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- Crypto Saving Expert Newsletter - Issue 110
Crypto Saving Expert Newsletter - Issue 110
Good morning! Bitcoin saw a sharp decline between late last night and today, adding to its ongoing trend of lower highs and lows. Despite the brief rebounds, selling pressure continues. Let's dive in for a closer look at what is going on behind the scenes with bitcoin and the overall Web3 market. 👇
This week's issue will feature technical analysis of bitcoin, Ethereum, S&P 500, NVIDIA, as well as important dates, key news stories and key alpha from today’s sponsor VALA:
Table of Contents
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Bitcoin Feels The Heat As TradFi Wobbles
Bitcoin suffered another drop to the downside late on Tuesday continuing into the early hours of Wednesday morning following shaky ground in traditional finance.
Bitcoin’s Movements
Bitcoin has dropped 7% between Tuesday’s high and the current low on Wednesday at the time of writing.
This marked another sell-off for bitcoin in what has become a series of high time frame lower highs and lower lows, seeing bounces fail and selling pressure overcome buyers.
The region lying just below bitcoin’s price is vital for bulls to hold to halt a further slide to the downside. If $54,000 is lost, bitcoin will likely tumble towards $50,000 again.
Still, there is the opportunity for bitcoin to build lower time frame strength from its current position which could turn into a shift in the trend and see upside momentum overtake.
Ethereum
While bitcoin was dropping Ethereum lost its August support level, which had seen the price bounce from $2,550 upon several tests.
This level has now turned to resistance, and ETH must reclaim it to provide a larger bounce.
The $2,800 level remains the high time frame region to reclaim for a bullish outlook. Still, further market weakness could see Ethereum drop below $2,000.
S&P 500
The catalyst for bitcoin’s drop was turmoil in TradFi as the S&P 500 dropped sharply on Tuesday.
This led to a sea of red form across the stock market, with the panic entering crypto.
The Nikkei 225, the Japan index that was the catalyst for bitcoin’s drop to $50,000 at the start of August, dropped by 4% in Wednesday’s session, adding fuel to the fire for bitcoin’s struggle.
NVIDIA
This week’s biggest headline thus far came from NVIDIA’s 9.5% drop on Tuesday.
NVIDIA, the world’s third most valuable company, lost $279bn from its valuation on Tuesday, marking the biggest stock loss in history.
Due to NVIDIA’s presence as the third most valuable company in the world and the stock with the most media attention over the last 18 months, the loss likely affected the overall market.
Fear & Greed Index
The Fear and Greed Index remains in the Fear section. Surprisingly, bitcoin’s drop had minimal impact on the Index, and it has yet to dive into Extreme Fear.
Investor sentiment remained low in August. Still, with Q4 approaching, the overall feeling around the market could spark an uptick in bitcoin and investor confidence.
Important Dates
Thursday 5 September, 12:15 UTC - ADP Employment Change
Automatic Data Processing Inc. (ADP) releases employment change for the US. A higher figure is bullish for the markets due to increased employment, which suggests economic strength.
The consensus is set at 145,000, with the previous data coming in at 122,000. Therefore, the ADP expects a slight increase in employment.
Thursday 5 September, 14:00 UTC - ISM Services PMI
The Institute for Supply Management (ISM) releases this data, with it providing a measure of the US non-manufacturing sector. It is considered positive if the figure is above the 50 mark.
The consensus is set at 51.1, with the previous data at 51.4.
Friday 6 September, 12:30 UTC - Nonfarm Payrolls (NFP)
The US Bureau of Labour Statistics releases the NFP. This form of data represents the number of new jobs created in the previous month, which will be December and is another signal of economic health.
The consensus is set at 165,000, with the previous data at 114,000.
Gainers
Losers
Reverse Repurchase Agreements Are Impacting Bitcoin - Arthur Hayes
Anticipation of Federal Reserve interest rate cuts has not had a bullish impact on bitcoin’s price. Arthur Hayes thinks it is due to the Reverse Repurchase Agreements.
Co-founder and former CEO of BitMEX, Arthur Hayes, has shared his perspective on why U.S. Federal Reserve interest rate cuts may not significantly impact bitcoin prices.
In a post on X on 2 September, Hayes noted that despite Fed Chair Jerome Powell’s indication of a potential rate cut in his 23 August Jackson Hole speech, bitcoin prices have struggled, dropping around 10% since the event.
Following his speech, bitcoin temporarily surged to $64,000 before dropping 10% to a low of $57,400 on 2 September.
As of 3 September, bitcoin has recovered to around $58,942, up 1% in the last 24 hours.
In his post, Hayes stated that he believes this lacklustre performance is due to reverse repurchase agreements (RRPs). These RRPs are currently offering a 5.3% interest rate, higher than the 4.38% yield on Treasury bills, leading significant money market funds to shift their cash from Treasury bills to RRPs.
What is An RRP?
A Reverse Repurchase Agreement (RRP) is a financial transaction where one party sells securities to another party with an agreement to repurchase those same securities at a specified price on a future date.
