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We Might Have An ETF Problem...
Federal Court Orders SEC to Reevaluate Approval of Grayscale Bitcoin Spot ETF
On Monday, the D.C. Circuit Court of Appeals brought a significant chapter to a close as it officially concluded the legal battle between the Securities Exchange Commission (SEC) and investment powerhouse, Greyscale. The crux of the matter revolved around the SEC's initial rejection of Greyscale's bid to establish a Bitcoin Spot ETF, a decision that they opted not to contest any further. This confrontation initially took centre stage back in July when the court criticised the SEC for what it deemed "arbitrary and capricious" behaviour. In essence, this meant that the SEC's rejection lacked substantial reasoning, rendering it seemingly arbitrary and impulsive.
In a turning of the tide, the High Court conveyed a clear directive to the SEC: they must genuinely consider granting a Bitcoin Spot ETF, signalling a shift towards more transparent and well-founded decision-making. While this directive does not automatically ensure that Greyscale will obtain the coveted Spot ETF, it underscores the necessity for the SEC to have substantial grounds for refusal, backed by sound reasoning.
Greyscale's pursuit of this ETF is not in isolation, as other prominent financial giants like Blackrock and Fidelity are also eager to launch their Bitcoin Spot ETFs. Consequently, the SEC will be compelled to evaluate these proposals with equal diligence.
Greyscale, with its almost $17 billion Grayscale Bitcoin Trust (GBTC), is poised and ready to cooperate closely with the SEC. Their aim is to expedite the product's readiness for investors, emphasising their commitment to working hand-in-hand with the regulatory body.
Jennifer Rosenthal, a spokesperson for Greyscale, expressed their dedication to the process, stating,"The Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC to an ETF". This marks a significant milestone in the evolution of cryptocurrency investment options, promising new horizons for investors and financial institutions alike.
Ledger Live Unveils Innovative Recovery Solution for Cryptocurrency Investors
Last week, Ledger Live, a top hardware wallet provider, introduced their new cloud-based open-source tool, "Ledger Recover." This innovative solution is currently available to residents of the United States, the United Kingdom, and the European Union who possess valid passports or identity cards. The primary aim of Ledger Recover is to provide a safety net for cryptocurrency investors who might encounter the distressing scenario of losing their Nano device or forgetting their Secret Recovery Phrase (SRP).
Access to Ledger Live's services comes with the option of an annual subscription priced at $120 or a more flexible monthly payment plan at $9.99. To get started, users must first create an account and complete a thorough identity verification process. Once these prerequisites are met, users can securely safeguard their recovery phrase within a digital vault. Ledger Live employs state-of-the-art encryption techniques to store fragmented segments of this crucial code within a cloud-based repository. In the unfortunate event of recovery phrase loss, users can request a unique code from Ledger Live, facilitating the recovery of their misplaced funds.
However, not everyone is fully convinced of the security and privacy aspects of this solution. Critics have voiced concerns about Ledger Live gaining potentially excessive access to users' cryptocurrency holdings, leading to potential vulnerabilities. There's also apprehension about how future regulatory changes might impact Ledger Live's ability to comply with government laws giving access to customers' cryptocurrency stored within the vault.
In summary, Ledger Live's "Ledger Recover" is a promising tool aimed at enhancing the security and accessibility of cryptocurrency assets, although it does raise important questions about security and compliance with future regulations.
Polygon 2.0: Top Layer 1 Blockchain Launch New Token “Pol”
Polygon, a prominent blockchain Layer 1 cryptocurrency platform, made a significant announcement on a Wednesday, introducing their latest digital asset, Pol. In a bold and innovative move, Polygon is embarking on a mission to create an all-encompassing, universal token that can seamlessly integrate all of their diverse solutions into a singular, comprehensive cryptocurrency. This visionary approach aims to consolidate their various achievements into a unified digital currency that serves as the definitive choice for their user base.
In what they refer to as Polygon 2.0, the platform envisions eventually replacing their current token, Matic, with the new Pol token by year-end. This transition will empower Pol token holders to exclusively transact within the Polygon ecosystem.
