suspense and uncertainty.

In Other News

• SEC Refuse Coinbase Petition For New Crypto Rules

• Binance Ban : Philippines Gives 3 month Last Orders 

Crypto Analysis

Bitcoin (BTC)

Bitcoin has exhibited a sideways movement since our last analysis, following the downward shift last Monday. Currently, it is forming a minor double top. However, it's crucial to interpret this as a mere indication of a potential minor top, as it's premature to determine if there's any deeper significance.

The true test comes with a breach of the swing low beneath the blue horizontal line at $40,222 on the daily chart. Only then can we consider a bearish scenario, and even in such an event, immediate support is anticipated around $38,400, as indicated by the green rectangle box.

Despite the breach below the 10-day exponential moving average (EMA) from last week's chart, Bitcoin (BTC) is finding support on the 21-day MA. This particular moving average, based on Fibonacci numbers, holds more significance in the medium term. The Relative Strength Index (RSI) is mid-ranging, signifying that the price has room to move in either direction.

The daily chart below depicts a potential scenario, illustrating a possible break below the blue line, followed by a conceivable descent to the rectangle box to the £38,400 level. Subsequently, a rebound above, creating a fake-out scenario, could lead to a return to the bullish trend. This price action, known as a fake-out, is a typical manoeuvre designed to shake out bearish traders—essentially a liquidity hunt. This strategy washes out bearish traders, hunting their stops and enabling larger players (Whales) to enter the market at a more favourable price.

Maintaining continuity with previous weeks, I've included the monthly chart. This highlights that the price continues to approach the 50% level to the upside of the swing from the all-time high of $69,000 to the significant November 2022 swing low of $15,476. This level is identified at $42,261.

For this week's analysis, I've chosen to conclude by examining the 4-hour chart, which is currently shaping a potential bullish inverse Head & Shoulders pattern. It's important to note that such price action isn't definitively bullish until there's a break of the neckline, clearly visible below. Even then, confirmation would require observing a positive candle and a daily or 4-hour close above that line. Nonetheless, nothing in the financial markets is ever 100% certain.

In summary, while the price is undergoing a pullback, it's premature to assume a more significant trend shift. I lean towards the bullish scenario unless there's a break of the triangle pattern on the right-hand chart. This inclination is reinforced by the overbought status of the daily Stochastic RSI, which could prompt a bounce and only a break of that triangle could potentially lead to a retest of the recent lows of the Head on the pattern negating the bullish case pattern.

It's crucial to emphasise that this information is not intended as financial advice, and I encourage you to conduct thorough research before making any trading decisions. As always, we'll continue our weekly monitoring of Bitcoin.

Stablecoins (USDT, USDC & DAI) & TOTAL3 (Alts Excluding Ether)

In this year-end newsletter, I'll provide a brief and straightforward roundup of a few significant markets along with their respective levels, starting with the stablecoin chart displayed on the left below. Notably, stablecoins have experienced a substantial decline since June 2022, indicating a shift of funds into Bitcoin and altcoins.

Examining the chart, we currently observe support at the 0.618 Fibonacci level, standing at 17.38% from the all-time low in June 2019 to the all-time high in June 2022 on this particular chart. This level holds immense significance and should not be underestimated. It might indicate a potential signal for investors to consider taking some profits off the table. Monitoring how the price evolves into the start of the new year will be crucial to understanding the market's direction.

Examining the Total3 Chart on the right, which tracks all altcoin markets excluding Ethereum, we observe a noteworthy confluence of resistance indicated by the presence of black and blue arrows. It's worth mentioning that, while not explicitly depicted on the chart, the price narrowly fell short of the 0.236 Fibonacci level. This Fibonacci level is calculated from the major high in November 2022 to the major low in December 2022 and is situated at $486.11 Billion. Importantly, this level aligns closely with the marked area of resistance, adding significance to the potential challenge the market is facing in this zone. As always, careful observation of how the price behaves around this resistance area will provide valuable insights into the market's dynamics.