In essence, it is a short-term loan where the securities serve as collateral. The seller agrees to buy back the securities at a slightly higher price, reflecting the interest on the loan.
In the context of the U.S. Federal Reserve, RRPs are used to manage short-term interest rates and control the money supply. Financial institutions, such as banks and money market funds, participate in RRPs to park excess cash in a safe, interest-bearing investment, often overnight. The interest rate paid on RRPs is typically very competitive, sometimes even higher than other short-term government securities like Treasury bills.
The RRP rate can influence where large institutions decide to place their money.
If the RRP rate is attractive, institutions may prefer to invest their capital in it over other investments. This leads to less liquidity in the market for riskier assets, such as stocks or cryptocurrencies. This can have broader implications for financial markets, especially during monetary policy shifts.
According to Hayes, since the Fed hinted at a September rate cut, an additional $120 billion has flowed into RRPs. This trend challenges the belief that lower interest rates would boost high-risk assets like bitcoin, which typically benefits from increased liquidity when borrowing and spending rise.
The CME Fed Watch tool shows a 67% chance of a 25 basis point cut and a 33% chance of a 50 basis point cut at the Fed’s 18 September meeting. A more significant rate cut could signal a more aggressive stance by the Fed, potentially leading to a more dramatic market response.
Machetes, Bitcoin and Toblerone - How The Scottish Court Recovered 23.5 BTC
The story of how a machete-and-Toblerone-wielding group of men robbed an unknown victim, leading to a landmark case regarding the seizure of crypto in Scotland.
In a landmark legal case, prosecutors have seized and converted £110,000 worth of bitcoin into cash following a violent 2020 robbery in Lanarkshire.
The robbery, which occurred in the Scottish town of Blantyre, involved three men armed with both a machete and a Toblerone chocolate bar, leading to the forced transfer of cryptocurrency from the victim.
During the home invasion, the unnamed victim awoke to find a man standing over him, holding a machete.
The attackers also assaulted a woman, who was also in the house, with a personalised Toblerone bar before forcing the victim to transfer 23.5 bitcoin. One of the assailants even made a threatening "throat-slitting gesture" with the bloodied chocolate bar before fleeing.
John Ross Rennie was convicted of possessing the stolen bitcoin and was identified as the "technical brains" behind the raid, although he denied direct involvement in the robbery itself. Rennie played a pivotal role in providing the robbers with technical expertise on how to transfer the bitcoin.
Rennie was sentenced to 150 hours of unpaid work and a six-month supervision order.
Despite his conviction, he claimed a relative coerced him into depositing the stolen bitcoin into an exchange account. Nevertheless, the court highlighted his crucial role in instructing the attackers on executing the cryptocurrency transfer, making him a knowing part of the crime.
The case, first heard in 2022, marked the first instance in Scotland where stolen cryptocurrency was successfully traced and recovered.
At the High Court in Edinburgh, legal authorities agreed to convert the 23.5 bitcoin into physical cash, amounting to £109,601 ($144,017). This conversion was based on the bitcoin value at the time of the robbery when it was trading around $5,400, roughly 10% of its current value.
Rennie’s lawyer, Marco Guarino, described the case as "unusual" throughout, reflecting the novel legal challenges posed by cryptocurrency's involvement in criminal activities.
Ripple CEO: SEC's Strict Stance Towards Crypto Makes an IPO a No-Go
Brad Garlinghouse pointed out that the SEC had sued Coinbase despite approving its IPO in 2021.
Ripple CEO Brad Garlinghouse has ruled out the possibility of the company going public in the United States through an IPO (initial public offering).
Mr Garlinghouse said, during a fireside chat at the Korea Blockchain Week in Seoul, South Korea, that the company had “no interest” in going public primarily due to the US Securities and Exchange Commission’s (SEC) continuous “hostile” approach towards the crypto industry.
He explained, “SEC approved Coinbase going public in the United States and now the SEC is suing Coinbase for the same things they approved.”
“One of the first pieces of advice I give entrepreneurs who ask me about starting crypto companies is: don't incorporate in the United States. You're just asking for more legal bills,” he added.
Ripple’s Stablecoin is Very Close to Launch
The Ripple CEO also commented on the company’s anticipated stablecoin, stating it was very close to being launched.
“We’re in a private kind of closed beta. It’s called Ripple USD. RLUSD has been minted in that framework. We will certainly launch soon. Weeks, not months,” he said.
He highlighted the company's desire to issue the stablecoin, particularly after USDC significantly depegged last year after the collapse of Silicon Valley Bank.
“I mean, 18 months ago, USDC depegged, and we felt like there was an opportunity for a credible player that's already working with lots of financial institutions to lean into that market,” he stated.
The company started testing RLUSD on the XRP ledger and the Ethereum mainnet in early August. Ripple, however, stated at the time that RLUSD had yet to get the necessary regulatory approvals for launch and, therefore, was not available for purchase or trading.
In April this year, Ripple said it intends to back the US dollar-pegged stablecoin with USD deposits, short-term US government treasuries, and cash equivalents. Furthermore, an independent accounting firm will audit its reserves, and its attestations will be published monthly.
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