Bank of Japan Surprises Markets; Crypto remains Muted

Weekly News Wrap Up

Happy Boxing Day! Last week, we saw the Bank of Japan (BOJ) shock markets with a policy tweak, strong US consumer confidence reaffirmed by strong earnings from Nike and FedEx, and fresh US 3Q GDP data (+3.2% vs. 2.9% expected) and PCE (+4.7% vs. expected 4.6%) suggesting a more-resilient-than-expected economy pushing back against the idea of a slowing US Federal Reserve. In crypto, large Bitcoin miner Core Scientific files for bankruptcy amid the challenging environment and Binance.US makes a bid for Voyager Digital’s $1.02 billion of assets.

SPX -0.20% and NASDAQ -1.95% for the week as it entered the holiday weekend. The USD -0.35% as the JPY strengthened (USDJPY -3.13%) with the BOJ changing the yield-curve-control (YCC) target of 10-year JGB target from 0.25% to 0.5%. Rather uneventful in crypto with BTC +0.50% and ETH +2.93%, failing to break $17,000 and recovering above $1,200 respectively. 

Looking ahead, 2022 is pretty much done from a data perspective as we wrap up the year. I’ll be watching fund flows as Bloomberg estimated almost $100bn of equities might get dumped as the world’s biggest asset managers are on track to sell stocks vs buy bonds to rebalance their asset allocation mix to 60% equity / 40% bonds. See you in 2023!

Cryptocurrency News

  • Bank for International Settlements (BIS) set standards on banks’ crypto exposure. The standard, which sets a limit of 2% on crypto reserves among banks, must be implemented on Jan. 1, 2025, according to an official announcement on Dec. 16.
    Our View: Clearer regulation could prompt increased traditional institutions’ interest in cryptocurrencies, and also limits contagion from crypto-related events to traditional risk assets.
  • Bitcoin miner Core Scientific files for bankruptcy amid rising energy costs and low BTC prices. The company accounts for about 10% of the entire hashrate of the Bitcoin network. It has gone into a prearranged bankruptcy, meaning it has agreement from the majority of its debt holders but not all.
    Our View: It does not seem to have a major impact – the Bitcoin network continues to operate and new blocks are created every 10 minutes, but it is a good reminder of the difficult environment we are in, and how being overleveraged in a bear market might not be the best idea.
  • Crypto exchange OKX suffers from intermittent outage due to Alibaba Cloud’s downed server from hardware failure. Users were unable to withdraw and deposit funds, and trades were affected causing potential losses.
    Our View: We wrote about Avalanche’s partnership with Alibaba Cloud two weeks ago, and cautioned against centralization risks as a single-point of failure – this exemplifies the risk we highlighted.
  • Binance finalizes acquisition of Indonesian crypto trading firm Tokocrypto, Tokocrypto’s CEO will step down and 58% of staff will be laid off as part of the deal, says Tokocrypto spokesperson. Tokocrypto is the first crypto asset trader in Indonesia that is regulated by Bappebti, the country’s commodity regulator.
  • Binance.US agrees to buy Voyager’s assets for $1.02B. The bid represents the fair market value of Voyager’s cryptocurrency portfolio, which has a current market value of around $1.002 billion, and an additional consideration of $20 million in incremental value.
    Our View: Bloomberg’s Matt Levine wrote an interesting opinion piece on FTX’s now-defunct bid for Voyager earlier this year, and how these buyouts are structured with the bidder actually not requiring to provide a significant amount of cash as they take over Voyager’s liabilities as well – food-for-thought?
  • Visa proposes automatic payments using Ethereum Layer 2 system StarkNet in a crypto thought-leadership post. This solution involves the creation of a smart contract that acts as an intermediary between a user account and a contract account, allowing for the creation of a self-custodial wallet that can make automatic recurring payments without requiring the active participation of the user.
    Our View:  It is interesting to see the major payments processing company delving into crypto technology and research, reinforcing our view of the value that crypto technology can bring to various facets of our daily lives.

Investment Consideration

Our best strategy for the moment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking because we still have potential return in DCD and Staking especially in BTC.

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