News Updates October 25 &26,2022
1. Why is the crypto market up today?
Bitcoin (BTC) volatility is finally giving BTC bulls what they want — but why now?
After drifting lower for months and spending recent weeks in a tiny trading range, BTC/USD has delivered 24-hour gains in excess of 7%.
Hitting its highest levels since mid-September, the largest cryptocurrency is rewarding those who refused to sell and punishing shorters to the tune of around $1 billion.
The change of trend has come quickly and caught many by surprise, as evidenced by that liquidation tally.
Behind the scenes, however, little has changed — macroeconomic conditions have not undergone major upheaval compared to a week ago, and internal problems for Bitcoin, such as miner strain, remain the same.
What could have caused BTC price action to break out of what could end up being a downtrend finally breaking after an entire year?
Cointelegraph takes a look at three major factors influencing crypto market strength in the current
environment.
Fed could change its tune on rate hikes
When Cointelegraph reported on why the crypto market saw fresh losses last week, the United States Federal Reserve was first on the list.
Concerns focused on unwavering policy keeping the U.S. dollar strong and rates surging higher for the foreseeable future — the worst case scenario for risk assets.
Nonetheless, the past week has seen the results of that policy spill over into other economies, notably Japan, which made repeated interventions in its exchange market to prop up the flagging yen.
At the same time, rumors are gathering over the outlook for rate hikes as the Fed runs out of room to maneuver. After next month’s hike, suspicions are that policy will begin to U-turn, making smaller hikes in subsequent months before reversing altogether in 2023.
Important upcoming dates for the Fed are:
Oct. 28: Personal Consumption Expenditures (PCE) price index
Nov. 1-2: Federal Open Market Committee (FOMC) meeting, rate hike decision
As such, any signal that the Fed is preparing to soften its hawkish stance is being seized on by markets weary from a year of quantitative tightening (QT).
November's FOMC meeting is still overwhelmingly expected to result in a 0.75% rate hike, matching September and July, according to CME Group's FedWatch Tool.
2. First Bitcoin ETF Is Having Disastrous 2022.
According to a report by the Financial Times, ProShares’s Bitcoin futures exchange-traded fund (BITO) has lost a whopping $1.2 billion of investors’ money during its first year. In fact, it has burned through more money than any other ETF, setting a new record. As reported by U.Today, ProShares rolled out the first Bitcoin futures ETF in the U.S. on Oct. 19, which was widely seen as a watershed moment for the cryptocurrency industry. It became the second-highest traded fund ever on its debut day, trading more than $500 million. In its first week, it managed to amass $1 billion in assets under management in a record-breaking two days, shattering records.
A year after its groundbreaking debut, BITO is down a whopping 70% since its start, which marks one of the worst debuts in history. While other ETFs recorded even steeper drops, they burned through less because of their smaller size. For instance, the Global X Blockchain ETF (BKCH) has plummeted 77%, but it held only $125 million worth of assets at its peak. In June, ProShares launched the world’s first short Bitcoin ETF that allows investors to bet against the world’s largest cryptocurrency. Todd Rosenbluth, head of research at consultancy VettaFi, told the Financial Times that the pendulum could swing back in BITO’s favor, but ProShares would need to have a lot of confidence in its product in order to prevent it from going underwater.
3. How Bitcoin Pro Traders Plan To Reap From Bitcoin’s Eventual Surge Above $20K.
Traders who think that Bitcoin (BTC) will break past $20,000 could go for this low-risk options strategy to execute a long bullish bet.
Bitcoin entered an Ascending channel in mid-September and has now continued to trade sideways around $19,500. Because of the bullish nature of the technical formation and a plunge in the selling pressure from the troubled miners, analysts expect a price surge in the coming months.
Independent analyst @el_crypto_prof said that the price of Bitcoin formed a “1-2-3 Reversal-Pattern” on a daily time frame, meaning that $20,000 could turn into strong support soon.
Yes, the price action of $BTC is really boring, isn't it? But if you look closely, a textbook "1-2-3 Reversal-Pattern" has formed in the last few days, which should finally send Bitcoin above 20k soon.
Fundamental analysts are also attributing this sideways action to troubled Bitcoin-listed mining firms. For instance, Stronghold Digital Mining explained a debt restructuring on August 16 that featured the return of 26,000 miners.
Core Scientific, a public miner, sold 12,000 BTC between May and July, while publicly traded mining firms offloaded 200% of their Bitcoin production. Bitcoin enthusiast @StoneysGhoster believes that the excessive leverage caused forced selling, not the mining activity itself.
Irrespective of the base case for Bitcoin’s price recovery above $20,000, investors fear the effect of an eventual stock market crash as the different central banks continue increasing interest rates to limit inflation.
