The Nasdaq Crypto Index (NCI) closed Sunday (12/11/22) 0.2% above last week’s closing. The index’s neutral performance was influenced by ether (ETH), down 0.3%, while bitcoin (BTC) rose 0.5%.
Coming out of a week where crypto prices rebounded on the back of mostly positive US macro newsflow, investors continued to monitor FTX contagion news while keeping an eye on macro developments ahead of this week's (12/14) FOMC's monetary policy announcement.
Crypto markets had started gaining momentum on the previous Sunday (12/04) and that trend extended itself into Monday morning, taking both BTC and ETH to their respective weekly highs of $17,362 and $1,300. A few hours before markets opened in North America, digital assets began losing steam and continued their downward trajectory until closing hours in the US.
Monday’s ISM Services report showed that the US service sector grew for the 30th consecutive month in November at a rate that exceeded market expectations, contributing to this downturn. This data came on the back of stronger-than-expected non-farm payrolls on the previous Friday, which showed that the US job market would continue to contribute towards rising prices. Both data points signaled the need for further Fed belt tightening. Consequently, all major US stock indexes moved in unison with crypto prices and closed in the red that day.
Prices moved sideways throughout Tuesday, then started going down in the early hours of Wednesday. By the time US markets closed, BTC and ETH registered their weekly lows of $16,781 and $1,225.
The drop in prices may have been influenced by a Bloomberg report that revealed that the investment firm Fir Tree Capital is suing Grayscale Investments in an attempt to access information that may reveal potential mismanagement and conflicts of interest at its $10.7 billion BTC fund. Additionally, on Wednesday, SEC Chair Gary Gensler promised further enforcement of securities laws in the crypto market in a Yahoo Finance interview.
On Thursday, digital asset prices benefited from a steep recovery during US market hours that took BTC to just under $17,250 and ETH to just above $1,275. The smart contract token was benefited by the announcement that Ethereum’s next hardfork, Shanghai, is expected to occur next March. The network upgrade promises to enable the withdrawal of ETH tokens staked on the Beacon Chain, among other improvements, which may affect ether’s circulating supply in a significant manner
Digital asset prices remained mostly unchanged throughout Friday and the weekend—with BTC trading around $17,200 and ETH hovering around the $1,275 mark—before dipping on Sunday afternoon.
The FOMC is set to announce its monetary policy decision on Wednesday. CME’s Fedwatch tool shows a 74.5% probability of a 50 bps increase. If market expectations are confirmed, the rate hike would be the smallest since May of this year. US CPI will be released one day before the FOMC’s announcement on Tuesday. Crypto investors will also keep a close eye on the Grayscale Bitcoin Trust's (GBTC) discount. Currently, the shares of the trust are nearing a 50% discount to the price of the underlying bitcoin in the trust and investors are worried Digital Currency Group, parent company of Grayscale, could file for bankruptcy as a result of counterparty exposure to FTX and be forced to liquidate the trust.
Goldman Sachs looks to scoop up crypto companies on the cheap after FTX collapse
Despite investor sentiment reaching a new low in 2022 after the FTX collapse, big names from traditional finance still see value in the crypto market. According to Reuters, Goldman Sachs, one of the world’s largest investment banks, is interested in purchasing crypto companies on the cheap in the wake of FTX’s collapse. "We do see some really interesting opportunities, priced much more sensibly," explained Mathew McDermott, Goldman's head of digital assets. According to the report, Goldman plans to spend “tens of millions of dollars to buy or invest'' in the crypto ecosystem.
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