News Updates January 08 & 09, 2023
1. BTC price 3-week highs greet US CPI — 5 things to know in Bitcoin this week
Bitcoin charges above the $17,000 mark but misgivings remain among traders ahead of CPI, Fed comments and amid a brewing storm at Digital Currency Group.
Bitcoin starts a new week on a promising footing with BTC price action near one-month highs — can it last?
In a new year’s boost to bulls, BTC/USD is currently surfing levels not seen since mid-December, with the weekly close providing cause for optimism.
The move precedes a conspicuous macroeconomic week for crypto markets, with the December 2022 Consumer Price Index (CPI) print due from the United States.
Jerome Powell, Chair of the Federal Reserve, will also deliver a speech on the economy, with inflation on everyone’s radar.
Inside the crypto sphere, FTX contagion continues, with Digital Currency Group (DCG) at odds with institutional clients over its handling of solvency problems at subsidiary Genesis Trading.
At the same time, under the hood, Bitcoin still shows signs of recovery from the FTX turmoil, with miners among those catching a break.
Cointelegraph takes a look at these factors and more as the second trading week of January gets underway.
Bitcoin price passes $17,000
Bitcoin managed to spike higher at the Jan. 9 weekly close, hitting levels absent from the chart since Dec. 16.
Data from Cointelegraph Markets Pro and TradingView shows local highs coming in at $17,250 on Bitstamp.
Despite only adding several hundred dollars, the move on BTC/USD did not go unnoticed given the extremely compressed trading range in place for many previous weeks.
Nonetheless, eyeing potential continuation, traders were less than willing to change their longer-term conservative perspective.
“Onwards and upwards to my $17,300 - $17,500 target,” Crypto Tony told Twitter followers in an update on the day:
“I have taken some profit here on my scalp long, and remain in my short as long as we are below 17,500 on 4 hour closure.”
Michaël van de Poppe, founder and CEO of trading firm Eight, likewise left the door open for some modest upside continuation, but warned that the start of the week would present hurdles.
“Still watching a case like this on Bitcoin,” he confirmed alongside an explanatory chart:
“I think we’ll continue rallying coming week, but probably have a drop due to Gemini or correction on Monday first.”
Meanwhile, Venturefounder, a contributing analyst at on-chain analytics platform CryptoQuant, reminded investors to zoom out.
“Bitcoin has been stuck between $16k and $18.5k for 2 months now,” he acknowledged:
“Watch this range very very carefully, a break from either direction can bring 20% volatility, could happen soon. A definitive break of $16k could see $13k, make $18.5k support we can see $22.5k.”
CPI countdown returns as risk asset traders eye volatility
All eyes, including those of the Federal Reserve, are on inflation data this week with the December print of the Consumer Price Index (CPI) due for release.
CPI, which will greet markets on Jan. 12, is a key component of Fed policy, and traders and analysts alike are keenly aware that the signals it provides can lead to shifts in its stance.
Recently, CPI has been declining, hinting that the Fed’s existing interest rate hikes have had a positive impact on inflation.
Should this continue or even decline more than expected, hopes that the Fed will decrease rate hikes faster — or even cancel them altogether — will increase.
This, in turn, provides a window for risk assets including crypto to gain, as Fed policy easing ignites appetite for risk.
“Expecting enormous volatility. Huge cash position and light position size for me,” Ted Zhang, trader and research analyst at Revere Asset Management, told Twitter followers, describing the CPI event as a “huge week.”
DCG publicly faces the music
As the fallout from the FTX saga rolls on, it is institutional investment giant Digital Currency Group (DCG) coming in for a grilling this month.
Exposure to FTX heightened pressure on certain DCG subsidiaries in an increasingly complex story which has even raised questions about the future of the largest institutional Bitcoin investment vehicle.
The Grayscale Bitcoin Trust (GBTC) currently has BTC assets under management in excess of $10 billion. Its share price, according to data from Coinglass, trades at an implied 44% discount to the Bitcoin spot price.
Miners break severe selling streak
Bitcoin miners have been on the radar for most of 2022, but the BTC price dip which followed the FTX implosion worsened an already tenuous situation.
Miners began to divest themselves of their stored Bitcoin in order to remain financially viable, and on-chain metrics swiftly warned of a miner “capitulation” already in progress.