Total Market Cap (TOTAL) & Ether (ETH)

Examining the Total chart, encompassing all cryptocurrency markets, a significant resistance emerges at the monthly 0.382 Fibonacci level, standing at $1.599 trillion. This level, derived from the major November 2021 swing high to the November 2022 swing low, coincides with a confluence area marked by a blue arrow on the left side of the chart. The most pronounced confluence of resistance occurs at the 0.618 Fibonacci level, calculated from the same major swing points, positioned at $2.137 trillion and highlighted by green arrows. These levels are critical indicators influencing the market's direction, warranting continued observation.

The Ethereum vs USDT chart is at a point of inflection and is also showing resistance at the 0.382 fib level from the November 2021 major monthly swing high to the major monthly June 2022 swing low which comes in at $2404.38 with confluence of resistance shown by the single blue arrow on the left.

Oasis Network (ROSE)

Oasis Network (Rose) has consistently followed an upward trajectory since breaking out of its range in late October 2023. Despite this positive trend, there are indications that the momentum may be gradually diminishing. Examining the bullish case on the daily chart, we observe a sequence of higher highs and higher lows since the initiation of the bull run. The price has been ascending within a parallel channel and currently holds a position in the middle of that range. Whether or not this is carving out a short-term double top is yet to be seen.

The 100 and 50-day exponential moving averages (EMA’s) are expanding, and the price remains above the 21-day EMA. The StochRSI indicates a mid-range position, and there has been sustained above-average volume since the breakout in October. Overall, the price action presents a robust picture.

However, the focus shifts to a potential warning sign suggesting a short-term top. On the daily chart, a bearish RSI divergence has emerged. Last Friday, a bearish candle with high volume was observed, possibly triggered by algorithmic trading or serving as an isolated anomaly. Since then, over the weekend, there has been a notable decrease in trading volume. It's essential to approach these observations with caution and consider the possibility of short-term adjustments in the market.

Examining the weekly chart below, reveals a significant development for Rose, indicating a substantial double bottom formation spanning almost a year and a half, from late June 2022 until the recent breakout of its highs just a couple of days ago. This breakthrough is highlighted by the black trendline at $0.08591, emphasised by the black arrow denoting 'Broken resistance.' This compelling evidence suggests the potential establishment of a major low and potentially marks the commencement of a significant bull run.

The subsequent focus is on key price levels, starting with the grey horizontal line at $0.11623. Beyond that, attention is drawn to the 0.236 Fibonacci level at $0.1489, where a confluence of resistance is indicated by the blue and black arrow on the left-hand side of the chart. The latter arrow signifies the point where price experienced a notable capitulation candle, plummeting dramatically through that Fibonacci level toward the chart's ultimate low.

Despite acknowledging the potential short-term topping pattern on the daily chart, an extremely overbought weekly RSI, the overall outlook from the weekly perspective exudes bullish sentiment. It's crucial to monitor any significant drop below the recently breached resistance level on robust volume, as such an occurrence would necessitate a re-evaluation of the chart. Looking ahead, there is anticipation for revisiting Rose in the future to assess its continued trajectory.

In Summary

Observing the main charts this week, the crypto markets stand at a crucial juncture. Given the sustained upward trend since Bitcoin bottomed in November 2022 and without a significant pullback so far, the path of least resistance suggests a potential continuation of the uptrend but as always, nothing should be taken for granted. Anticipating further analysis in the new year, I extend warm wishes for a Merry Christmas and a Happy and Healthy New Year to all.

Macro News & Analysis

BOE & ECB Out-Hawking the Fed?

Last week we had interest rate decisions from the Fed, Bank of England and the European Central Bank. All 3 held rates but varied in their tone. First was Fed Chair Jerome Powell who was widely interpreted by all markets and most commentators to have pivoted away from hiking to the prospect of gradual rate cuts. Powell referred to the US economy’s strength, persistently resilient job market continually falling inflation.

Thursday was BOE & ECB’s turns. There was no press conference at the BOE but whilst Governor Andrew Bailey showed some optimism towards falling inflation, he retained a hawkish tone saying “there is still some way to go” and it’s “really too early” to speculate on rate cuts.

Finally the ECB’s Christine Lagarde was definitely the most hawkish. One reporter referred to Jerome Powell’s comment that “rate cuts have started to come into view” and asked if “the same is true for the ECB”. Lagarde’s answer: “We did not. We did not discuss rate cuts at all. No discussion, no debate on this issue.”

