The Nasdaq Crypto Index (NCI) closed Sunday (10/30/22) 10.4% above last week’s closing. The index’s positive performance was influenced by ether (ETH), up 19.6%, while bitcoin (BTC) rose 6.4%.

At the start of the final week of an October of unusually small price variations, investors continued to monitor the release of Q3 results in traditional markets while awaiting the last major US inflation reading (PCE, on Friday) before the FOMC’s monetary decision on November 2.

After a late Sunday rally, both ETH and BTC moved sideways within a tight range throughout Monday. This trend extended itself until market opening hours in North America on Tuesday, when ETH shot up by $150 on its way to $1,500, a price level not seen since September 15, recovering most of the losses ETH had after the successful Merge. About an hour into the ETH rally, most major protocols joined in, with the native tokens of rival smart contracts platforms SOL (Solana) and ADA (Cardano) leading the second wave. 

Traditional markets had a positive day too (S&P 500 +1.63%), but ETH’s surprising surge was the consequence of a short squeeze, triggered by an unexpected price rise that generated a wave of buy pressure as short sellers were forced to purchase ETH to cut losses. 

In contrast to what occurred in mid-October — when prices recovered after a hotter than expected core CPI reading — this short squeeze was not caused by macro news.

After a brief selloff on Tuesday afternoon, ETH began a slow but sustained climb — this time taking BTC along for the ride, while ADA and SOL stayed behind. 

Crypto asset prices looked like they were about to lose steam as markets opened in North America on Wednesday and investors began reacting to negative earnings reports from tech giants Microsoft and Alphabet released after closing on Tuesday. 

However, Canada’s Central Bank announced a 50 bp rate hike, surprising investors expecting a Fed-size 75 bp. Is the Bank of Canada’s announcement a sign central bankers around the world are looking to slow down monetary tightening? CME’s FedWatch Tool showed a moderate decrease in probability of a 75 bp rate hike for the upcoming November FOMC meeting (OCT 21: 95% vs. OCT 27: 88.5%) that suggests some investors see it that way.   

Prices dipped on Thursday following the news that US GDP rose 2.6% in Q3, exceeding projections (2.4%) and suggesting there is still some room for the Fed’s monetary tightening.    

As markets prepared to close in the US, crypto asset prices dipped further, in tandem with traditional markets, as investors began positioning themselves for the release of personal consumption expenditures report the next morning.

On Friday, investors breathed a sigh of relief when PCE results came in just under market expectations. Inflation rose 0.3% (expected: 0.4%) for the month and 6.2% on a yearly basis. Core CPE, which excludes the more volatile food and energy categories, rose 0.5% for the month and 5.3% on a 12-month basis, matching August's results.

Investors interpreted the results as a sign that the Fed’s restrictive monetary policy was achieving its desired result and may soon slowdown, as evidenced by the fact that the probability of a 50 bp hike being announced at the conclusion of the FOMC’s final meeting in 2022 (December 14) finally surpassed the probability of a fifth-straight 75 bp hike, according to the CME Group.

Friday's positive inflation reading reestablished the momentum that had predominated throughout the week for crypto assets. BTC would eventually reach its weekly high of $20,925 on Saturday morning. ETH’s rally would be sustained until later in the afternoon, its price rising to the weekly high of $1,645.

Looking Ahead 

 

On Monday, Eurozone CPI results will help gauge the extent to which the Ukraine War is impacting prices as Europe enters a winter of uncertainty. On Tuesday, all eyes will be on the FOMC’s monetary announcement. Markets are assuming a 75 bp rate hike will be announced (2:00 pm EST), but Chair Powell’s press conference (2:30 pm EST) could bring pivotal information to light. Initial jobless claims (Thursday) and non-farm payrolls (Friday), both from the US, close out the week’s macro calendar. 

 

Other news

 

Google announces a cloud-based node engine for Ethereum projects

 

After announcing plans to accept crypto payments from Google Cloud Web3 clients earlier in the month, Google announced plans to debut a cloud-based node engine for Ethereum projects. According to the announcement, the new engine will allow Web3 companies who require dedicated nodes to “relay transactions, deploy smart contracts, and read or write blockchain data with the reliability, performance, and security they expect from Google Cloud compute and network infrastructure.” Google’s latest project promises to streamline the deployment and syncing of new nodes and signals the continued attention given to the crypto ecosystem by tech companies despite the persistence of the bear market. 

 

Fidelity survey shows institutional interest remains high

 

Fidelity, one of the largest asset managers in the world, released the results of a survey that gauges institutional investor interest in crypto investments. According to the Institutional Investor Digital Assets Study, adoption of digital assets among institutional investors increased in both the US (42%) and Europe (67%), a respective 9-point and 11-point change year-over-year. Also, more than half of those surveyed (58%) had invested in digital assets during the first half of 2022 and 74% planned to invest in the future. According to Tom Jessop, president of Fidelity Digital Assets, ”while the markets have faced headwinds in recent months, we believe that digital assets fundamentals remain strong and that the institutionalization of the market over the past several years has positioned it to weather recent events.”

 

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