Daily News | BTC Continues 3rd Day Decline, Soaring Dollar Triggers Concerns For Emerging Markets Defaults

Fundamental & Technical Outlook

👓 Macro

As of this writing, Bitcoin (BTC) and Ether (ETH) were changing hands at $19,060 and $1,281, or down 1.23% and 1.91% in a 24hr period, respectively, continuing their declines on Monday and Tuesday.

The S&P futures (-0.51%) continued to fall on Thursday during the Asian session as the DJIA (-0.33%), S&P 500 (-0.67%) and Nasdaq (-0.85%) halted their 2-day gains on Wednesday.

The Eurozone, which reported a 9.9% annual inflation rate for September on Wednesday, is facing an energy crisis which, according to the International Monetary Fund, puts the European Central Bank on a shallower path for interest rates.

In the U.S., the Biden administration announced the extension of the releases of the U.S. Strategic Petroleum Reserve well into December which is intended to offset any market volatility expected once a European oil embargo goes into effect on Dec. 5.

In the U.K., the consumer price index soared 10.1% in September and economic troubles continue to pile up as inflation and a cost-of-living crisis continue to batter households and businesses. The BoE still expects to go ahead with its quantitative tightening program from November.

In Japan, the yen (USDJPY 149.92) traded at levels last seen in 1990 and has traders on guard for potential government intervention to shore up the currency. In China, the offshore yuan was around a fresh record low and has investors concerned over its economic outlook after President Xi reiterated his stance on zero-covid policy at the latest Politburo Standing Committee.

Around the world, interest-rate differential, or difference in monetary policy among central banks, is weakening a basket of currencies against a soaring dollar, even as projections point to 100% certainty of a U.S. recession in the next 12 months, per Bloomberg data.

Global concerns are rising over a strong dollar which can trigger a liquidity or credit crisis as foreign governments and private corporations have trillions in dollar-denominated debt that they’re struggling to pay back.

This week, traders should keep a lookout for these key events:

• US existing home sales, initial jobless claims, Conference Board leading index, Thursday
• Euro area consumer confidence, Friday

🟠 BTC Weekly Timeframe

As of Oct. 20 Asian session, Bitcoin (BTC) was trading above the 23.6% (19,144) weekly Fibonacci Retracement level measured from Sep. 12 - 19.

Throughout the past week, BTC consistently traded below said level, and having a weekly candle close above it is a good sign for the bulls. Though, notably, the weekly candle is still a bearish one which indicates the sellers still have an advantage.

This week, it’ll be crucial for the bulls to not only keep the price above the 23.6% level but also to use it as an anchor to push the price above the 38.2% (19,792). Conditions would shift to a more bullish outlook if we see this week’s candle close above the 38.2% due to the price action formation of a “higher-high” wave.

On the contrary, the bears will have to pull BTC back below the 23.6% (19,144) level to prevent a “higher-high” price action formation from forming on the weekly timeframe, or at the very least, below the closing price of the last candle (19,262) in order to maintain a bearish outlook.

BTC Weekly Resistance zones

1. 19,667 - 19,792
2. 19,951 - 20,331

BTC Weekly Support zones

1. 19,144 - 18,472
2. 18,143 - 17,700

BTC Daily Timeframe

As of this writing on Oct. 20 00:35 UTC, Bitcoin (BTC) was trading at $19,121 (-0.6%) in a 24hr period.

On Sunday, the bulls managed to pull the price of BTC back into a resistance zone formed between the 38.2% (19,109) and 61.8% (19,267) daily Fibonacci Retracement levels measured from Oct. 10 - 11.

Notably, BTC had been trading within a range set between the opening (19,440) and close (19,061) of Oct. 10 - 11 for the past week.

In the coming days, it’ll be crucial for the bulls to close a daily candle above the 61.8% and then towards the next resistance zone (19,380 - 19,523) to establish a “higher-high” wave on a daily timeframe.

On Monday, the last price of BTC (19,549) closed above the aforementioned resistance zone (19,380 - 19,523) which helped establish a “higher-high” price action formation on a daily timeframe, implying a short-term sentiment change to the long side.