As Cointelegraph reported, however, neither the extent of the sell-off nor its duration appeared critical, and recently, the situation has stabilized.
“The heavy sell pressure from Bitcoin miners that has barraged the market for the last 4 months has finally subsided for now,” William Clemente, founder of crypto research firm Reflexivity, summarized alongside data from on-chain analytics firm Glassnode this weekend.
“Extreme fear” meets 18-month crypto volume lows
Crypto market sentiment is as unsure as ever when it comes to the near-term outlook, according to the Crypto Fear & Greed Index.
2. Nearly 65% of USDC reserves are held in US Treasury bills
US T-bills held by Circle Reserve Fund continues to grow.
Circle held $43.4 billion in USDC reserves to back 43.23 billion USDC in circulation as of Nov. 30, 2022. Of these reserves, $12.79 billion lay in the Circle Reserve Fund, a registered government money market fund wholly owned by Circle and managed by BlackRock. The fund’s holdings included 12 US treasury bills as of Nov. 30.
Circle created its Reserve Fund on Nov. 3, and in less than a month, it transferred around 29.5% of the stablecoin reserves to the fund. Since then, Blackrock’s disclosures information reveals that “USDC reserves invested in the Circle Reserve Fund have risen to around $28.6 billion, or 65%,”
Popular crypto analyst John Paul Koning called it a “win” for USDC users, adding:
“Circle is yielding some of its control over USDC’s reserves to an external manager subject to SEC regulation, which ultimately makes USDC safer. Transparency improves too, since USDC users can now get regular updates from BlackRock.”
Another $19.41 billion worth of USDC reserves were held as treasury bills directly by Circle as of Nov. 30. This brought the portion of USDC reserves held in T-bills directly and through the reserve fund up to $32.2 billion, or around 75% of total reserves.
Additionally, $11.15 billion of the stablecoin’s reserves was stored as cash at US-regulated financial institutions, which include Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank, and Silvergate Bank.
3. Bithumb’s Valid Owner Investigated For Stock Price Manipulation And Embezzlement.
Key Points:
Bithumb’s valid owner, Kang Jong-hyun, is being investigated by the Korean prosecutor’s office on suspicion of manipulating stock prices and embezzling company money.
Kang Jong-hyun’s younger sister, who is also a big fan, is also being questioned.
Earlier in October, a number of companies related to Bithumb were also searched for investigation.
South Korean prosecutors have summoned Kang Jong-hyun, known as Bithumb’s valid owner, on suspicion that he and his sister Kang Ji-yeon also manipulated Bithumb’s stock price and embezzled it.
Kang Jong-hyun is considered the anonymous chairman of Bithumb because the company holds a 34% stake in another of his companies, Vidente. Meanwhile, Vidente is the largest shareholder of Bithumb Holdings, the parent company of Bithumb.
However, Vidente and Inbiogen – the two companies where Kang Jong-hyun is the chairman – denied that Mr. Kang was the chairman and said only the chairman was Kang Ji-yeon, Kang Jong-hyun’s sister. This raises suspicions that Kang is operating under his sister’s name.
Today, an investigation into allegations of embezzlement by affiliates of Bithumb, one of the largest virtual asset exchanges in South Korea, was conducted, according to reports from Korean media.
Seoul Southern District Prosecutor’s Office, Financial Investigation Division 2 (Chief Prosecutor Chae Hee-man) is investigating Kang Jong-hyun, known to be the actual owner of Bithumb. Last week, Kang Ji-yeon, CEO of Vident, Kang’s younger sister and “biggest shareholder of Bithumb,” was summoned and investigated twice. He was accused of tampering with capital markets and stealing company money through stock price manipulation.
Since last year, the prosecution has been investigating allegations of embezzlement, breach of trust, and stock price manipulation of Bithumb-related companies. In October last year, Bithumb Vident’s largest shareholder, Inbiogen, the largest shareholder of Vident and Bucket Studio, was confiscated and searched, and the company’s executives and employees were investigated.
In December last year, a Vident executive was put on trial for the destruction of evidence and concealment.
Bithumb and Upbit account for most of the domestic virtual asset trading market share. Bithumb is the second-largest virtual asset exchange in the industry, with more than 8 million users.