This transformation represents the culmination of considerable effort on Polygon's part, as they have diligently conducted successful testing phases. They are on the verge of enabling Pol holders to engage in staking activities, which will ultimately facilitate the integration of various technologies, including Matic's Layer 2 and Ethereum sidechains. This integration is seen as a pivotal step toward enhancing the safety, accessibility, and simplicity of Polygon's ecosystem for all users. The ambitious vision of a singular, versatile token is poised to streamline and amplify the benefits of Polygon's robust suite of solutions.
In Other News
Explosive Sam Bankman Fried Testimony: Former Boss Points Fingers at All Those Around Him
Crisis at Binance? CEO CZ Loses $12 Billion Amid Plummeting Revenue
Last Monday, Bitcoin surged beyond its monthly resistance, registering a remarkable single-day gain of nearly $5,000, ultimately reaching a peak of $35,280 on Tuesday. The current consolidation of prices at these elevated levels enhances the prospects of an upward trend continuation. This bullish sentiment is further reinforced by a declining trading volume as prices retrace over the past few days. Nevertheless, it's essential to acknowledge that market dynamics can always be influenced by significant players who might enact a price correction.
While the daily chart suggests an overbought condition, a closer look at the four-hour chart reveals intermediate-level indicators, such as the Stochastic RSI and RSI, indicating room for short-term growth. It's crucial to remember that oscillators can persist in extreme readings during robust trends. Turning our attention to the monthly chart, we observe that the price falls short of the 0.382 Fibonacci retracement level at $35,922, where it encounters confluence of resistance, making it a key point of interest. A decisive breach of this Fibonacci level could propel the price toward the 0.618 level at $42,238.
It's noteworthy that the current trading volume significantly lags behind that witnessed during March's rally, with an 83% reduction. This, however, may change with the influx of new capital into the market. It's imperative to closely monitor the chart for any potential topping patterns on both shorter and longer timeframes, as these may provide early indications of a reversal.
TOTAL2 (All Altcoins including Stablecoins)
Examining the charts provided, it's evident that Total2 has closely mirrored Bitcoin's performance in the past week, indicating a positive trend for the cryptocurrency market in general. However, it is currently encountering resistance around the $566 billion mark, a level substantiated by both the daily and weekly charts.
Notably, the weekly oscillator (StochRSI) is situated in a mid-range position, while the daily chart suggests an overbought condition. Consequently, there may be a potential for a minor pullback towards the 10-day exponential moving average before any further upward movement is realised.
Should the aforementioned resistance be breached, it could propel the price towards the rectangular pattern visible on the weekly chart at approximately between $660 billion - $700 billion. An eventual break beyond that point would usher in a scenario with minimal resistance until around the $900 billion mark. Vigilance in monitoring price developments is advised, especially when the rectangle pattern is breached.
I eagerly revisited the Stablecoin chart, keen to track the capital flow. It's now abundantly clear that funds are pouring into Bitcoin and Altcoins, as both their charts exhibit upward momentum while the Stablecoin chart is on a downward trajectory. Simultaneously, I maintained a watchful eye on the old Head & Shoulders pattern I had annotated on the daily chart a few weeks back. Remarkably, it hit the anticipated target at $9.94 and even exceeded it.
Now, as for our next move, we find ourselves amidst conflicting indicators. On one hand, there have been substantial bearish candles with little respite in sight, and a minor consolidation on the daily chart, suggesting the possibility of further downside. On the other hand, we're approaching significant monthly support levels, and the Stochastic RSI is indicating an oversold condition. If I were to make a technical analysis-based decision, I'd lean towards expecting additional downside movement and a continued inflow into Bitcoin and Altcoins. This inclination arises from the overall downward movement of Stablecoins and the healthy outlook of both Bitcoin and Altcoin charts presently. Rest assured, I'll revisit these charts for any future developments.