On Tuesday, BTC peaked at 19,704 at 06:00 - 07:00 UTC, following the rise of the U.S. futures markets but during the U.S. equity trading session (13:00 - 18:00 UTC), BTC started a decline of more than 2% (19,218). The directional correlation between U.S. futures and crypto markets has been aligned so far to the precise hour, but the same can’t be said for volatility which is much higher for crypto.

Update: On Wednesday, BTC’s decline started from 00:00 UTC and broke below the support zone (19,274 - 19,157) once U.S trading session began. Today, the key support zone will be 19,091 - 18,988, and more importantly, a “lower-low” price action formation will happen if BTC closes below the opening price (19,070) of the Oct. 16 daily candle which further confirms a bearish signal.

BTC Daily Resistance zones

1. 19,194 - 19,296
2. 19,296 - 19440
3. 19,488 - 19,578

BTC Daily Support zones

1. 19,091 - 18,988
2. 18,901 - 18,683
3. 18,580 - 18,443

🔵 ETH Weekly Timeframe

As of Oct. 20, Ether (ETH) was trading below the 61.8% (1,346) weekly Fibonacci retracement level measured from Jul. 4 - Aug. 8 and the monthly support level of 1,313.

Notably, ETH made a strong return from a low of 1,192 last week which prevented a “lower-low” price action formation from forming on a weekly timeframe. This signifies the struggles bears have been experiencing to bring the price of ETH below the weekly trendline.

However, on Wednesday (Oct. 19), ETH broke below the trendline and appears to be heading toward the closest support zone (1,264 - 1,238).

ETH Weekly Resistance zones

1. 1,345 - 1,379
2. 1,379 - 1,416
3. 1,427 - 1,458

ETH Weekly Support zones

1. 1,264 - 1,238
2. 1,241 - 1,192
3. 1,180 - 1,152

ETH Daily Timeframe

As of this writing on Oct. 20 00:51 UTC, ETH was trading at $1,274 (-2.03%) in a 24hr period.

Similar to BTC, ETH had been trading within range the past week, though notably, the bears managed to form a “lower-low” wave on Saturday by closing the daily candle below the last price of Oct. 11. However, the bulls swooped in and bought on the support zone (1,278 - 1,265) to bring ETH back into a resistance zone formed between the 38.2% (1,294) and 61.8% (1,310) Fibonacci Retracement levels measured from Oct. 10 - 11.

The Sunday candle had established a “higher-high” price action formation. To solidify its strength, in the coming days, the bulls will have to make the next “higher-high” wave by closing above the 61.8% (1,310) level and from there towards the next Fibonacci Extended resistance zone (1,326 - 1,332).

On Monday, likewise to BTC, the last price of ETH (1,331) was within the Fibonacci Extended resistance zone (1,326 - 1,332) which helped establish a “higher-high” price action formation on a daily timeframe, implying a short-term sentiment change to the long side.

On Tuesday, ETH’s declining pattern followed BTC which started during the U.S. equity trading session (13:00 - 18:00 UTC). The directional correlation between U.S. futures and crypto markets has been aligned so far to the precise hour, but the same can’t be said for volatility which is much higher for crypto.

Update: On Wednesday, ETH traded in a similar pattern to BTC but was comparatively more steady. The major decline happened around 22:00 UTC which saw ETH breaking below the 78.6% Fibonacci retracement level. Today, the key support zone will be 1,274 - 1,266, and more importantly, if ETH breaks below the opening price (1,275) of the Oct. 19 daily candle, a “lower-low” price action formation will confirm further bearishness.

ETH Daily Resistance zones

1. 1,279 - 1,286
2. 1,288 - 1,298
3. 1,298 - 1,313

ETH Daily Support zones

1. 1,274 - 1,266
2. 1,263 - 1,255
3. 1,253 - 1,242

📌 The topic of the Day: ‘Layer-3’ Scaling According to StarkWare

Last month, crypto’s second-largest crypto network by market capitalization Ethereum transitioned from its energy-intensive proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) mechanism.