So there we have it, UK and EU central bankers appear to be out-hawking the Fed, even though US inflation is proving sticky while UK & EU inflation continues to fall:

UK, Eurozone Recession Risks Rise

UK retail sales data for Q4 came in weaker than expected, reigniting fears of a mild recession as adjusted GDP data released this coming Friday could push Q3 GDP to negative from the initial zero print. UK data is however more positive than that of the Eurozone. EU PMIs are in contraction, and have been throughout Q3 & Q4:

Eurozone GDP has been in decline for 18 months and looks set to head into negative growth territory, whilst the UK has seen stagnation to marginal growth this year and the US economy is positively booming:

Breaking the aggregate Eurozone PMI down by its largest economies it’s clear that Germany, France and Italy have been in recessionary territory for most of the second half of 2023:

This data is why last week’s central bank rhetoric has been so perplexing: the US economy is strong with inflation proving sticky around 3%, still significantly above the 2% target, whilst the EU is clearly in trouble but Lagarde was the most hawkish. This poses a concerning question: does the Fed see something we don’t? Is there trouble brewing, causing the Fed to prepare markets for easing?

Maybe Powell Pause Wasn’t So Dovish After All

After the market’s bullish reaction to a decidedly dovish tone from Powell, NY Fed President Williams spoke to CNBC on Friday saying "We aren't really talking about rate cuts right now", apparently contradicting Powell’s press conference 2 days earlier.

This has been seen by many, including former Fed staff members Joseph Wang and Danielle DiMartino Booth, as an attempt to walk back the market’s take on Powell’s remarks but Michael McKee, Bloomberg’s Chief International Economist and Fed reporter, posted a thread on X saying otherwise:

During a speech at Spelman College on 1st December, Powell reiterated the FOMC is “strongly committed to bringing inflation down to 2 percent … and to keeping policy restrictive”, and that it would be premature to “speculate on when policy might ease”. Just 2 weeks later during his FOMC Q&A session, Powell said “the question of when will it become appropriate to begin dialing back the amount of policy restraint in place, that begins to come into view, and is clearly a topic of discussion out in the world and also a discussion for us at our meeting today”.

That to me sounds like a clear change of policy, particularly given there was no publicly released data to justify such a U turn in sentiment. So, is there something the Fed sees that we can’t? Is there some sign of significant weakness somewhere in the US or global economies? Did something break that they managed to fix and keep out of the media and public view? Time will tell. But for now it seems NY Fed’s John Williams’ attempt to rein in the euphoria has fallen on deaf ears as financial conditions haven’t given back any of the loosening that’s happened since Wednesday’s decision:

Key Events This Week

Monday

• ECB holds biennial conference on fiscal policy and Economic Monetary Union (EMU) governance

• Pro-democracy media tycoon Jimmy Lai’s trial begins in Hong Kong

• Annual Nasdaq 100 index reconstitution

Tuesday

• RBA December policy meeting minutes

• Bank of Japan rate decision

• Canada inflation

• Eurozone inflation, PPI

• Atlanta Fed President Raphael Bostic speech

Wednesday

• Japan balance of trade, imports, exports

• New Zealand half-year economic and fiscal update

• China loan prime rates

• UK inflation, PPI

Thursday

• UK public sector net borrowing

• Bank Indonesia interest rate decision

• US GDP

Friday

• Japan inflation

• UK GDP, retail sales

• US core PCE, durable goods orders

• US MoM personal income, MoM personal spending

• US home sales

Final Thoughts

Well that wraps up the last Blocks & Stocks newsletter for 2023. What a year it’s been and we still have half of December to go! Markets continue to consolidate and given how overbought everything is (except for USD which is oversold) a bit of a pullback wouldn’t be unexpected this week. That said, option flows, sentiment and widening breadth all indicate a continuation of this rally into year end and early to mid January is likely.

Enjoy it while you can but please do remember, everything discussed here is the opinion of the authors. Nothing mentioned in this article or on this Substack constitutes financial advice or recommendation and should not be considered as such. Always do your own research and due diligence.

And with that, Merry Christmas, Happy New Year and happy holidays to all. See you in January :-)