Discover more from Learning Crypto
The Ethereum ETF Buzz Is Getting Louder
Black Friday Sale: Click Here - Up to 60% off on our memberships. Limited codes available. Don’t delay. Our biggest discount yet.
Blackrock's Ethereum ETF Filing Sends Second-Largest Crypto Soaring
The value of Ethereum surged by 12%, reaching a six-month high of $2136 on Thursday. This spike followed Blackrock, the world's largest asset management firm, filing for an Ethereum Spot ETF with the Nasdaq, operating under the title "iShares Ethereum Trust." Simultaneously seeking approval for a Bitcoin Spot ETF, Blackrock's move underscores a solid commitment to offer clients cryptocurrency investment opportunities. It marks a significant stride toward widespread adoption, sparking discussions within the industry about potentially incorporating other cryptocurrencies into similar Spot ETFs.
An ETF, or exchange-traded fund, offers a cost-effective investment portfolio encompassing various assets, from stocks and bonds to, in this case, cryptocurrencies. These funds can be marketed to clients without requiring them to physically hold the assets, a convenience appreciated by many investors. Blackrock's existing Ethereum Futures ETF, effectively mirroring price trends, strengthens the case for a spot ETF. The future might witness ETFs housing a diversified range, possibly incorporating multiple cryptocurrencies.
Reportedly, five companies express interest in an Ethereum Spot ETF, yet obtaining approval from the Securities Exchange Commission (SEC) precedes their public offering. If granted, Blackrock plans to collaborate with Coinbase for Ethereum custody, ensuring its safekeeping, while an undisclosed entity will manage the cash. This strategic shift for Blackrock, considering CEO Larry Fink's prior hesitance towards cryptocurrencies, signifies a substantial pivot towards supporting these digital assets.
Game On As Gensler Signals Potential Approval for FTX 2.0
Renowned trading platform FTX, previously owned by convicted fraudster Sam Bankman-Fried, may be on the brink of a legitimate takeover. The potential acquisition gained momentum when Tom Farley, the Former New York Stock Exchange President, expressed interest in rescuing the beleaguered FTX. Gray Gensler, the chair of the Securities Exchange Commission (SEC), recently weighed in on the matter, signalling a possible endorsement.
Gensler's opinion on the prospective takeover was sought in the wake of rumours surrounding Farley's intentions. In response, Gensler asserted, "If Tom or anybody else wanted to be in this field, I would say, 'Do it within the law.'" The scenario has attracted attention from three distinct groups vying for control of the company that Sam Bankman-Fried, once hailed as a crypto king, drove into bankruptcy. Bankman-Fried faced a recent court case, culminating in his conviction on all charges, resulting in a looming prison sentence.
Central to Gensler's concerns is the prevention of further malfeasance in the industry, especially concerning acquiring FTX. He emphasised the importance of building investor trust, advocating for proper disclosures, and condemning practices such as trading against customers or utilising their crypto assets for personal gain. Gensler underscored the need for ethical conduct within the space.
The potential takeover raises questions about the existence of a native token in the event of a successful acquisition. FTX, at its pinnacle, stood as one of the world's largest exchanges, collaborating with crypto hardware wallet Ledger. The integration of FTX's swap functionality into Ledger Live marked a significant partnership before the platform's downfall. Over a year has passed since FTX's decline, with far-reaching implications for the cryptocurrency markets.
Gensler's recent comments prompted a notable market response, particularly in the price of FTT, FTX's native token. Following Gensler's remarks, the token surged by 90%, reaching a peak of $2.45 on Thursday. The situation surrounding FTX's potential takeover remains dynamic, with regulatory scrutiny and market sentiment playing pivotal roles in determining its future.
Tron Rockets Up 25% Amidst High-Stakes Cyber Heist on Polionex Exchange Hardware Wallet!
Poloniex, the renowned trading platform co-owned by investor Justin Sun, encountered a substantial breach that resulted in the loss of around $114 million in digital assets from its hard wallets. This incident left a meagre $10,000 and a mere 175 tokens in the Poloniex wallet.
The breach was swiftly identified at 10:55 UTC by two blockchain security firms, Peckshield and Cyvers. Within just 12 minutes of the breach detection, the exchange took immediate action, disabling the wallets and initiating maintenance due to suspected unauthorized access. Justin Sun later confirmed the occurrence through a post on X (formerly known as Twitter).