US Blockbuster GDP
The US consumer remains resilient, despite a year of recession calls from many economists and portfolio managers. Whilst new and continuing jobless claims rose slightly more than forecast, US third quarter GDP came in much hotter than expected at 4.9% vs estimates of 4.3%. MoM durable goods orders jumped 4.7% vs expected 1.7% but quarterly core PCE – a key indicator for the Fed – came in at 2.4%, slightly below the 2.5% forecast.
Have 10 Year Treasury Yields Peaked for the Year?
Joseph Wang, former senior trader on the Federal Reserve’s open markets desk (he executed monetary policy), thinks the 10 year yield has peaked, for the time being at least. Since April this year, the 10 year Treasury yield – the global long term funding benchmark rate – has risen over 150bp to break 5% early last week. Such a wild move in what should be one of the most stable markets, Joseph argues, needs time to be digested.
He also thinks the Fed may be cutting as early as March, as real rates would rise if inflation continues to fall. According to Investopedia:
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation. Once adjusted, it reflects the real cost of funds to a borrower and the real yield to a lender or to an investor.
If nominal interest rates (set by the Fed) remain unchanged, while the rate of inflation falls, real rates (the difference) rises. Joseph observes the market likely will be caught off guard by this change, just as it has been the last year plus in thinking the Fed wouldn’t raise rates, despite Jay Powell’s consistent messaging throughout the hiking cycle.
Billionaire hedge fund manager Bill Ackman last week announced on X, “we covered our bond short”, and he’s not alone as other portfolio managers have said they see this sell off in long bonds cooling.
Central Bank Rate Decisions, Treasury Refunding Announcement
Last week the central banks of China, Canada and Europe left main policy rates unchanged. This week sees rate decisions from the Bank of Japan, Federal Reserve and Bank of England, all of which are expected to remain unchanged.
Central bankers however, particularly the EU, US and UK, have been signalling caution as the delayed effects of monetary policy decisions catch up with where rates are. Focus this week will be on the Treasury’s quarterly refunding announcement on Wednesday, which breaks down how they intend to fund government spending over the next 3 months. Attention will be on how much of this funding will be via sales of longer duration Treasuries which will effectively draw liquidity out of the economy as bond dealers free up cash to buy new issuance. If however, issuance is largely weighted at the short end of the yield curve there will be little effect on the economy as this cash is already parked at the Fed, earning yield, rather than being invested in risk assets.
Equities Turning Despite Israel/Gaza Escalation?
Israel have now entered “phase two” of their war against Hamas in Gaza, with defence minister Yoav Gallant saying this phase may last for months, according to the Times of Israel. Markets have definitely been in risk off move recently, particularly since this conflict started over 3 weeks ago.
The benchmark US S&P 500 index is set to make a 3rd consecutive month of losses, which last happened during the covid crash of 2020. Market breadth is weak with almost 90% of S&P stocks being below their 50 day moving average and over 75% being below their 200 day moving average. The Russell 2000 small cap index made its lowest weekly close last week, since October 2020, closing -18.3% from its July peak. The S&P and Nasdaq both closed more than -10% form their recent highs, putting all 3 indices into correction territory. Gold closed last week above $2000, following a strong 3 week gain of over 10%.
Although the Middle East war has unquestionably escalated over the weekend, and markets have been in risk off move for several weeks, today equities are making early gains in Asia and Europe, whilst US futures are recovering as well. Yields, gold and oil are down, the dollar index is down and crypto is up, which all adds up to a potential change in sentiment. Given the weekend’s negative news, this contrary reaction may be a key indication of a turning point in risk assets, at least from a short term tactical perspective.
Key Events This Week
China’s key financial policy gathering day, a rare closed door event led by Chinese President Xi Jinping
Japan unemployment, industrial production, retail sales
Bank of Japan rate decision
China non-manufacturing PMI, manufacturing PMI
Eurozone CPI, GDP
US construction spending, ISM Manufacturing, job openings
US Treasury quarterly refunding announcement
Federal Reserve rate decision
Bank of England rate decision
China Caixin services PMI
US unemployment, nonfarm payrolls
Another Busy Earnings Week
Some big names to watch here include AMD and Apple, consumer stocks such as airlines and retail names and Coinbase earnings on Thursday.