Daily Flash | BTC And ETH Tanked 12%, US Inflation Data Breaks Economists Optimistic Outlook, OFAC Allows The Sharing Of Tornado Cash Code

2022-09-14, 01:56

Chart of the Day - Bitcoin VS Inflation

The U.S. unseasonably adjusted Consumer Price Index in August was 8.3%, which is a higher than expected consensus of 8.1%. This index is a key measurement of country's inflation, which has tremendous effect on global financial markets.

Bitcoin is believed to be a kind of inflation hedge, such as gold. However, lately, it has not performed well as a hedge due to macro factors. The main reason is the high correlation between Bitcoin (and crypto overall) and traditional financial markets as Bitcoin mostly follows significant moves of Wall Street. The same can be said for today when the CPI index was higher than expected, BTC fell by 5.44% in the first 30 minutes after the announcement (the moment is marked on the chart with the blue arrow), as well as many tech stocks falling at pre-market too. Usually, if the CPI is lower than the consensus forecast, the Bitcoin and broader market react positively, but a CPI lower than expectations most likely drives markets lower (since high inflation is usually followed by an increase in rates).

As of this writing,
Bitcoin (BTC) is changing hands at around $20,171, down 9.21% in the past 24 hours,
while Ether (ETH) is trading at $1,572 or down 6.89% during the same period.

Major Layer-1 Tokens are trading in the red,
with Solana leading the plunge at -10.53%,
while Cardano (ADA) is down by 6.16%,
Polkadot (DOT) -6.44%,
Avalanche (AVAX) -9.68%,
and Cosmos (ATOM) -8.3%.

Notable gainers include:
TrustSwap (SWAP) at $0.372 (+55.54%),
Pundi X (PUNDIX) at $0.760 (+36.64%),
Terra Luna Classic (LUNC) at $0.000353 (+12.80%).

Notable losers include:
Aleph.im (ALEPH) at $0.144 (-25.84%),
Ampleforth (AMPL) at $1.04 (-17.15%),
Helium (HNT) at $4.58 (-13.77%).

On Tuesday, following the release of September CPI data from the U.S. Bureau of Labor Statistics, the Dow Jones Industrial Average (DJIA), S&P 500 (SPX), and tech-heavy Nasdaq composite index (IXIC) tanked 3.94%, 3.32%, and 5.32%, respectively.

Costs were up 8.3 percent in August compared with 12 months earlier, higher than analysts’ expectations at 8.1%. The overall figure was lower than the inflation rate released in July and June, but many economists were expecting to see a steeper decline.

Some have thought that U.S. inflation might have hit its peak in June when it reached 9.1 percent over 12 months. But price increases have not slowed as much as some had imagined. A number of factors are keeping prices high.

The government’s food index, for example, has risen 11.4 percent over the past year, the largest 12-month increase since May 1979. Food prices were up 0.8 percent from July to August. Flour was up 2.2 percent over that span. Potato prices rose 2.5 percent. Butter jumped 1.9 percent, and canned fruit spiked 3.4 percent.

This also ties in with Fed Chair Jerome Powell’s hawkish remarks during his speech at the Economic Policy Symposium in August, “Estimates of longer-run neutral are not a place to pause or stop. Our decision at that September (FOMC) meeting will depend on the totality of the incoming data and the evolving outlook.”

September’s FOMC meeting will be held on the 21st.

Futures markets are now predicting an 82% chance of a 75 basis point rate hike later in September following the release of the CPI report, according to data from CME Group.

The cryptocurrency market was affected greatly by the news. Bitcoin and Ether, at one point, lost as much as 12% and 11%, respectively.

Notably, CME Group’s ether futures contracts have seen rising average daily volume and open interest. Throughout September, CME Group’s ether futures contracts have notched average daily volume (ADV) of 7,100 contracts — up 15% from August. Average daily open interest (ADOI) for the contracts stands at 4,400, a 10% increase from last month.

3 days before The Merge, the company also launched options on ether futures. The new contracts — based on the CME CF Ether-Dollar Reference Rate — deliver 1 ETH ($1,600) futures, sized at 50 ETH ($80,000) per contract.

In terms of technical outlook, as of this writing, Bitcoin (BTC) was trading at $20,196, or down 8.83% in a 24-hour period.

BTC reached a height of $22,784 Tuesday, but following the release of U.S. CPI data, it plunged at one point to $19,881 (-12.74%) before finding support at 23.6% Fibonacci level ($20,000) measured from Aug. 15 - Sept. 6. Together with a monthly level of $19,858, they form a support zone.

Notably, the height of the “lower-high” daily candle formed on Sept. 4 coincides with the 23.6% Fibonacci level. If the bulls are able to hold above this level, then it will prevent the break of a “higher-high” wave (Sept. 7 - 12) which may indicate the short-term bull run isn’t over.

On the contrary, if the bears manage to close the daily candle below the support zone, then we may see prices first dive toward $19,500, and eventually, the support zone formed between a daily support level of $18,975 and a weekly support level of 18,431. If this happens, BTC will be immensely bearish.

It is worth noting that even if the bulls are able to hold above the current support zone, it is very likely the cycle of the next “higher-high” wave will take much longer to complete relative to the previous wave under normal circumstances, without considering an unexpected jump like the one we’ve seen on Monday.

