The NCI closed Sunday (10/02/22) 0.9% above last week’s closing. The index’s neutral performance was influenced by ether (ETH), stable at 0.0%, while bitcoin (BTC) rose 1.4%.

After another week where the Fed acted as the bearer of bad news, crypto asset prices made modest recoveries on Monday despite a day of losses for traditional markets driven by growing fears of a global recession. BTC was trading just above $19,000 and ETH slowly worked its way up to $1,325 as volume picked up during market opening hours in North America.

As markets closed on Monday, crypto asset prices began a steep climb that would last until midday Tuesday, at which point BTC and ETH rallied to their weekly highs of $20,300 and $1,390, respectively. Altcoins followed suit, led by Uniswap’s 15% price spurt.

The sharp momentum was short lived, however, with most tokens plummeting Tuesday morning (EST), eventually erasing their intraday gains by mid-afternoon. In the final hours of Tuesday, crypto assets prices tumbled once again, taking BTC and ETH into their weekly lows of $18,550 and $1,270, respectively, just as Tuesday gave way to Wednesday.

A slew of positive economic data pertaining to the US economy released on Tuesday  (housing starts, consumer confidence and durable goods) may have influenced the early-week spike in volatility. In all three cases, the positive numbers contributed to the notion that there is still room for FOMC monetary intervention and make the prospect of a Fed pivot less likely.     

Additionally, trading volume seems to indicate that buy pressure picks up anytime  BTC dips below $19,000. That psychological maker may have influenced investor behavior last week. 

Crypto asset prices recovered part of their losses on Wednesday, following the upward momentum of traditional markets reacting positively to the Bank of England’s announcement of an emergency bond market intervention. Both BTC and ETH maintained their upward momentum for the entire 24 hours. 

After a relatively stable Thursday, crypto asset prices traded higher on Friday morning, with BTC peaking at $19.868 and ETH reaching $1,355 before maintaining a slight downward trend for the remainder of the week. 

BTC was down 1.62% for the month of September, which has historically been a bad month for the world’s largest crypto by market cap. Despite the success of The Merge, ETH was down 12.79% in the month. .         

 

Bank of America sees growth of use cases for stablecoins 

 

Bank of America published (9/23) a research report that highlighted the growing inflows into stablecoin protocols. According to the bank, inflows grew 58% on a week-over-week basis, reaching 490 million in mid September, as a result of the development of “real world use cases like payments/remittances.” The report also noted that future regulatory clarity is likely to benefit the DeFi (Decentralized Finance) adoption and explained the recent drop of ETH prices as a function of investors realizing that Ethereum’s Merge did not reduce transaction fees or improve scalability issues, noting that investors are taking a “wait-and-see approach regarding future upgrades.”

 

Citibank highlights growth of decentralized exchanges

 

Citibank noted (10/03) in a research report that decentralized exchanges (DEXs) grew faster than their centralized counterparts during the last two years. Citi analysts blamed the more onerous know-your-customer procedures of the centralized exchange (CEXs) as one of the reasons that may be causing crypto investors to shift. According to the bank, DEXs are now responsible for 18.2% of spot-trading volume, with over $50 billion in monthly trades. Among the DEXs, Uniswap (UNI) dominates the market with a 70% share of all volume. 

 

Looking ahead 

 

This week’s US economic calendar will be highlighted by the Purchasing Managers' Index (PMI) on Monday and non-farm payroll on Friday. Both should give greater clarity to the extent of the impact of the Fed’s monetary intervention so far. In the Eurozone, investors will continue to monitor the ongoing UK financial situation and the Bank of England’s bond buyback plan. 

 

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