Recently, the virtual currency market has been depressed, and the trading volume of virtual currency has decreased significantly. Still, until the third quarter of last year, the sales revenue and accumulated operating profit were 273.7 billion won, respectively, and 151.7 billion won.
Prosecutors are investigating whether the Kang cousins spread misinformation about Bithumb sales and stock price manipulation and whether they stole the company’s money through regular bond issuance conversion and created black funds through this or not.
4. Crypto layoffs mount as exchanges continue to be ravaged by the prevailing bear market
Many popular cryptocurrency trading platforms, including Kraken and Coinbase, have recently initiated a fresh round of firings.
There’s no denying that the crypto market has been gripped by immense bearish pressure over the past year, as made evident by the fact that the total capitalization of this sector has continued to hover below the $900 billion mark for most of the year after having scaled up to an all-time high of $3 trillion in 2021.
These conditions have been characterized by many companies facing insolvency, as well as many of the world’s top exchanges laying off their staff in recent months. Moreover, the recent FTX debacle has set in motion a contagion effect that has continued to have a major effect on several crypto platforms, dissuading newer investors from entering the space in the process.
Since Q2 2022, a host of prominent crypto entities (including many digital asset trading and lending platforms) such as Terra, Celsius, Bbl, Voyager Digital, Vauld, FTX, Alameda Research and BlockFi, among others, have either collapsed entirely or filed for bankruptcy, thus suggesting more incoming pain for the industry.
Layoffs continue en masse
As the market continues to be faced with major headwinds, several crypto companies, especially exchanges, have had to let go of their workforce. It is estimated that over the first eleven months of the year alone, the industry has witnessed over 26,000 layoffs.
In November, leading cryptocurrency trading platform Coinbase announced a fresh round of job cuts, with the firm reportedly firing more than 60 employees from its recruiting and institutional onboarding teams. What’s more, is that earlier this year, the company laid off 18% of its staff (approximately 1,100 oppositions), with company CEO Brian Armstrong admitting that he had hired more personnel than were required to begin with.
Similarly, on Nov. 30, cryptocurrency exchange Kraken announced that it was going to be parting ways with 30% of its global workforce — which works out to over 1,000 employees — amid the ongoing market downturn. A spokesperson for the firm noted in a blog post:
“Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets. This resulted in significantly lower trading volumes and fewer client sign-ups. We responded by slowing hiring efforts and avoiding large marketing commitments. Unfortunately, negative influences on the financial markets have continued and we have exhausted preferable options for bringing costs in line with demand.”
It is worth noting that back in June, the company had stated that it was looking to expand and grow its operations, primarily by adding 500 experienced individuals (laid off from other firms) to its roster.
5. Is Bitcoin (BTC) Price Heading Back To $15,000 Before Rallying To $22K?
The Bitcoin (BTC) price recently breached the crucial $17K level but the relief rally might not stay for long.
Following a strong performance in the U.S. stock market at the end of last week, Bitcoin’s daily trading session closed above $17,000 on Sunday for the first time in nearly a month. The flagship cryptocurrency which is currently changing hands for around $17,200 per BTC, has met with a moderate level of daily trading volume on major exchanges and an increase in volatility. This has been at historic lows up until now and further suggests that the relief rally might not have much-staying power.
Time To Sell Bitcoin?
According to information acquired by CryptoQuant, a declining number of investors are taking a loss while selling their Bitcoin holdings. This comes after the ASOPR (Adjusted Output Profit Ratio) for Bitcoin has reached a value of 0.99. In a bear market, the value 1 for ASOPR, functions as a significant point of resistance.
The ASOPR measures the proportion of profitable outputs that were spent across a stipulated time period (greater than an hour in duration). The number of investors selling for a profit increases as the value rises above 1. When the value is less than 1, it means more investors are selling at a loss. The data further sheds light on the fact that it might be prudent to consider cashing in on BTC earnings as a result of this resistance.
However, according to another data point shared by renowned crypto analyst Sulivan, if the price of Bitcoin (BTC) reaches $20,000–$22,000, it would enter the S2F green zone (as shown below), which may cause another immediate sell-off. He also stated that such an increase might take place later on in this week if the U.S. CPI statistics turned out to be better than the general projections.
