Bitcoin hits a 2-week low as inflation data and war disrupt markets

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Bitcoin and altcoins continue to fall, and since Friday’s NFP and as the September Producer Price Index report indicates, wholesale inflation has risen to 0.5%, above market expectations. Rates markets led a large post-NFP reversal on Friday, as a capitulation fake break of 5% on the 30-year UST prompted a massive CTA unwind of its short rates and equity positions. However, cryptocurrency has been unable to stay up with this positive reversal, dropping back to the month’s lows. The selling escalated after the September producer price index gained 0.5% for the month, versus a 0.3% increase expected. This indicates that inflationary pressures in the United States economy are unlikely to ease quickly.

Fundamental Updates

Let’s delve into the significant developments shaping the crypto market landscape:
  • JPMorgan Introduces BlackRock Tokens as Collateral: JPMorgan has completed its first live blockchain-based collateral settlement transaction involving BlackRock and Barclays, the US financial behemoth announced on Wednesday. BlackRock used JPMorgan’s Ethereum-based Onyx blockchain and the bank’s Tokenized Collateral Network (TCN) to tokenize shares in one of its money market funds. The tokens were subsequently transferred to Barclays Plc for use as collateral in an OTC (over-the-counter) derivatives trade. Tokenization of traditional financial assets is a significant thing for banks, and JPMorgan has been at the forefront of this, recently joined by Citi and others. The operational burden associated with fulfilling margin calls would be significantly reduced if shares of money market funds were tokenized and used as collateral in clearing and margining transactions.
  • USDR Stablecoin Depegged to $0.53: USDR, a stablecoin backed by real estate, underwent a major depegging, falling to $0.53 per coin on October 11. The crisis developed as a wave of redemptions emptied its treasury of marketable assets, notably Dai (DAI). Due to a liquidity problem that resulted in panic selling, USDR, a token created by the decentralized finance project Tangible protocol that aims to tokenize real-world assets, had a sharp decline in value.The USDR problem is far from unique in the realm of stablecoins. Other popular stablecoins, such as Circle’s USDC and Terra’s UST, have also struggled to keep their pegs under volatile market conditions. These occurrences highlight the critical need of addressing liquidity concerns and implementing solid procedures to maintain stablecoin stability in the face of market volatility.
  • RWAs (Real World Assets) in the DeFi space: Real World Assets (RWA) are currently one of the key investment targets in the crypto industry. The market for tokenized assets is expected to be worth $16 trillion by 2030, accounting for 10% of global GDP at that time, according to Boston Consulting Group. Interoperability between permissionless public blockchains and traditional banks is only now approaching the stage where tokenizing a significant fraction of real-world assets is a viable possibility. The RWA movement is still in its early stages, and considerable structural changes in traditional banking and the legal system are needed if the vision is to be fully implemented.

Key Data Points

  • Total market capitalization: The total market capitalization of the crypto market is currently around $1.08 trillion. This is a net $50 Billion change from last week.
  • Bitcoin dominance: Bitcoin dominance, which tracks the percentage of the total market capitalization that is held by Bitcoin, is currently at around 48.1%. This is 0.41% up from last week.
  • ETH dominance: ETH dominance, which tracks the percentage of the total market capitalization that is held by Ethereum, is currently at around 17.2%. This is 1.71% down from last week.
Crypto Market Data

Bitcoin Price Analysis:

Bitcoin just dropped below the $27,500 hurdle after finding support there for a few days. This indicates that the bears are attempting to gain control. On the downside, the next support level to keep an eye on is $26,450. If this level cracks, it indicates that traders are trying to get out. The BTC/USDT pair could potentially fall to $26,100 before retesting support at $24,719. A break above the $27,812 resistance level, on the other hand, indicates significant accumulation at lower levels. The pair might then try to rally to $28,500. The bulls may struggle to break above this level, but if they do, the pair might reach $29,000. For the time being, $27,812 represents significant resistance to overcome.

Bitcoin graph

BTC Technical Indicator:

BTC Technical Indicator

Macro Updates:

  • Production inflation has exceeded expectations. In the minutes of the September meeting, the FED agreed to keep interest rates high for an extended period of time.
  • The US JOLTS data was released and it amazed to the upside, with job openings reaching 9.62 million, the largest since May. The trend in job openings in the United States is still downward from post-pandemic highs, but they remain historically high. 
  • Credit tightening will have an impact on economic activity, hiring, and inflation. GDP growth is predicted to decelerate in the short future and remain modest from 2024 to 2025. 
  • Even if inflation has not fallen to the Fed’s desired level, the Fed will have to begin decreasing rates as early as 2024 to avoid further economic repercussions.

    Bitcoin returns were -2.43% for this week. The Alpha Blue Chip Focused Strategy returns were −5.55% during the same period (05 October – 11 October). The Top Cap Digital Assets Strategy and Arbitrage Opportunities & Balanced Strategy returns were −2.81% and −1.71%, respectively.

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