Daily News | Equities, Bonds And Cryptos Rise On In-line CPI Data But The Lack Of Liquidity In US Treasury Triggers Worry For Default

Fundamental & Technical Outlook

👓 Macro

On Thursday, the widely anticipated Consumer Price Index (CPI) report rose 8.2% in September year-on-year, slightly higher than the 8.1% forecasted by economists. The index rose 0.4% month-on-month.

With inflation remaining stubbornly high, traders are now pricing in a 97% chance that the central bank will raise its key rate by 75 basis points in November. Expectations are building in financial markets for a 4.5% fed-funds rate by year’s end, and a 5% - 5.25% fed-funds rate by February, from a current level between 3% to 3.25%.

The core CPI also rose 6.6% from a year ago to its highest level in more than 40 years. Core CPI does not account for volatile energy and food prices and is traditionally seen as a more steady indicator of underlying price pressures by investors and policymakers.

The U.S. equity markets’ reaction to the latest inflation report underlined just how confused and fearful investors are.

The S&P 500 (+2.6%) plunged as much as 3% shortly after the U.S. markets opened but changed course within three hours in one of the biggest reversals on record. The DJIA (+2.83%) and Nasdaq (+2.23%) both followed similar patterns.

Volatility in U.S. bond markets was also intense Thursday. At one point before noon, the 10-year Treasury yield topped 4% and the 2-year yield exceeded 4.5%. A potential lack of liquidity in the $23.7 trillion Treasury market is one of many cracks that seem to be forming in financial markets triggering a debate about whether the next financial crisis is inevitable.

As for cryptocurrencies, $203 million in long crypto positions were liquidated Thursday, according to data from The Block, as markets experienced high volatility triggering a sharp sell-off right before U.S. markets opened.

As of this writing, Bitcoin (BTC) was trading at $19,827 and Ether (ETH) was changing hands at $1,330, or up 3.86% and 3.37% in a 24hr period, respectively.

Notably, Uniswap (UNI) was up 12.12%, Ethereum Name Service (ENS) +17.83%, and LidoDAO (LDO) +9.53%.

🟠 BTC Weekly Timeframe

As of Oct. 14 Asian session, Bitcoin (BTC) was still trading below the monthly level of 19,528 and within a resistance zone formed between 23.6% and 38.2% (19,144 - 19,792) Fibonacci retracement levels measured from Sep. 12- 19.

However, the current price action setup still largely favors the bears but circumstances may change if the bulls are able to keep the price of BTC above the 23.6% (19,144) Fibonacci level by the week’s end.

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. 14 00:44 UTC, BTC was trading at $19,398 (+1.31%) in a 24hr period.

On Tuesday, BTC broke below the supporting trendline which coincides with the 23.6% (19,144) Fibonacci retracement levels measured from Sep. 12- 19. Yet on Wednesday, the bulls managed to close the price of BTC above said level.

Notably, Wednesday’s candle engulfs that of Tuesday which may signal a momentum switch, or at the very least, a slow down of bearish momentum.

On Thursday, approximately between 10:00 - 13:00 UTC before U.S. markets opened, BTC took a deep dive into a Fibonacci extended support zone (18,397 - 18,097) measured from Sep. 23 - 25. The following ascent can be traced back to the U.S. equity markets as BTC followed their bullish sentiment. BTC closed on the day within a Fibonacci extended resistance zone (19,309 - 19,400) measured from the engulfed candle on Oct. 12.

BTC Daily Resistance zones

1. 19,309 - 19,400
2. 19,488 - 19,578
3. 19,619 - 19,700
4. 19,729 - 19,838
5. 19,876 - 19,967

BTC Daily Support zones

1. 19,267 - 19,109
2. 19,091 - 18,988
3. 18.939 - 18,851

🔵 ETH Weekly Timeframe

As of Oct. 13, Ether (ETH) was trading below the monthly support level of 1,313 but returned above the weekly supporting trendline Wednesday after falling through Tuesday.

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. 14 01:03 UTC, ETH was trading at $1,290 (-0.43%) 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.

On Tuesday, ETH followed suit as broader markets continued their descent. ETH found bottom on Tuesday at the edge of the support zone (1,274 - 1,267) and bounced back slightly.

On Wednesday, ETH made a relatively strong comeback with a candle that engulfs the previous one and managed to close on the day slightly above the resistance zone (1,294 - 1,302). Although this isn’t a sign of a bottom, yet, the price action does indicate the bears are losing short-term strength.

On Thursday, likewise to BTC, Ether (ETH) took a deep dive into the weekly 127.2% and 141.4% Fibonacci extended support zone (1,264 - 1,180) measured from Aug. 15 - 22, representing nearly an 8% plunge before returning above the closest daily support zone (1,286 - 1,279) and closing -0.58% on the day.

