Inflation Hot, but Crypto Pumps

crypto pumps

The heavily anticipated CPI came in hotter than expected; the Consumer Price Index rose 0.5% in January, translating to an annual increase of 6.4%, higher than the expected 0.4% and 6.2%, respectively. In crypto, U.S. regulation heats up, the NFT marketplace war intensifies, and DBS and Interactive Brokers look at plans to offer cryptocurrency trading in Hong Kong.

CPI weighed on risk sentiment with SPX -0.28%, DJIA -0.13% and NASDAQ +0.59% for the week. Cryptocurrencies shook off the negative macro and regulatory headwinds via BTC +11.39% and ETH +11.19%, reaching $25,000 and above $1,700, respectively. Some attribute the pump to a short squeeze; others believe it could be linked to tax-loss harvesting (investors sell at a loss at the end of the year to reduce their tax hit and then add to their holdings again in the new year).

For on-chain, the Net Unrealized Profit/Loss Ratio (NUPL) for Bitcoin indicates that the recent price rally has pushed the market back into a period of unrealized profit, where the average holder is making gains. Historical analysis of past bear markets shows that the current cycle has a similar duration of negative NUPL as the 2011-12 and 2018-19 cycles but is not as long as the 2015-16 bear market.

chart patterns btc 20 feb chart patterns eth 20 feb
Cryptocurrency News

  • The U.S. Securities and Exchange Commission (SEC) intends to sue stablecoin issuer Paxos over its issuance of Binance USD (BUSD), alleging that it is an unregistered security. It is rumoured that Paxos also faces a probe from the New York Department of Financial Services (NYDFS). Paxos is a New York-regulated trust company with a provisional charter from the Office of the Comptroller of the Currency, a federal bank regulator. Under the direction of NYDFS, Paxos has halted minting of new BUSD tokens.
    Our View: crypto regulations are heating up in the U.S. following the SEC’s crackdown on Kraken’s staking service. This opinion piece attempts to connect the dots, terming it “Operation Choke Point 2.0.”
  • DBS Bank plans to offer cryptocurrency trading in Hong Kong, Bloomberg reports. In other news, Interactive Brokers also announced plans to offer crypto trading in Hong Kong.
    Our View: welcome news on the regulatory front where pressures have increased for U.S. banks. As pointed out, a possible effect of a more restrictive environment onshore will see flows move offshore.
  • German electronics company Siemens announced that it will issue its first digital bond on a public blockchain. With a face value of 60 million EUR and a maturity of one year, this makes Siemens one of the first companies in Germany to issue a digital bond.
    Our View: following Goldmans blockchain-based bond issuance in December 2022, this furthers the case of blockchain technology solving inefficiencies in traditional industries, which is great to see.
  • Nigeria’s demonetization deadline results in riots. Nigeria’s central bank decided last year to start circulating newly designed 200, 500 and 1,000 naira notes, giving people until Jan. 31 to get rid of their old notes, which would no longer be legal tender after that date. Millions of Nigerians who do not have bank accounts, especially in rural areas, were expected to exchange their old notes for new ones at banking agents.
    Our View: we reported two weeks ago about the demand for alternative store-of-values pushing Nigerians towards Bitcoin. It solidifies the appeal of decentralized money as a solution to the unbanked population.
  • NFT marketplace wars intensify: Blur launched claims for its highly anticipated $BLUR airdrop, a governance token for its marketplace. Following its launch, it also escalated the royalty battle with incumbent OpenSea, releasing a policy that recommends blocking the latter platform.
    Our View: Blur is shaping up to be a serious contender, capturing the top spot in NFT volume traded in the week it launched $BLUR, overtaking OpenSea. (see this dashboard here)
  • Jump Crypto discovered a critical vulnerability on Binance’s BNB Chain, which was disclosed to the team and fixed. The vulnerability would allow the mint of an unlimited amount of arbitrary tokens. In other news, Avalanche-based stable-swap platform, Platypus, suffered an $8.5 million flash loan attack.
    Our View: security vulnerabilities may exist on seemingly mature chains. It is vital to do your own research (DYOR) and right-size your exposures!

Investment Consideration

Our best strategy for medium to long term investment 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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