The Nasdaq Crypto Index (NCI) closed Sunday (10/23/22) 2.1% above last week’s closing. The index’s neutral performance was influenced by ether (ETH), up 3.6%, while bitcoin (BTC) rose 1.6%.

After three consecutive weeks where BTC prices varied less than 2%, digital asset prices entered the new workweek with strong upward momentum as they dovetailed with traditional markets lifted by earning reports that exceeded forecasts. 

By the time stock markets were opening in North-America on Tuesday, digital asset prices had begun surrendering their Monday gains. By mid-afternoon on Tuesday, digital assets had slid down to Monday’s opening prices—this despite another day in the green for all major stock indexes in the US. 

Crypto asset prices initially traded flat alongside traditional markets on Wednesday, but eventually dipped after trading hours. US housing starts data (construction of new homes) came in slightly below expectations (1.44 million vs. an expected 1.47 million). On a 12 month basis, housing starts are down 7.7% as of September, the lowest level in two years. 

Investors have typically reacted positively to signs the American economy is cooling, in the hopes it could sway the FOMC’s hawkish stance, but the Fed has done a particularly effective job as of late at convincing market participants that it is committed to fighting inflation.

Just as markets opened on Friday, both BTC and ETH slipped further still into their weekly lows of $18,800 and $1265, respectively. 

At that point, Nick Timiraos, a Wall Street Journal contributor widely referred to as the “the Fed leaker”, published an article that highlighted the fact that Fed officials had become concerned about the possibility of “an unnecessarily sharp slowdown (in economic activity)”, citing the possibility of “responding overly aggressively.” 

Whether or not Tiranos' article was a veiled message from the Fed  hoping to instill some optimism in markets is impossible to say, but Tiranos has had a suspiciously accurate track record when it comes to foretelling changes in the Fed’s sentiment. Consequently,  investors have interpreted his writing as an unconventional form of short term forward guidance used by the Fed to recalibrate market expectations.

Tirano’s article seems to treat the fact that the Fed will announce a fourth consecutive 75 bp rate hike at the start of November as a foregone conclusion, but it also seemed to point to a smaller (50 bp) hike for the FOMC’s final monetary policy announcement in 2022.

Immediately after the article was published, BTC’s price surged by $400 to just over $19,200, with ETH following suit from $1260 up to $1300. Traditional markets closed out the week with a similarly optimistic tone (S&P 500 +2.37%). 

BTC moved sideways for most of the Weekend, before surging by $400 on Sunday to register a late intra-week high of $19,630. Around the same time, ETH registered an even more precipitous rally that took its weekly high to $1,370.

Looking Ahead

 

Traditional markets will continue to evaluate earning reports this week, with several big tech companies divulging Q3 results on Wednesday (GOOGL and META) and Thursday (AAPL,INTC and AMZN). Despite their waning correlation with digital assets, results could bleed over to crypto. This week’s economic calendar is headlined by the release of the US Personal Consumption Expenditures Price Index (PCE) on Friday, an inflation reading often referred to as the Fed’s preferred gauge of inflation.

Other News

 

ETH will be added to Fidelity Institutional platform

 

Fidelity Digital Assets will debut Ethereum trading on its institutional trading platform. According to an email sent out (10/19) by the US asset manager, Institutional investors will be able to buy and sell ETH for the first time since the platform was launched on October 28th. Fidelity believes investors have been looking at Ethereum “through a new lens” since its transition to PoS in September. Currently, BTC is the only token available on the platform. Fidelity previously made waves in April after announcing plans to include a BTC investment option to its 401k plans. 

 

Brazil's largest digital bank to launch proprietary token 

 

Nubank, Brazil’s largest digital bank by market value, has announced (10/19) plans to launch its own crypto currency in Brazil, Colombia and Mexico in 2023. The Polygon based token, nucoin, will be made available to its 70 million clients as part of a discounts and perks program. “Nucoin is a new way to recognize customer loyalty and encourage engagement with Nubank products”, stated Fernando Czapski, general manager of the project at the digital bank. 

 

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