Taking into consideration the constant uncertainty caused by the macroeconomic factors, a strategy that yields gains in the $21,000 to $28,000 range while limiting losses below $19,000 appear to be the most prudent. In that case, options markets offer more flexibility to develop some custom strategies.
It Starts With Selling Put Options For Upward Exposure
To maximize the returns, investors could consider the Iron Condor options strategy, which has been a bit skewed for a bullish outcome. Although the put option offers its buyer the privilege to sell an asset at a fixed price in the future – selling the instrument provides exposure to
4. Fed Governor Waller Skeptical of Central Bank Digital Currencies — Says He's 'Not a Big Fan' of the Fed Issuing Digital Dollar.
Federal Reserve Governor Christopher Waller says he is not a big fan of the Fed issuing a central bank digital currency (CBDC). “It’s just a checking account at the Fed,” said the governor. Federal Reserve Chairman Jerome Powell recently said that the central bank has not decided whether to issue a digital dollar.
Fed Governor Skeptical of CBDCs
Federal Reserve Governor Christopher Waller shared his view on central bank digital currencies (CBDCs) Tuesday during the Money 20/20 conference in Las Vegas. Commenting on the Federal Reserve issuing a digital dollar, he was quoted by Bloomberg as saying:
It’s just a checking account at the Fed. I’m not a big fan of it, but I’m open to having someone convince me that this is something that’s really valuable.
Some people have argued that a Fed-backed digital currency would help ensure the U.S. dollar’s dominance, noting that many countries, including China, are already working on launching their own CBDCs.
The People’s Bank of China (PBOC) has been actively trialing its CBDC. In September, the Chinese central bank revealed its intention to expand the digital yuan test areas. This month, the PBOC said transactions with its central bank digital currency exceeded 100 billion yuan ($13.9 billion) as of Aug. 31.
Waller opined:
It’s not clear why China giving their citizens a checking account at the People’s Bank of China, why that’s going to undermine the reserve role of the dollar in the global payments system.
The Federal Reserve outlined its digital dollar work in a January report titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation,” calling it “the first step in a public discussion between the Federal Reserve and stakeholders.”
However, the U.S. central bank has not decided whether to issue a digital dollar. Fed Chair Jerome Powell said in September: “We have not decided to proceed and we don’t see ourselves making that decision for some time.” He added: “We see this as a process of at least a couple of years where we are doing work and building public confidence in our analysis and in our ultimate conclusion.” Powell also noted that the decision of whether to issue a digital dollar would need approval from both the executive branch and Congress.
5. United Kingdom banks hate crypto, and that's bad news for everyone
Banks in the United Kingdom try to block businesses and individuals alike from investing in cryptocurrency. Regulators should fix the situation.
In 2018, the United Kingdom’s Financial Conduct Authority (FCA) wrote to the heads of the country’s biggest high street banks to emphasize the importance of due diligence when dealing with crypto businesses. That seems to have led to widespread high-risk ratings and bans on crypto-related banking, impacting both crypto businesses hoping to operate in the U.K. and investors alike.
Banks are, understandably and responsibly, concerned with scams, but the current situation creates uncertainty. Crypto investors need to be able to move their money around as they like, and crypto businesses need access to payment rails for a variety of other reasons, such as paying staff and suppliers.
A catch-22 that harms market competition
By barring crypto businesses from accessing “mainstream” banking, organizations are forced to use payment service providers (PSPs), which are rated higher risk by banks because they’re also used by the gambling industry. There’s a lack of nuance in this process, with banks tending to blanket block transactions through PSPs.
When it comes to specific services such as payment handling, refusing to service crypto also harms market competition. There’s a sense that banks are reluctant to derisk crypto and make crypto-to-bank payments easier because they feel it cannibalizes their own market. If that’s true, then the regulator needs to step in to maintain market competition.
Restricting individuals’ freedoms
Banks’ economic risk-reward calculations mean they continue to dip their toes in offering banking services to crypto-asset service providers, but those relationships are fraught. Take, for instance, Barclays providing faster payment services to Coinbase, which ended abruptly after three months. It’s likely that the risk was deemed too great in return for the reward of the amount of funds.
Banks are contradicting themselves
Although crypto businesses struggle to open bank accounts and investors have their freedoms curtailed, there is significant interest in crypto from nearly every high street bank. But that’s just on one side of the bank. They’re looking at whether crypto will work from an institutional investment standpoint, but that willingness and knowledge don’t make it across the building to the people doing transactional banking — retail and corporate. You can’t have your cake and eat it, too: Crypto adoption as a form of institutional investment will be hampered by the same issues. Banks are showing a short-sightedness that fails to translate interest in one area into meaningful processes across others, harming every aspect.
BCB, Revolut, Clear Junction and ClearBank all offer banking relationships or U.K. bank accounts for those involved in crypto. The fact that a limited number of PSPs are able to work with crypto businesses or investors without significant sanctions from regulators, a greater risk exposure than other organizations and with comparable compliance teams to major retail banks shows that it is possible. Banks are failing to see the size of this opportunity — an opportunity already mined by a few organizations successfully — to create a more competitive landscape.
