First Mover Americas: Bitcoin Tumbles Below $22K on Higher-Than-Expected U.S. Inflation
- Price Point: Bitcoin rose to its highest level in three weeks during Asia trading hours, but the sell-off was swift after the U.S. consumer price index for August came in higher than expected. As of press time, bitcoin's price was back below $22K.
- Market Moves: Investment banks are predicting a quick reversal of the dollar's recent slide. That could be bad for bitcoin, Omkar Godbole writes.
- Chart of the Day: The dollar value locked in the open perpetual futures contracts tied to ethereum classic (ETC) has tripled to over $300 million in two months.
By Omkar Godbole and Bradley Keoun
The leading cryptocurrency rose to $22,600 during Asian trading hours, marking its highest price since Aug. 19 and representing a 21% gain in seven days, according to CoinDesk data.
But – the cheery mood was quickly dashed at 8:30 a.m. ET (12:30 p.m. UTC) when the U.S. Labor Department released its monthly inflation report showing that the consumer price index rose 8.3% in August – a deceleration from July's 8.5% pace but still higher than the 8.1% forecast by economists.
Bitcoin quickly tumbled below $22,000, dropping about 5.4% in sync with a big drop in U.S. stock futures.
JUST IN (from Helene Braun): US Inflation Higher Than Expected in August, Bitcoin Dips 4%
In other news, Hodlonaut, a pseudonymous bitcoiner who edits Bitcoin magazine Citadel21, filed a lawsuit against self-proclaimed bitcoin inventor Craig S. Wright. Hodlonaut began tweeting in 2019 that Wright isn't the pseudonymous creator of bitcoin, Satoshi Nakamoto. And now, the Norwegian court will decide whether Hodlonaut's tweets hold water under domestic law.
According to CoinDesk, Hodlonaut's supporters are worried that Wright's legal action might scare developers, journalists and institutions away from working on the leading digital cryptocurrency.
Elsewhere, Starbucks said it will allow customers to purchase and earn digital collectibles in a new Polygon-powered rewards program, Starbucks Odyssey. Customers can now join a wait list to gain access to Starbucks Odyssey, after which members can go on "journeys" aimed at community building and customer engagement.
CoinDesk Market Index
|Terra Luna Classic||LUNA||+10.85%||Smart Contract Platform|
|Adventure Gold||AGLD||+2.85%||Culture & Entertainment|
|Hedera||HBAR||-9.88%||Smart Contract Platform|
Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk Market Index (CMI) is a broad-based index designed to measure the market capitalization weighted performance of the digital asset market subject to minimum trading and exchange eligibility requirements.
Bitcoin Hits 3-Week High on Dollar Weakness, But TradFi Firms Retain Bullish Bias on Greenback
By Omkar Godbole
Bitcoin tends to move in the opposite direction of whatever the U.S. dollar is doing in foreign exchange markets.
Early Tuesday, BTC jumped to a three-week high, tracking continued weakness in the U.S. dollar index (DXY).
"We see the current market moves to be largely driven by the pullback in the dollar index as well as position unwinds ahead of the Ethereum Merge," Dick Lo, the founder and CEO of quant-driven trading firm TDX Strategies, said.
It may be too early for BTC devotees to throw caution to the wind as some investment banks expect the greenback to regain its mojo soon.
The index, which tracks the greenback's value against major fiat currencies, peaked above 110 last week as the European Central Bank rate hike put a floor under the euro, and inflation expectations fell, offering relief to risky assets, including bitcoin. As of press time, the index was trading lower at around 108.
The dollar's pullback, however, could be fleeting, according to Chris Turner, global head of markets at ING.
"With the Fed expected to hike another 75 basis points next week and introduce new quarterly projections, we doubt much momentum will be behind a dollar correction," Turner wrote in Monday's edition of ING's foreign-exchange market update. "We would be favoring a move back above 110.00 next week."
Multinational investment bank UBS (UBS) expects the dollar to remain well supported in the near term.
"We think investors should brace for continued dollar strength over coming months," the bank's strategists led by Mark Haefele, chief investment officer of global wealth management, wrote in a client note published on Sept. 9.
The team said the combination of a weaker growth outlook for the Eurozone and China and relatively robust U.S. economic data is likely to keep the DXY in demand.
Chart of The Day
Open Interest in ETC Futures Surges
By Omkar Godbole
The dollar value locked in the open perpetual futures contracts tied to ethereum classic (ETC) has tripled to over $300 million in two months.
“It's a clear sign that traders are searching for any and all trading opportunities ahead of the Merge,” Paris-based Kaiko Research said.
The influx of capital could also be related to Ethereum miners switching to the Ethereum Classic blockchain, which uses a proof-of-work consensus mechanism to validate transactions. “Miners could be hedging using perpetual futures," Kaiko said.
Ethereum’s Merge, due later this week, will combine the current proof-of-work (PoW) chain with the proof-of-stake Beacon Chain that went live in December 2020, rendering miners who are now operating on the PoW chain workless.
- Investment Giant KKR Puts Portion of Private Equity Fund on Avalanche Blockchain: The firm hopes that a tokenized fund will increase accessibility to individual investors.
- Filecoin Miner RRMine Global Leaves China for Singapore: China banned crypto trading and mining last year.
- Venture-Capital Firm Northzone Raises $1B Fund for Fintech, Web3 Investments: Web3 is a "core sector" for the firm one Northzone partner told the Block.
- Ethereum Proof-of-Work Fork Timing Posted: The fork will occur 24 hours following the Merge, according to an @EthereumPoW Twitter thread.
- Hong Kong's HashKey Receives Approval to Manage 100% Crypto Portfolio: The crypto funds can manage a portfolio of 100% virtual assets, joining the first batch of Hong Kong’s few licensed virtual asset managers.