Daily Flash | The Bears Are Winning In All Markets While The EU Is Moving Swiftly With Its Legislative Measures

Fundamental and Technical Outlook

👓 Macro

Major U.S. indexes finished lower for a fourth consecutive session on Monday as concerns about additional rate hikes by the Fed continued to damp sentiment.

The dollar index DXY rose 0.3% to 113.12 as the euro intermittently broke below $0.97 after the war further intensified.

The DJIA (-0.32%), S&P 500 (-0.75%), and Nasdaq (-1.04%) exacerbated losses that occurred at the end of last week. Notably, the Nasdaq Composite was down 31.9% for the year to date through Friday.

Yesterday, Jamie Dimon, CEO of JPMorgan Chase, told CNBC that he expects markets to remain volatile for the foreseeable future and that the S&P 500 could easily fall another 20% as the Federal Reserve continues to raise interest rates.

As Bitcoin closely correlates with the U.S. indexes, a potential 20% drop in the S&P would be catastrophic for the cryptocurrency markets. Another important indicator is the CBOE VIX index, a gauge of expected S&P 500 volatility, which sat at 32.15 on Monday, well above its long-term average of 20.

This Thursday, the Consumer Price Index (CPI) is widely expected to show a slight decrease from last month's 8.3 reading, hardly enough to sway the Fed’s monetary hawkishness and alleviate fears of a harsh recession.

As of this writing, Bitcoin (BTC) was trading at $19,025 and Ether (ETH) was changing hands at $1,275, or down 2.44% and 4.18% in a 24hr period, respectively. Notably, Terra Luna Classic (LUNC) was down 11.42%, Near Protocol (NEAR) -10.16%, and Ethereum Classic (ETC) -11.63%.

As of Oct. 11 Asian session, not only did Bitcoin (BTC) trade below the monthly level of 19,858, but it had also broken the 23.6% (19,144) Fibonacci retracement level measured from Sep. 12- 19. This signifies the advantage the bears have over the current price action formation.

Looking ahead in the coming weeks, key resistance and support zones have been measured from various Fibonacci extension levels.

BTC Weekly Support zones

1. 19,057 - 18,807
2. 18,807 - 18,143

BTC Weekly Resistance zones

1. 19,144 - 19,792
2. 19,858 - 20,331

BTC Daily Timeframe

As of this writing on Oct. 11 02:19 UTC, BTC was trading at $19,019 (-2.3%) in a 24hr period.

As of early Tuesday trading, Bitcoin (BTC) was extending losses from Monday as it continued to show bearish momentum after failing to sustain above the 23.6% (19,144) Fibonacci retracement level measured from Sep. 12- 19.

BTC Daily Resistance zones

1. 19,157 - 19,274

BTC Daily Support Zones

1. 19,091 - 18,988
2. 19,939 - 18,879

🔵 ETH Weekly Timeframe

As of Oct. 11, Ether (ETH) was trading below the monthly support level of 1,313 and extended beyond the weekly supporting trendline. Notably, ETH had been floating around the 61.8% (1,346) Fibonacci retracement level measured from Jul. 4 - Aug. 8 for the past three weeks.

ETH Weekly Support zones

1. 1,264 - 1,241
2. 1,241 - 1,192
3. 1,180 - 1,125

ETH Weekly Resistance zones

1. 1,345 - 1,379
2. 1,379 - 1,428

ETH Daily Timeframe

As of this writing on Oct. 11 02:35 UTC, ETH was trading at $1,277 (-3.55%) in a 24hr period.

Monday’s decline had been incremental to the bears as the latest price action indicates an overwhelming preference for the downside. Notably, ETH had broken below the weekly supporting trendline on Monday, further giving strength to the bears.

ETH Daily Resistance zones

1. 1,285 - 1,302
2. 1,303 - 1,313

ETH Daily Support zones

1. 1,286 - 1,278
2. 1,274 - 1,267
3. 1,265 - 1,256

📌 The topic of the Day: Ether Turns Deflationary as Secretive Project Pushes Up Gas Prices: TheDefiant

According to ultrasound.money, ETH supply has dropped by more than 2,000 digital tokens less than a month after the Merge. And it appears that a mysterious project called XEN Crypto is largely responsible for the spiking transaction fees, and corresponding deflationary pressure on ETH.

According to Etherscan, XEN’s smart contract ****accounts for more than 40% of the gas used on Ethereum in the past 24 hours. And yet, not much is known about XEN except for who the founder is and what the project intends to do according to its lite paper.

According to its website, Jack Levin is the founder of XEN Crypto and he was the 21st employee at Google who had worked on Google Cloud. It is said that he also began mining Bitcoin in 2011 and is the co-founder of ImageShack, a sub_script_ion-based image-hosting website that raised money from Sequoia Capital.