6. Vietnam's Prime Minister Says Country Needs to Regulate Crypto
Lawmakers have been pressuring Pham Minh Chinh to clarify his stance toward virtual assets, which aren’t recognized as property yet.
Vietnam Prime Minister Pham Minh Chinh called for new rules to regulate the crypto sector in a discussion group.
Chinh said that he was “impatient that virtual assets are not recognized, yet people continue to trade” them. He was discussing amendments to the country’s anti-money-laundering law, local newspaper VnExpress reported.
Lawmakers have been putting pressure on the prime minister, as well as on the governor of the State Bank of Vietnam, the country's central bank, and the minister of justice to clarify their stance toward virtual assets and blockchain technology.
7. Google Settles With DOJ Over Lost Criminal Crypto Exchange Data
The agreement stems from a fumbled search warrant response in the case against BTC-e.
Google today agreed to improve its legal compliance program after losing data related to BTC-e, a criminal crypto exchange investigated and shut down by the FBI for alleged money laundering in 2017.
The tech giant will “ensure timely and complete responses to legal process such as subpoenas and search warrants,” going forwards, according to a news release from the Department of Justice on Wednesday.
The department served a search warrant on Google in 2016, demanding the company turn over data the company held concerning BTC-e.
However, Google leaned on a standing legal precedent that limited such requests to data stored on American soil. Due to Google’s optimization algorithms, which moved data around the world, the company couldn’t clearly define which information it was required to forfeit.
Congress eventually intervened by passing the CLOUD act, which required all related data in cases like Google’s be handed over, regardless of where it was stored. Google even signed a letter in 2018 praising the act’s passage for clarifying the firm’s obligations. However, the data originally sought by the Justice Department had already been lost.
Today, the firm said it is taking numerous measures to ensure such legal complications never happen again.
“In the filed stipulation, Google represented to the court that it spent over $90 million on additional resources, systems, and staffing to implement legal process compliance program improvements,” said the DOJ.
BTC-e operated in the United States from 2011 to 2017, handling an estimated $9 billion in Bitcoin transactions during that time. According to the Justice Department, its operators allowed users—many of which were criminals—to trade Bitcoin anonymously and launder money.
8. Warning about Bitcoin Bank and Intesa Sanpaolo.
A piece of dangerous fake news is circulating that needs to be paid attention to because it actually promotes an attempted scam. It is the news about Bitcoin Bank and Intesa Sanpaolo.
Bitcoin Bank is a hypothetical automated trading software that promises easy gains.
Intesa Sanpaolo, on the other hand, is Italy’s largest banking group in terms of the number of branches and market share, with a turnover of more than 20 billion euros. The company is listed on the Milan Stock Exchange, and its shares are included in the Euro Stoxx 50 Index and the Euro Stoxx 50 Banks.
On Intesa Sanpaolo’s official website there is no trace of any service called “Bitcoin Bank,” partly because to date this bank does not offer any crypto services.
Despite this, there is still circulating the false news that Bitcoin Bank is a service offered by Banca Intesa Sanpaolo.
Moreover, there is even a website called BuyBitcoinBank that mentions Intesa Sanpaolo, and although it explicitly says that the bank does not directly offer cryptocurrency services and trading, at a superficial analysis it might seem to connect Bitcoin Bank to Intesa Sanpaolo.
9. SQUID Ranks as One of the Biggest Crypto Rug Pulls.
The SQUID coin is set to make a comeback one year after one of the biggest rug-pulls in crypto history, but developers are still at large.
The SQUID coin launched on Binance SmartChain last year to much fanfare, rekt more than 40,000 investors as it rose from $0.01 to about $3,000 in six days, then plummeted to zero.
SQUID developers rug-pull
Developers released the SQUID project while a Netflix show called Squid Game was rapidly growing in popularity and targeted GenZ and millennial investors looking for quick returns. Netflix confirmed that the project is not officially affiliated with the show.
According to Katherine Wooler at U.K. crypto company Dacxi, the team capitalized on the Netflix show’s focus on games. In Squid Game, cash-strapped adults play children’s games for the chance to win a cash prize and gain worldwide fame. Similarly, the developers attracted investors by offering a play-to-earn game where they could earn marbles needed to sell their SQUID.
After the coin price skyrocketed, the developer team behind the project drained all liquidity, making off with about $3.3 million. One Twitch streamer caught the rug-pull on a live stream in real-time. In the video, the coin’s market cap dropped from $2.2 trillion to almost zero instantaneously.
Developers disappear after using Tornado Cash
The project had numerous red flags, including a website replete with grammatical errors and an anti-dump mechanism that made it harder to sell SQUID coins.
