Daily News | Equity Markets Have Priced In FOMC Gloomy Statement While Awaiting CPI Data To Gauge December Fed Move

Fundamental & Technical Outlook

👓 Macro

On Wednesday, the latest Federal Open Market Committee (FOMC) meeting minutes show that many central bank officials are determined to bring inflation under 2.0% using tight monetary policy (also known as Quantitative Tightening).

The U.S. equity markets seem to have priced in more than an 80% chance that the FOMC boosts rates by another 75 basis points in November as the DJIA (-0.10%), S&P 500 (-0.33%) and Nasdaq (-0.09%) closed slightly lower on the day and appeared to have slowed in bearish momentum after seeing an average of 5% loss since last Thursday.

The Fed has hiked the target range for the benchmark federal funds rate five times since roughly mid-March, increasing it by 300 basis points. Currently, the Fed Funds futures see rates at 4.14%. That is about 25 bps below the Fed's projections of 4.4%.

This situation could easily prove bearish for risk assets such as cryptocurrencies and stocks if compelling yields motivate investors to seek interest-bearing assets like U.S. Treasury notes.

Meanwhile, the consumer price index (CPI) will be released tomorrow, and estimates forecast another reading with CPI year-on-year expected to climb by 8.1% and 0.2% month-on-month. While the report isn't going to change the path of Fed policy in November, it could very well shift the direction of monetary policy for December.

U.S. equities could rally on in-line or cooler-than-expected CPI data, but a relief rally may only be short-lived, with monetary policy unlikely to change much.

Elsewhere in the world, the Bank of England head Andrew Bailey spooked markets as he warned pension funds that have been struggling to meet margin calls to act fast, and reaffirmed the Oct. 14 end date for the central bank’s bond purchases initiative. The pound sterling (GBPUSD) rose slightly on Wednesday to 1.10853 but was still down by more than 18% since January 2022.

As of this writing, Bitcoin (BTC) was trading at $19,077 and Ether (ETH) was changing hands at $1,287, or up 0.07% and 0.24% in a 24hr period, respectively. Notably, MakerDAO (MKR) was down 5.15%, LidoDAO (LDO) -7.19%, and Huobi Token (HT) +19.18%.

🟠 BTC Weekly Timeframe

As of Oct. 13 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. 12 00:55 UTC, BTC was trading at $19,042 (+0.28%) 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.

BTC Daily Resistance zones

1. 19,109 - 19,188
2. 19,188 - 19,267
3. 19,309 - 19,380

BTC Daily Support Zones

1. 19,109 - 19,012
2. 19,012 - 18,939
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 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. 13 00:41 UTC, ETH was trading at $1,295 (+0.73%) 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.

ETH Daily Resistance zones

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

ETH Daily Support zones

1. 1,294 - 1,288
2. 1,286 - 1,279
3. 1,274 - 1,267

📌 The topic of the Day: Mango Markets May Actually Pay Up: Rekt Report

On Tuesday, Solana’s flagship margin trading protocol Mango Markets suffered a $116 million exploit that left the protocol in critical condition.

The attack drained all of Mango Markets’ available borrow liquidity, with $70M remaining in the treasury. This leaves a shortfall of approximately $50M to cover the bad debt left by the incident.

On Wednesday, in true DeFi style, the attacker used their freshly acquired responsibility tokens to suggest a solution to the mess that they themselves created. The proposal suggests that Mango pay the hacker a bounty of $65 million and that they do not pursue any criminal investigation.

Attacker’s address: yUJw9a2PyoqKkH47i4yEGf4WXomSHMiK7Lp29Xs2NqM

The governance vote on the hacker’s proposal is on-going and the attacker voted yes with all of their stolen 32M votes.

The hacker’s proposal would allow users to be made whole and the protocol to become functional again, essentially starting from scratch. And by the looks of Mango Markets’ stated priorities, the protocol could very well take up the offer to prevent total annihilation.

The way things are turning out sounds like a big “Fxxk You and wha’chu gonna do about it” from the attacker at this point.

🗒 Happenings of The Week (Oct. 08 - 13):

• 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.

• 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.

• 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.

• 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.
  • Quantum-resistant Layer 1 blockchain QANplatform has suffered a $2 million hack, token slumps 94%.
  • Staking Protocol TempleDAO suffered an exploit for $2.3 million worth of crypto tokens.