Daily News | Markets Gone Wild, Sino-US Tension On The Rise Coupled With An Inevitable US Recession

Fundamental & Technical Outlook

👓 Macro

Following the extreme volatility that came after a key U.S. inflation reading for September which remained above 8% on a year-over-year basis, U.S. equities closed higher Monday with the DJIA (+1.86%), S&P 500 (+2.65%) and Nasdaq (+3.43%).

But how long the rally lasts remains to be seen amid continued worries about inflation and the future of the global economy.

The two primary L1 networks in the cryptocurrency markets followed suit, with Bitcoin (BTC) and Ether (ETH) up 1.9% and 2.5% in a 24hr period, respectively. Notably, Polygon (MATIC) was up 7.24%, Cosmos (ATOM) +6.79%, and Huobi Token (HT) +13.29%.

In the U.S., expectations rose significantly in October in terms of where the Fed’s policy rate was headed, with it recently pegged as likely to top 5% in 2023 from its current 3%-3.25% target range, based on one-month forward swaps rates.

According to the latest Bloomberg Economics forecast model released on Monday, the U.S. economy falling into recession now sits at 100% by October 2023, up from 65% for the comparable period in the previous update. ****

In the U.K., Jeremy Hunt has been appointed the next chancellor of the exchequer after Prime Minister Liz Truss dismissed Kwasi Kwarteng earlier on Friday, and has announced scrapping nearly all new tax-cut plans that were in the mini-budget and shortening energy cost support to April 2023.

Together, the moves save some £30 billion, ahead of the official budget plan due at the end of October. U.K. market participants reacted positively by sending the pound sterling up 1% against the U.S. dollar (GBPUSD), and the 10-year gilt yield down more than 40 basis points, back below 4%.

In China, President Xi Jinping stood firm on his policies at the 20th National Congress of the Communist Party of China on Sunday, with an emphasis on maintaining the current zero-covid policy in order not to “sacrifice national security” and doubling GDP and per-capita income, with an average GDP growth rate of 4.7%.

Notably, concerns are rising over a property crisis sparked by a crackdown on excessive borrowing and a slide in home sales, but President Xi gave few signals of any major changes regarding housing market policies.

In a nutshell, the focus for market participants this week, if not in the coming months, will return to U.S. earnings report, the implications of China’s policies, and rising tensions between the U.S. and China, particularly in the semiconductor sector as U.S. regulators moved to keep chip companies from doing business with Chinese firms.

🟠 BTC Weekly Timeframe

As of Oct. 18 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.

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. 18 00:15 UTC, Bitcoin (BTC) was trading at $19,527 (+1.53%) 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.

Update: 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.

BTC Daily Resistance zones

1. 19,619 - 19,700
2. 19,729 - 19,792
3. 19,838 - 19,929

BTC Daily Support zones

1. 19,440 - 19,296
2. 19,276 - 19,144
3. 19,121 - 19,010

🔵 ETH Weekly Timeframe

As of Oct. 18, Ether (ETH) was trading below the 61.8% (1346) weekly Fibonacci retracement level measured from Jul. 4 - Aug. 8 but above 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.

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. 18 00:34 UTC, ETH was trading at $1,340 (+2.84%) 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).

Update: 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.

ETH Daily Resistance zones

1. 1,334 - 1,342
2. 1,346 - 1,352
3. 1,355 - 1,364
4. 1,367 - 1,377

ETH Daily Support zones

1. 1,313 - 1,303
2. 1,298 - 1,288
3. 1,286 - 1,283
4. 1,278 - 1,265

📌 The topic of the Day: VC’s New Baby - Aptos Launches Mainnet

In 2019, Meta (Facebook at the time) was working on its own blockchain project called Libra, later renamed Diem, but the project came to a pause due to criticism from regulators.

The same developers who pioneered Diem left Meta to found their own startup, Aptos Labs, which secured a $200 million in a seed round led by a16z back in March. In July, Aptos closed a $150 million Series A round led by FTX Ventures and Jump Crypto.

The Layer 1 solution is now valued at a whopping $2 billion, four times higher than the company’s previous valuation just six months earlier.

On Monday, Aptos launched its mainnet. Now crypto enthusiasts are calling it the “Solana killer” as the unicorn project claims it can handle 160,000 transactions per second, according to a blog post.

Why this matters: Solana was dubbed the ‘Ethereum killer’ and saw an unbelievable rally in 2021 where it dramatically spiked from $1.52 to $259, although SOL is now back in the $30 range due to 2022’s bear rally. For investors who missed out on the Solana rally, Aptos may now be a second chance, but keep in mind this could all be just another hype.

🗒 Happenings of The Week (Oct. 14 - 17):

• 📣 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.

• 📣 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.

• 📣 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.

• 📣 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.

• 📣 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.

• 📣 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.

• 📣 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.

• 📣 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:

  • 🔹 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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  • 🔹 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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• 📣 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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  • 🔹 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.