According to Ben-Sasson, StarkWare's President, the Merge not only proved that Ethereum is capable of serious updates but also gave developers more confidence in their ability to execute the next parts of the upgrade and laid important groundwork for scaling solutions like StarkWare.

StarkWare, the Israeli-based company which is developing Ethereum layer-2 scaling solutions StarkEx and StarkNet, aims to scale the network using zero-knowledge rollups.

Speaking with Decrypt on how layer-3 would work in practical terms, Ben-Sasson said,

“Basically, our layer-2 is like tethering this much bigger ecosystem to Ethereum and having this bigger ecosystem have the same security as Ethereum because of the math of Starks. We can grow something like a tree, but on each one of the leaves of this tree we can start to grow another tree using the same mathematical security. And that is exactly what layer-3 is.”

To sum it up, Ethereum is used to check the security of the entire layer-2, which gives exponential scale, and layer-2, or a small fraction of the computation on this layer, is then used to check the security of something much bigger, like this third layer of computation.

Ben-Sasson added that,

“Layer-3 is going to be much faster for specific applications like payments, NFTs or gaming, but if you want interoperability and composability you are probably better off with layer-2.”

For crypto enthusiasts who follow the development of Web3 closely, no doubt StartWare’s launch of its native token is on their radar. However, the launch was delayed back in September and is slated for sometime in October, and the team has cited that “there will be no free token for users initially, with provisions for teams that are going on a long journey.”

🗒 Happenings of The Week (Oct. 14 - 19):

• 📣 CFTC Commissioner Christy Goldsmith Romero proposed to split the definition of retail crypto investors into two parts to applying different rules to households and entities with high net worth. The current definition of a retail customer is an individual with total assets that do not exceed $10 million which range from people who make less than $50,000 in the markets to hedge funds that make millions. Last Friday, SEC Chair Gary Gensler reiterated his support for the CFTC to oversee the crypto spot markets.

• 📣 The Senate Agriculture Committee, which holds jurisdiction over the CFTC, is negotiating changes to a bill that would grant the CFTC oversight over Bitcoin and Ether. One of the changes is to include the SEC participating in regulatory oversight. However, regulators are concerned if they can submit a vote by the end of this congress which ends in January.

• 📣 With the ongoing war adding stress to energy supplies in Europe, the European Commission tells its member states to prepare to shut down crypto mining “in case there is a need for load shedding in the electricity systems.” The commission also introduced a rating system for cryptocurrencies according to environmental impact which is set to begin in 2025.

• 📣 UK’s Financial Conduct Authority (FCA) has appointed former fintech specialist Binu Paul as its head of digital assets. The cumbersome and lengthy licensing process for crypto previously caused some companies to give up on the prospect and seek approval in other jurisdictions.

• 📣 The Israeli Ministry of Finance's Office and Tel Aviv Stock Exchange have established a joint team to pilot digital state bonds with assistance from Fireblocks and VMware.

• 📣 The Japan Virtual and Crypto assets Exchange Association (JVCEA) plans to ease token listing rules and reduce the lengthy process. Currently, just over 50 crypto assets are allowed to be traded in Japan.

• 📣 Bank of Canada study shows expansion in Bitcoin ownership from 5% in 2020 to 13% in 2021. Researchers found that buyers predominately accessed digital currencies via exchanges on mobile and that 66% of respondents who did not own any Bitcoin also showed a basic understanding of the blockchain network.

• 📣 The Blockchain Association, an advocacy group focused on blockchain policy, has filed a brief in the Grayscale suit over the SEC’s approval of a futures-based Bitcoin ETF but not a spot product that the association considers an uneven treatment.

• 📣 France’s third biggest bank Société Générale gets approval to custody, sell and trade digital assets due to a digital asset service provider (DASP) ruling from the French financial market regulator Autorité des Marchés Financiers (AMF). This latest ruling implies that French VC firms will now have legal means to custody their token investments.