The hacker orchestrated 357 transactions across various cryptocurrencies using Poloniex. At one point, an Ethereum wallet named "Poloniex hacker" moved approximately $42 million to the Tron network and then bought approximately $20 million worth of TRX tokens, causing a significant 25% surge in the value of its native token, TRX.
Established in 2013, Poloniex stands as one of the oldest cryptocurrency exchanges. Acquired by Circle in 2018 and transitioning through various investors, including Justin Sun in 2019, the platform is committed to reimbursing affected users. It intends to collaborate with other exchanges to track the diverted crypto funds and is offering a 5% 'white hat bounty' as an incentive for the hacker's cooperation within a seven-day window. Sun added, “At present, the losses are within manageable limits, and Poloniex's operating revenue can cover these losses,". If the hacker doesn’t comply within the allotted time, law enforcement will be involved to address the matter further.
This week, attention gravitated toward altcoins, especially Ethereum, driving most of the price movements. While Bitcoin has been steadily reaching new 18 month highs, its recent activity lacks the robust trading volumes witnessed in previous bullish periods. The consistent rise, with five positive closures out of six and an ongoing streak of four consecutive weeks in the green, signals a bullish trend. Despite a bearish RSI divergence, the absence of a topping formation suggests little cause for concern among bullish investors. The current pattern indicates a potential for continued upward movement in the short to medium term, with occasional pauses to alleviate overbought conditions before resuming the upward trajectory.
The expanding moving averages and sustained position above the 10-day exponential moving average (EMA) since its breakthrough on October 16th reflect a notably robust trend. On the monthly chart, there's a clear break above the 0.382 Fibonacci level at $35,922, marking a solid shift from the all-time highs to the lows of November 2022. The next significant level to observe is the 50% level at $42,238, with relatively limited activity anticipated at this stage. As previously highlighted, the subsequent significant level lies at the 0.618 mark of $48,553. Ongoing weekly monitoring will track any potential topping formations for Bitcoin.
Last week, Ethereum experienced a notable surge following the filing of the Blackrock Spot ETF, marking a significant 12.35% gain on Thursday amid robust trading activity. Analysis of the daily chart reveals a considerable deviation from the 10-day Exponential Moving Average (EMA), prompting consideration for a potential pullback after such an aggressive rally. The Relative Strength Index (RSI) indicates an overbought status without any divergence signals. While contemplating long positions, it's crucial to await a retracement, which hasn't yet manifested, implying caution against impulsively entering the market. Meanwhile, the monthly chart suggests an approaching resistance point depicted by a horizontal black line. Despite this, the underlying strength in Ethereum's price trajectory indicates a plausible continuation of the upward trend. Notably, Ethereum previously convincingly breached the 0.236 Fibonacci (fib) level at $1822.36, spanning from the November 2021 all-time highs to the June 2022 lows. The RSI, though overbought, lacks divergence or topping patterns. Further examination using the Fibonacci tool hints at a potential convergence of resistance around the 0.382 fib level, indicated by two black arrows, following this there is a convergence of support shown by the two blue arrows at the 0.618 fib level at $3345.18. Any potential downturn may find support back at the 0.236 fib level previously mentioned, which is previous resistance turned possible support. Continuous monitoring of this market remains essential.
The current Bitcoin Dominance trend offers valuable insights into the overall crypto landscape, particularly reflecting the recent surge in altcoins over the past couple of weeks. Despite hitting overbought levels on a daily basis, a significant shift seems imminent, highlighted by a compelling pattern on the weekly chart—an extensive ascending wedge formation dating back to the lows of May 2021. This pattern typically signals bearish market trends, although it's unpredictable and could break in either direction. The gradual upward movement of prices indicates a slowdown in growth and price contraction, usually indicative of bearish trends. Notably, two consecutive large bearish weekly candles have emerged, suggesting that if dominance breaches the lower wedge line, it might unleash substantial potential for altcoins. The daily oscillators indicate oversold conditions, potentially hinting at an upcoming rebound followed by a double topping pattern on the daily chart before a subsequent decline. Support levels are notably sparse until reaching approximately 48%. Considering the deceleration in Bitcoin's momentum and the rising value of altcoins, this might signify the inception of an altcoin bull market, potentially at its nascent stage.