Since the project has only gone live for 2 days, no doubt crypto twitter will churn out a much simpler explanation of what the project actually is. For now, the lite paper states that the project aims to “become a community-building crypto asset that connects like-minded people together.”

Notably, this isn’t the only time ETH has been deflationary. An NFT mint for the Bored Ape Yacht Club’s Otherside pushed ETH ****into deflationary territory in May as minters paid exorbitant fees to get their transactions to execute.

Meanwhile, ETH issuance is still up by over 10,000 tokens since the Sept. 15 Merge, meaning there’s still a long way to go before ETH can be called a deflationary asset.

🗒 Happenings of The Week (Oct. 08 - 11):

• EU’s MiCA Bill Passes Committee Vote in European Parliament. Final approval of the legislation alongside an anti-money laundering bill that obliges transfers made in crypto to include data on the payer and payee are expected to be passed by parliament later in October. The final implementation of new laws around stablecoins and crypto exchanges is expected in 2024.

• The Organisation for Economic Co-operation and Development (OECD) releases a final plan to crack down on international tax evasion using crypto. The guidelines aim to increase regular information sharing between 38 countries in order to cut down on tax evasion using digital assets. The framework will be formally unveiled during a G20 meeting later this week.

• The European Commission released a bid to monitor Ethereum network. According to the document, the study will focus on “automated supervisory data gathering directly from the blockchain to test the technological capabilities for supervisory monitoring of real-time DeFi activity.” In simple terms, the commission seeks to automate DeFi data collection for regulators and is currently looking for willing participants.

• Portugal’s 2023 budget proposal includes a 28% income tax on cryptocurrencies held for less than a year. Free crypto transactions would also be taxed, and a 4% rate would apply to commissions charged by intermediaries. The budget is still subject to discussions and approval within the Parliament in the coming weeks.

• India’s Central Bank Is Preparing to Launch Digital Rupee Pilot Soon. On Friday, a 50-page concept note has been released to discuss key features of India’s CBDC prototype. Notably, the report points out a wholesale CBDC would be account-based and issued by the central bank, while the CBDC for consumers would be token-based and managed by an intermediary.

• US Department of Commerce Agency NIST released an initial public draft addressing the top five stablecoins that retained their peg: USDT, USDC, BUSD, DAI, and FRAX. The report also claims that while DeFi is more vulnerable to security issues due to increasing code complexity, CeFi architectures are more vulnerable to trust issues due to a greater reliance on human trustworthiness.

• Bitcoin mining difficulty jumps to all-time high levels with the difficulty spiking by 13% to reach 35.61 trillion hashes. Bitcoin network’s hash rate, another important metric, is at an all-time high of 257 exahashes per second (EH/s) according to data from The Block. The spike in block difficulty can potentially impact the miner's profitability.

• Popular Solana NFT project DeGods removes NFT royalties, and predicts all marketplaces will move to 0% model. Founder Frank added that the current royalty model was “already broken” as it is bringing in decreasing revenues even as the project’s popularity grows.

• Brazillian Police Raid ‘Bitcoin Sheikh’ for Defrauding Victims of $766M (4 billion reals). The operation allegedly deceived "thousands of victims" by offering services that promised monthly returns of up to 20% of the amount they invested. Police reportedly raided 20 addresses linked to the crypto fraud network controlled by Francisco Valdevino da Silva, aka “Sheikh dos Bitcoins.”

• Luna Foundation Guard: Distribution of Assets Is 'Not Possible at This Time.’ LFG cited “ongoing and threatened litigation” for its inability to distribute its remaining assets to UST users starting with the smallest HODL-ers. Prior to the market decline in May, the fund's reserves included more than $4 billion in assets; at the time of publication, this sum had fallen to about $105 million.

• Mt. Gox Creditors Need to Register with Exchanges By Next Year To Receive Lost Crypto, wrote Trustee Nobuaki Kobayashi. A majority of creditors approved a draft rehabilitation plan last November, and in a public letter dated Oct. 4, Kobayashi announced court approval of amendments to the rehabilitation plan, although it’s not clear when exactly the disbursements will happen next year. ****

• This week’s fundraising activities include but are not limited to:

  • Bitcoin miner TeraWulf raised $9.5 million in equity and drew an extra $7.5 million from an existing loan. The company recently energized the first 50-megawatt building in New York, reaching 1.6 EH/s in total operational capacity.
  • Led by Digital Currency Group and SoftBank spinoff Upload Ventures, Defi Startup Arch Raises $5 Million To Become The 'Blackrock of Web3’. The startup aims to make investing in DeFi accessible to the everyday investor by using the fund to tokenize a wider suite of decentralized finance indices.

Author: Gate.io Researcher Peter L.
This article represents only the researcher's views and does not constitute any investment advice.
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