• 📣 Fidelity Digital Assets, an independent subsidiary of Fidelity Investments, will start offering its institutional customers the ability to transact with ether. On Sep. 13, Fidelity Digital Assets, Charles Schwab and Citadel Securities announced a collaborative effort to launch a digital asset exchange called EDX Markets.

• 📣 Leading Brazilian digital bank Nubank announced a new loyalty token, Nucoin, which will be built on Polygon. This move also follows the e-commerce giant Mercado Libre’s launch of its own token, Mercado Coin, in August.

• 📣 Terra founder Do Kwon, in an interview on the Unchained podcast, has continued refusal to reveal his whereabouts, citing concerns over personal security, and claiming that his arrest is “politically motivated” because South Korea’s Capital Markets Act does not include cryptocurrency. The Financial Times reported that a group of nearly 4,400 investors has joined forces to track down Do Kwon.

• 📣 According to Bloomberg, law firm Roche Freedman had been removed from a class action against stablecoin issuer Tether and crypto exchange Bitfinex following the leaked videos released on the whistleblower website CryptoLeaks. The class action against Bitfinex and Tether alleged over $1.4 trillion in damages suffered by plaintiffs.

• 📣 Meta, which released its Quest VR headsets last week, faces hurdles to growing its user base in Horizon Worlds, its flagship Metaverse. The company has revised its goal of reaching 500,000 monthly active users by year-end to 280,000. Horizon Worlds’ current number of active users stands below 200,000 according to the Wall Street Journal.

• 📣 Twitter founder Jack Dorsey’s Web3 startup Bluesky has announced a name change to its protocol from “ADX” to the Authenticated Transport (AT) Protocol and provided additional documentation on the scope of the project. AT Protocol will hinge on account portability, algorithmic choice, interoperation, and performance.

• 📣 Solana’s biggest NFT marketplace Magic Eden opts for optional royalty payments. Buyers will now have three ways to set their preferred royalty percentages. The move follows DeGods, a popular NFT collection on Solana, which removed all royalty payments last week.

• 📣 South Carolina house sold as NFT for $175,000 paid in USDC via Roofstock onChain, the web3 subsidiary of real estate company Roofstock. The firm says after completing the initial legal requirements, buyers would be able to purchase a home with a single click, resulting in an automatic settlement in the real world.

• 📣 Beer giant Budweiser released an NFT collection that features live scoreboards for the upcoming FIFA World Cup in Qatar. The Budverse x FIFAWorldCup Live Scoreboard NFT Collection allows buyers to mint a scoreboard that will track their country of choice throughout the World Cup that begins on Nov. 20.

• 📣 Metaverse content developer Everyrealm which raised $60 million in Series A funding led by a16z back in March gets support from influencer Paris Hilton. Its new game Hometopia is a free-to-play game set to launch this year on Epic Games Store.

• 📣 Major League Baseball (MLB) is looking to expand strategic partnerships in NFTs, gaming, metaverse and other web3 areas in its latest job postings. Earlier this year, the MLB partnered with Candy Digital and Sorare to sell collectible NFTs of MLB players.

• 📣 Music platform Audius has acquired the virtual music experience platform SoundStage and intends to provide virtual concerts. The platform has garnered supports from notable music industry giants such as Katy Perry, The Chainsmokers, Nas, Jason Derulo and Sony Music’s former CEO Martin Mandier.

• 📣 Uniswap founder Hayden Adams is concerned that Binance has now become the second-largest entity by voting power in the Uniswap DAO. The exchange with 5.9% of voting power sits behind VC firm a16z with 6.7%.

• 📣 The Avalanche blockchain has released the Banff hardfork upgrade which allows its subnets’ validators to stake and earn rewards in the subnet’s native token. However, validators will still need to stake AVAX tokens alongside the subnets’ native tokens.

• 📣 The Terra Classic community passed a vote to reduce a burn tax from 1.2% down to 0.2% in hopes of reviving on-chain activity. The previous rate drove down the on-chain transaction volume for LUNC by 91.67%, according to core contributors.