Poor 30 Year Treasury Auction
US government spending is decided by Congress and funded through the Treasury department. Any shortfall between tax receipts and spending is financed by issuing government debt (known as US Treasuries). Congress always spends more than it takes in in tax, so there’s always new debt being issued.
Treasury debt ranges in tenor (time to maturity, i.e. when the debt is repaid) of 1 month to 30 years and is issued via monthly auctions. The shorter the tenor, the easier the issuance is digested by the market. Treasury issued debt is referred to by its maturity (time to maturity at issue) and comes in three types:
Bills: short term, up to 1 year maturity; high demand and easily digested.
Notes: medium term, 2 year to 10 year maturity; generally good demand, decreasing as maturity increases.
Bonds: long term, 20 year to 30 year maturity; generally harder to digest as cash is tied up for decades if held to maturity.
More on why bills are in high demand vs bonds later.
Last week’s $24bn 30 year Treasury auction was disappointing, to say the least, resulting in higher yields (lower bond prices) across all maturities and one of the biggest losses this year in Bloomberg’s Treasury index:
What does this mean? Ultimately, any market works on supply and demand. Poor demand for long duration US debt at current market prices indicates the market’s long term uncertainty. Record – and rising – US debt levels and higher inflation expectations, combined with current economic and geopolitical issues, all play into why investors demanded a much higher than expected discount for new 30 year US debt.
Moody’s Cuts Outlook on U.S. Credit Rating
Last Friday, credit rating agency Moody’s Investors Service cut its US credit outlook to negative from stable. According to Barron’s, unlike credit rating agencies S&P and Fitch who have both downgraded their US ratings to AA+ from AAA, Moody’s retained its US AAA rating.
However, in its outlook Moody’s said “The downside risks to the US’ fiscal strength have increased and may no longer be fully offset by the sovereign’s unique credit strengths.”
“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”
This comes the week before a potential debt related US government shutdown, should Congress not pass a spending bill by this Friday 17th November. More on that, next.
Debt Ceiling Circus Returns
It’s that time again! On 30th September, US Congress passed a temporary spending bill which suspended the US debt ceiling until mid November. Well, mid November is here. If the US government cannot pass a full budget – or pass another stopgap funding bill – by 17th November, government will shutdown.
The 45 day resolution passed on 30th September was largely disrupted by House Speaker Kevin McCarthy’s ousting 3 days later. Much of the time since has been spent deciding who would replace McCarthy, eventually resulting in Mike Johnson taking the role on October 25th, 22 days later.
Whilst it is extremely unlikely the Republican held House of Representatives and Democrat held Senate won’t pass a bill to avoid a shutdown, Brookings’ Molly Reynolds sees Johnson’s relative inexperience potentially hurting negotiations.
Add Moody’s credit watch downgrade, and this could be another theatrical storm in a teacup as US politicians play politics. The lack of news coverage however is reassuring, demonstrating market’s and media’s growing immunity to politicians on both sides of the aisle crying wolf, once again.
CRE Trouble Brewing
Former AT&T tower, a 44 story St Louis office building, is being auctioned in December for the second time in two years. Previously sold to a REIT for $205 million in 2006, and with its current owner having paid $5 million for the property last year, December’s auction starts at $2.5 million. That’s a massive reduction in value and there are many other, similar problems in the US commercial real estate market as work from home practices were accelerated by the pandemic shutdowns.
Coworking space company WeWork, valued in 2021 at $47 billion, filed for chapter 11 bankruptcy in the US last Monday. Founded in 2010 and going public in 2021, the company which arguably has no unique selling proposition, has never turned a profit. This is perhaps one of the most egregious cases of what’s possible when cost of capital is artificially held at near zero for the best part of a decade, and how central banks’ current rate hiking cycle is finally having some effect. Bad businesses are being flushed out of the market by tighter financial conditions for the first time since 2008.
This Week’s Economic Events
ECB Vice President Luis de Guindos speaks, Monday
US CPI, Tuesday
UK jobless claims, Tuesday
Chicago Fed President Austan Goolsbee speaks, Tuesday
China retail sales, Wednesday
UK CPI, Wednesday
US retail sales, PPI, Wednesday
China new home prices, Thursday
US initial jobless claims, Thursday
New York Fed President John Williams, Thursday
US housing starts, Friday
ECB President Christine Lagarde speaks, Friday
Chicago Fed President Austan Goolsbee, Boston Fed President Susan Collins, San Francisco Fed President Mary Daly all speak, Friday