10/12/2023 0 Comments

1. Bitcoin Price Whipsaws Following Blockbuster US Jobs Report

Bitcoin (BTC), the world’s first and largest cryptocurrency by market capitalization, has seen whipsaw price action since the release of a much stronger-than-expected US jobs report for September. The blockbuster report showed the US economy adding 336,000 jobs last month, nearly double the median economist forecast for a gain of 171,000.

Those numbers underscored the ongoing strength of the US economy, which should bolster the case for 1) another interest rate hike from the US Federal Reserve (Fed) and 2) that the Fed should subsequently hold interest rates at higher levels for longer.

Unsurprisingly, US yields spiked higher across the curve, with the 10-year briefly nearing 4.9%, as traders bets on higher interest rates for longer, with this spike weighing on on crypto prices at the time.

Bitcoin dipped from the $27,700s prior to the data to as low as $27,200 in its immediate aftermath. Higher yields on risk free assets like US government bonds reduce the incentive for investors to hold riskier and non-yielding assets, of which Bitcoin is (arguably) both.

However, as US yields have pulled back from earlier session highs (the 10-year was last under 4.8%), Bitcoin and the broader crypto market has enjoyed a strong recovery from intra-day lows. BTC was last trading close to session highs and attempting to push through $28,000, up close to 3% from earlier session lows.

Why Did the Market Reverse?

The exact reason for the market’s reversal is unclear, but a few factors could be playing on investors minds.

Firstly, the latest US jobs report wasn’t strong across the board – the unemployment rate unexpectedly edged up to 3.8% from 3.7% and the MoM pace of wage gains was 0.2%, a little slower than the expected 0.3%.

Investors could have taken the view that the US jobs market isn’t quite as strong as the headline NFP number implied and that the market’s initial move was an overreaction, hence the subsequent reversal.

Alternatively, investors could be buying into the idea that the strong jobs numbers are actually bad for the economy’s longer-term outlook as they might encourage the Fed to hold interest rates at excessively high levels for too long, and could have been buying Bitcoin as a safe-haven against over-tightening from the Fed.

Of course, that’s all speculation.

What’s clear is that Bitcoin’s recent price action – holding above and rebounding from the $25,000s in recent weeks despite US yields hitting multi-decade highs – suggests the world’s largest cryptocurrency is becoming increasingly comfortable with higher interest rates. While the broader macro picture (of a strong US economy with high interest rates) remains a long-term headwind for BTC, the prospect of a continued near-term grind higher shouldn’t be discounted.

Where Next for Bitcoin (BTC)?

Bitcoin is in a short-term uptrend, but for this uptrend to continue, BTC must break above a key resistance area that it is currently probing. The cryptocurrency’s 200DMA sits just above $28,000, while $28,500 is a key resistance-turned-support-turned-resistance zone. If Bitcoin can break above this key area, a retest of $30,000 becomes a strong possibility. A quick surge beyond this psychological threshold and onto new yearly highs above $31,800 is difficult to forecast in the near-future when macro headwinds remain so high.

But the narrative may shift away from macro heading into 2024, which will see the likely approval of spot Bitcoin ETFs in the US (accelerating Bitcoin’s institutional adoption) and the halving (historically a bullish event).

The outlook for 2024 remains very strong, a view that Bitcoin options traders certainly seem to agree with.

As per data presented by The Block, the 25% delta skew of Bitcoin options expiring in 180 days remains strongly positive at around 5, suggesting investors continue to pay a premium for options that pay out in the case of Bitcoin price upside versus equivalent options that pay out in the case of Bitcoin price downside.

2. DeFi not yet a ‘meaningful risk’ to stability: EU market regulator

Decentralized finance (DeFi) is not yet a meaningful risk to financial stability — but does need monitoring, says the European Securities and Markets Authority (ESMA).

In an Oct. 11 report, the regulator laid out the benefits and risks of DeFi but ultimately concluded it’s not currently a threat due to its small size and lack of correlation with other financial markets.

Crypto-assets markets, including DeFi, do not represent meaningful risks to financial stability at this point, mainly because of their relatively small size and limited contagion channels between crypto and traditional financial markets.”

ESMA said the crypto market is about the same size as the European Union’s 12th largest bank or just over 3% of the total assets EU banks hold.

The regulator claimed the crypto market blow-up in 2022, which saw multiple crypto firms and projects collapse, had “no meaningful impact on traditional markets.”

Despite investor DeFi exposure being small, due to its “highly speculative nature” there are still risks to investor protection which ESMA warned may turn into systemic risks if DeFi gains traction or if it becomes more connected with traditional markets.

3. JPMorgan debuts tokenization platform, BlackRock among key clients

United States banking giant JPMorgan debuted its in-house blockchain-based tokenization application, the Tokenized Collateral Network (TCN), on Oct. 11, according to Bloomberg. TCN settled its first trade for asset management giant BlackRock.

The Tokenized Collateral Network is an application that allows investors to utilize assets as collateral. Using blockchain technology, investors can transfer collateral ownership without moving assets in underlying ledgers.

In its first public collateralized trade between JPMorgan and BlackRock, the TCN turned shares of one money market fund into digital tokens, which were then transferred to Barclays bank as security for an over-the-counter derivatives exchange between the two companies.

The first internal test of the TCN was conducted by JPMorgan in May 2022, with a pipeline of other clients and transactions now that TCN is live. The TCN was launched to streamline and scale the process of traditional settlements on a blockchain. The use of decentralized technology made the process faster, more secure and more efficient.

According to Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, the new TCN platform unlocks capital and allows it to be used as collateral in ongoing transactions, boosting efficiency at scale. The platform enables the creation, transfer and settling of tokenized traditional assets. It also allows for the movement of collateral nearly instantly, unlike earlier methods.

4. Digital shovel announces S300 minipod line of module crypto mining data centers

Digital Shovel, a leader in Bitcoin mining infrastructure, today announced the latest evolution of its MiniPOD line of modular cryptocurrency mining datacenters, the S300 MiniPOD. The S300 builds on the design and functionality of Digital Shovel’s previous products, improving on many aspects of the installation and operation of a portable mining container.

The S300 has minimized the materials required for the pod, leading to a claimed 60% reduction in shipping costs from Digital Shovel to the deployment site. The container can be set up and installed on-site from a flat shipping pack within four hours, requiring only two people and no heavy lifting equipment necessary.

“As a pioneer of the modular approach to cryptocurrency mining data centers, we constantly strive to expand, improve and innovate our already advanced product line,” said Scot Johnson, CEO of Digital Shovel. “The S300 MiniPOD represents the cutting-edge in mining, allowing customers to continue achieving maximum efficiency and profit wherever they choose to establish their data centers.”

The new MiniPOD has integrated new features with the goal of streamlining operator maintenance and device profitability during operations. Four 1.1 KW direct drive fans contribute to increasing airflow from 60,000 cubic feet per minute (CFM) to 88,000 CFM, a 32% increase in air flow from previous models. With mitigation of heat build up being one of the core logistical issues of mining operations, this is a very attractive improvement.

In addition to the increased airflow, a new two-stage air intake filtration system has been upgraded with a 1 inch pre-filter that can be changed from outside the POD housing and handle protecting your machines from external contaminants, as well as improve the lifetime and durability of the primary air filter.

The POD also includes automated power distribution units (PDUs) to enable remote monitoring and management of electrical systems, and at a cheaper cost (almost 35%) than competitors in the industry. This is accomplished thanks to their vertically-integrated production facilities in North America.

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