Ether (ETH) followed suit, and as of this writing, ETH was trading at $1,562, or down by 7.5% in the past 24 hours, though, unlike its BTC counterpart, ETH started its descent on Monday which totaled -11.4% as of early Wednesday trading.

Tuesday’s plunge completely ignored a support zone formed between the 50-Day EMA ($1,628) and a weekly level of $1,611, bringing a stop at the next support zone formed between the close of a daily candle on Sept. 7 ($1,629) and the 38.2% Fibonacci level ($1,500) measured from Apr. 3 - Jun. 18.

If the bears manage to bring the price below the support zone, then we may see the price of ETH dive deeper and towards a monthly level of $1,428, breaking the short-term “higher-high” wave from Aug. 29 - Sept. 11, which would indicate further weakness.

On the contrary, if the bulls manage to hold above the current support zone, then we will witness a retest of the resistance zone formed between the 50-Day EMA ($1,628) and a weekly level of $1,611, and if the price breaks and holds above this zone, then the next overhead resistance would be the 100-Day EMA ($1,699).

As The Merge is expected to occur Thursday between 02:38 UTC and 03:52 UTC, volatility will be high during this period, as such, investors and traders alike will be more careful in placing their bets.

Today’s Headline - US Treasury Clarifies Publishing Tornado Cash’s Code Does Not Violate Sanctions, Will Allow Users to Recover Funds From Tornado Cash: Decrypt Report

On Tuesday, the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) announced a path for Tornado Cash users to legally withdraw deposited funds from the now-blacklisted platform.

In addition, individuals who have been nonconsensually sent small amounts of Tornado-cash affiliated funds will likely not be at risk of criminal prosecution. In the days following the sanctions, an anonymous Tornado Cash user trolled a number of celebrities, including Jimmy Fallon and Logan Paul, by “dusting” them—sending them small amounts of funds and therefore potentially exposing them to criminal liability.

The Treasury also stated that while it remains illegal for an American citizen to conduct any transactions with Tornado Cash, disseminating information about the tool itself—including its underlying open-source code—is legal.

Numerous individuals—including a Johns Hopkins professor—have taken steps to publicly preserve Tornado Cash’s underlying code, to fight back against the prospect that the U.S. government, in banning a service, was also “ban[ning] source code distribution and scientific speech.”

Influencer of the Day - Anthony Sassano explains why Ethereum’s ‘final boss’ is still the nation state: The Block Report

Anthony Sassano, a prolific Ethereum commentator and co-founder of Ethereum information hub EthHub, shared his thoughts with The Block about Ethereum’s ‘social layer’ and its biggest challenges going forward.

“The social layer is not an "afterthought" in crypto; it's the entire point. Without a strong and healthy social layer, a project is doomed to fail in the long-term.”

The social layer has played an influential role in the journey to this point, says Sassano. He theorizes that the ideals of Ethereum community are one explanation for why The Merge has taken so long to pull off. For instance, Vitalik Buterin’s goal to provide a system that gives users more control over their data, is decentralized and requires buy-in to make changes at the protocol level.

Sassano also thinks the sanctioning of Tornado Cash has far and wide concerns,

“I mean, they wouldn't have sanctioned Tornado Cash if they were able to trace it. So basically, it worked. That technology works and they are thinking, oh shit. There is actually a way to do digital private financial transactions now and completely outside of the view of the state.”

Last month, the US Office of Foreign Assets Control (OFAC) blacklisted decentralized crypto mixer Tornado Cash. The development marked the first time for the US government to sanction a smart contract.

Buzzes of Yesterday

Highlights:
#Filecoin to Move to Singapore, Have Concerns For Policies in China
#Doodles NFT Jumped 1,200% Following VC Funding Led by Reddit Co-founder
#Miner Poolin Issues ‘IOUs’
#US Brokerages Join Hands to Establish Crypto Exchange
#Linus Foundation Announces Support for Open Source Wallets
#SWIFT and Symbiont to Launch Corporate Blockchain for Wall Street
#Uruguayan Central Bank to Take Over Country’s Crypto Industry

DeFi

Jet Protocol, Solana-based Liquidity Protocol Launches Swap Margin Trading

Filecoin service provider announces move to Singapore in light of tightening restrictions in China

NFTs & Metaverse

Ethereum Fans Meme the Merge With Pandas and Bats

Doodles Ethereum NFT Sales Surge 1,200% After Big Raise Values Project at $704M

Mining

Crypto miner Poolin issues ‘IOUs’ after freezing withdrawals

Business & Finance

SWIFT and Symbiont announce corporate data blockchain pilot

Linux launches foundation to support development of open source wallets

Finance Giants Join Forces To Launch Crypto Exchange

Fidelity Weighing Bitcoin Trading For Retail Users, 4yrs After Offering to Wealthy Clients

Abra to Launch US Chartered Bank, Crypto Yield Accounts

Musk's $44 billion buyout of Twitter action0 by shareholders ahead of trial

KKR experiments with listing private equity investments on Avalanche

UK venture firm Northzone eyes web3 startups with new €1 billion fund

Governments & Policies

Federal Trade Commission seeks entry into Celsius bankruptcy case

New regulatory bill grants Uruguayan Central Bank control over the nation's crypto industry

Crime & Order

BitGo Accuses Galaxy Digital of ‘Intentional Breach’ of Contract in $100M Suit

UK fintech EPayments officially closes its doors following FCA probe

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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