ETH Daily Resistance zones

1. 1,294 - 1,302
2. 1,303 - 1,310
3. 1,315 - 1,326
4. 1,334 - 1,342

ETH Daily Support zones

1. 1,286 - 1,279
2. 1,274 - 1,267
3. 1,266 - 1,256

📌 The topic of the Day: $3B Stolen in 2022: Chainalysis

According to blockchain analytics firm Chainalysis, October has become the biggest month this year for hacker exploits as $718 million has now been stolen across 11 different DeFi protocols.

This year, $3 billion had been stolen across 125 different hacks, compared to $3.2 billion last year. Notably, $1.7 billion of which was stolen in the first half of 2022.

The latest hacks include $100 million stolen from Solana DeFi trading platform Mango Markets; a $1 million exploit stolen from QANplatform bridge to the Ethereum network; and a $2.3 million hack worth of tokens stolen from TempleDAO.

Per Chainanalysis’s tweet,

“Cross-chain bridges remain a major target for hackers with three bridges breached this month and nearly $600 million stolen, accounting for 82% of losses this month and 64% of losses all year.”

Interestingly, activity had dropped as market participants reacted to the TerraUSD collapse and the bankruptcies of Three Arrows Capital, Voyager Digital, and Celsius.

The sophistication of hacks has also been on the rise as innovations in the DeFi sector improved. It’s almost as if the decentralized world has become a battleground for hackers to prove their relevance in some underground competition.

🗒 Happenings of The Week (Oct. 08 - 14):

• 📣 SEC rejects WisdomTree's latest spot Bitcoin ETF proposal, citing insufficient protection from fraud and manipulation. WisdomTree received another rejection from the regulator in December of last year for a previous iteration of the product.

• 📣 CFTC Chairman Rostin Behnam pushed before Congress to expand their agency's authority to spot markets for cryptocurrency. A council of U.S. financial regulators recently recommended that Congress grant rulemaking authority to regulators for digital asset spot markets and the Senate Agriculture Committee has held a hearing on bipartisan legislation to grant the CFTC that power.

• 📣 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.

• 📣 Lightning Network nodes fell out of sync with the Bitcoin network due to a large multi-sig transaction made by a developer. The Lightning network did not go down, but merely a lot of nodes fell out of sync with it — an issue that only affected node runners from adding liquidity. The issue was due to a bug in the parsing library of the implementation of Bitcoin called btcd.

• 📣 Meta, the parent company of Facebook, debuted its new virtual-reality headset Tuesday. Meta also announced strategic partnerships with Microsoft, Accenture, and Zoom. The Meta Quest Pro VR device will cost $1,499 and is available for pre-order.

• 📣 Aptos CEO's motion to dismiss $1 billion Glazer lawsuit was denied by court. Founded by former Meta employees, Aptos aims of building a scalable Layer 1 blockchain based on the Diem payments network. Investor Shari Glazer claimed that a “fraudulent scheme” implemented by Aptos CEO Mo Shaikh deprived her of her rightful share of a partnership and a fair share of equity.

• 📣 Bank of New York Mellon (BNY Mellon), the oldest bank in America, won approval from New York’s financial regulator and will custody customers’ digital assets alongside traditional investments on the same platform using software developed by Fireblocks.

• 📣 BNB Chain executes hard fork to secure network after $100 million hack. The upgrade secured the cross-chain infrastructure between BNB Beacon Chain and BNB Smart Chain. With this hard fork, the team is expected to move to its next plan of action： to conduct governance votes to decide whether to freeze funds held in the hacker’s address on BNB Chain and "auto-burn" them.

• 📣 Stablecoin issuer Tether has eliminated $30 billion of commercial paper from its reserves. It also increased its direct exposure to U.S. Treasuries by more than $10 billion in the last quarter. Tether claims its tokens are pegged one-to-one with a matching fiat currency and are backed by the company’s reserves.

• 📣 Decentralized exchange protocol Uniswap V3 passes governance proposal to deploy the protocol on the Ethereum scaling solution zkSync. The goal of this deployment is to support Uniswap’s cross-chain expansion into multiple blockchain ecosystems and onboard new users and increase user activity due to the cheaper fees and security from zkSync.

• 📣 Cosmos developers have reported a critical security vulnerability across its IBC-enabled blockchains. A security patch will be deployed on Friday, said Cosmos co-founder Ethan Buchman. Currently, there are 51 blockchains in the Cosmos ecosystem that support the IBC protocol, including Osmosis, Cosmos Hub, Axelar, Evmos, Injective, Juno, Sifchain, and Cronos.