• 📣 Flashbots has announced an upgrade called SUAVE to resolve censorship concerns. Flashbots is a service that provides suggested blocks for validators to process while maximizing reward payouts. SUAVE will address censorship resistance and decentralization concerns stemming from the transactions related to Tornado Cash.

• 📣 Decentralized stablecoin issuer Frax Finance is set to release liquid staking protocol on Ethereum in 2 weeks. This will allow users to stake ether (ETH) and receive a liquid derivative token called Frax Ether (frxETH). Frax Finance also runs a decentralized exchange Fraxswap and a lending platform called Fraxlend.

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

  • 🔹 Blockchain infrastructure startup Celestia Labs, which is now valued at $1 billion, raised $55 million in two funding rounds led by Bain Capital Crypto and Polychain. The firm claims any developer will be able to use Celestia’s modular blockchain architecture technology to roll out a decentralized blockchain without having to concern themselves with setting up a consensus network from scratch.
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  • 🔹 Investment app startup Stash, which previously closed a Series G fundraise with a $125 million capital infusion in February last year led by Eldridge, raised another $52.6 million via debt offering. The platform now supports purchases of eight cryptocurrencies.
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  • 🔹 Blockchain research and development studio ChainSafe raised $18.8 million in a Series A round led by Round13. The firm is known for its Ethereum consensus client for implementing Ethereum’s proof-of-stake algorithm, Lodestar.
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  • 🔹 Layer 1 blockchain Shardeum raised $18.2 million in a seed round that includes Spartan Group, Big Brain Holdings, Jane Street and Foresight Ventures. The startup was founded by the co-founder of WazirX, Nischal Shetty.
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  • 🔹 Crypto security startup Web3 Builders Inc. raised $7 million in seed funding round led by Road Capital. The firm also launched its first product, TrustCheck, a Google Chrome extension that detects scams and notifies users.
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  • 🔹 Polkadot synthetic asset protocol Tapio raised $4 million in a seed round led by Polychain, Hypersphere and Arrington. Tapio aims to promote staking and crowd-loan derivatives efficiency on Polkadot parachains.
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  • 🔹 Solana play-to-earn gaming platform Arcade2Earn has raised $3.2 million in a seed funding round led by Crypto.com Capital. The platform allows gamers to make money without owning NFTs via its unique concept called "mission pools.”
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• 📣 This week’s onchain criminal activities include but are not limited to:

  • 🔹 The hacker group Lazarus has been identified to be the culprit behind several years of crypto-related cyber-attacks on numerous Japanese crypto funds, according to a joint statement issued by Japan’s National Police Agency and the Financial Services Agency of Japan.
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  • 🔹 Mango Markets exploiter revealed his identity on Saturday as Avraham Eisenberg. The Mango community voted to allow Eisenberg to keep $47 million while returning the remaining $67 million to the project. The hack was the sixth-largest DeFi exploit in history, falling just behind Cream Finance’s $130 million hack. On Monday, a governance vote was initiated which proposes to pay back users with different tokens based on a snapshot of balances from an hour before the attack on Oct. 11.
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  • 🔹 Crypto market maker Wintermute paid off its $96 million loan on DeFi lender platform TrueFi. In September, it suffered an exploit due to vulnerability associated with a ‘vanity address’ used to reduce gas costs and lost $160 million. CEO Evgeny Gaevoy said Wintermute’s liquidity remains strong.
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  • 🔹 Moola Market, a lending protocol on the Celo blockchain, suffered an $8.4 million exploit. Hours later, the attacker returned $7.8 million but kept the remaining $518,000 as a negotiated bounty reward.
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  • 🔹 Staking protocol TempleDAO, which saw an exploit of $2.3 million last week, saw its hacker move funds via Tornado Cash Sunday over 24 transactions according to Etherscan.
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  • 🔹 Multi-chain crypto wallet service provider Bitkeep was hacked for $1 million via an exploit found in its token swap service. The stolen funds were later routed through crypto mixer Tornado Cash.