• 📣 Yuga Labs, creators of Bored Ape Yacht Club NFTs, faces SEC probe. The regulator is looking into whether certain assets could be treated more like stocks and therefore should follow the same rules. In a 24hr period, ApeCoin (APE) has declined by 6.5% as of Wednesday's Asian session.

• 📣 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.”

• 📣 During the Ethereum Foundation’s Devcon conference in Bogota, Colombia, a group of web3 companies launched the Universal Privacy Alliance focused on raising awareness about the need for data privacy following U.S. sanctions on coin mixer Tornado Cash. The UPA Legal Defense Fund was also unveiled to “defend the right to experiment, build, and use full-stack privacy technologies.”

• 📣 Non-profit Organization Coin Center Filed Lawsuit Against US Treasury over its sanctioning of Tornado Cash. This is the second lawsuit brought against the department since the sanctioning.

• 📣 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:

  • 🔹 Offchain Labs, the parent company of Arbitrum, acquires Prysmatic Labs, the developer team behind Prysm client for Ethereum. Over 43% of Ethereum nodes use Prysm client to run the Ethereum network on proof-of-stake.
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  • 🔹 Banking platform Step, which caters to a teenaged and young adult clientele, has secured $300 million in new debt funding led by Triplepoint Capital and Evolve Bank & Trust. The firm said it will expand into crypto investment services, and launched a financial literacy program to improve consumer education on banking and crypto.
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  • 🔹 Crypto custody firm Copper raises $196 million in Series C round. The firm had received anti-money laundering (AML) approvals from Swiss regulators that were granted in May this year.
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  • 🔹 Uniswap Labs raised $165 million in a Series B led by Polychain Capital with participation from a16z crypto, Paradigm, SV Angel and Variant. The DEX has processed $1.2 trillion in trading volume, to date.
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  • 🔹 Crypto-native asset management firm BlockTower launches $150 million fund backed by BPI France and Mass Mutual. Recent BlockTower investments in startups such as Aptos, Lighthouse Labs and Maple Finance all fall within this new fund.
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  • 🔹 Blockchain developer startup Tatum raises $42 million led by Evolution Equity Partners. The platform offers products such as NFT plug-ins for Wordpress, software development kits for over 40 protocols and an API that enables speedy NFT minting across eight blockchains.
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  • 🔹 Blockchain indexer Nxyz raises $40 million in a Series A round led by Paradigm. The startup is being spun out of the private search engine Neeva and aims to provide fast and reliable blockchain indexing and data services.
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  • 🔹 Singapore-based crypto investment app Pillow raised $18 million led by Accel and Quona. The platform funnels user funds into DeFi protocols to generate returns of up to 6% and 10.42% on ETH and stablecoins USDC and USDT.
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  • 🔹 Low-code blockchain platform SettleMint raises $15.5 million in a series A funding led by Molten Ventures and OTB Ventures. The startup seeks to solidify its India, Singapore and EMEA operations and establish a base in Japan. The platform includes a suite of tools, frameworks, templates and APIs that are ready to use for developer teams.
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  • 🔹 Former Terra developer Neel Somani raises $15 million for cross-chain modular rollup project Eclipse built on Solana. The developer said he learned to avoid single points of failure, and built a protocol that can swap out its Layer 1 component.
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  • 🔹 Bitcoin mining hardware startup Fabric Systems raises $13 million in a seed round from Bitcoin miner TeraWulf and Skype co-founder’s fund Metaplanet. The firm is developing a liquid cooling ASIC Bitcoin miner that will achieve an energy efficiency of 20 watts/TH — significantly lower than most models currently available.
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  • 🔹 DeFi platform Zerion raises $12.3 million led by Wintermute Ventures, Mosaic, Alchemy and Placeholder. The platform enables users to access and manage assets across decentralized finance protocols with its crypto wallet.
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  • 🔹 NFT debt provider MetaStreet raises $10 million from investors such as Dragonfly and OpenSea. The funding will be used to create trust, credit and ownership products to facilitate debt and build out the NFT industry’s debt infrastructure.
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  • 🔹 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.
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  • 🔹 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.
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• 📣 This week’s onchain criminal activities include but are not limited to:

  • 🔹 Solana Lending Platform Mango Markets suffered a $116 million hack. The attacker put forward a governance proposal that would give them a $70 million bounty reward. Voting will end on Oct. 15 at 1:12 am UTC.
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  • 🔹 Quantum-resistant Layer 1 blockchain QANplatform has suffered a $2 million hack, token slumps 94%.
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  • 🔹 Staking Protocol TempleDAO suffered an exploit for $2.3 million worth of crypto tokens.