Good morning and welcome to First Mover. I'm Bradley Keoun and I'll be updating you on the latest crypto market developments, news and insights. (Lyllah Ledesma is on vacation in the UK).
- Price Point: Bitcoin has managed to climb back above $30K as lower oil prices boost traditional markets.
- Market Movements: Bitcoin traders have speculated for years that an economic "hurricane" may be in the making, similar to the one Jamie Dimon of JPMorgan is now warning traditional investors about.
- Feature: highlights from Helene Braun's Q&A with FTX President Brett Harrison.
Bitcoin (BTC) has climbed back above $30,000 in early trading after a 6.2% plunge on Wednesday.
Solana's SOL tokens also found support after plunging 12% on Wednesday when the network was halted by a bug related to certain cold-storage transactions.
In traditional markets, crude oil fell after reports that U.S. President Joe Biden may visit Saudi Arabia this month. European stocks gained, and U.S. stock futures rose on speculation that lower energy prices could curb inflation.
ICYMI: CoinDesk's Eliza Gkritsi and Aoyon Ashraf reported that a squeeze on bitcoin miners' profit margins - due to lower crypto prices and higher energy costs - could force miners to sell some of their bitcoin holdings to cover additional operating costs. Miners may also want to set aside more (fiat currency) liquidity reserves for what could be a prolonged crypto bear market.
An economic "hurricane" on the way?
Jamie Dimon, CEO of JPMorgan, the largest U.S. bank, warned Wednesday of a coming economic "hurricane," rattling traditional investors.
But the warning likely resonated with many crypto traders, who have been speculating for years that economic and financial conditions appear unsustainable.
One bet is that the Federal Reserve may be sufficiently rattled by falling stock prices to ease its campaign to tighten monetary policy, which it believes is necessary to tame inflation. That market logic was somewhat undermined this week, however, when President Joe Biden held a meeting with Fed Chairman Jerome Powell and essentially promised to let the Fed do what it needs to do.
This means that lingering fears of further monetary tightening by the Federal Reserve could put the brakes on any immediate bitcoin recovery. Arthur Hayes wrote in the most recent post for his Crypto Trader Digest blog on the BitMEX website that a bull market in risky assets would likely not begin again until "the Fed and its sycophantic cadre of other central bankers reverse course."
"There are no easy ways out when you combine the most leveraged U.S. and global economies in history, interest rates that are already at their lowest levels on record, the disruption of the world's largest energy and food exporters (Russia and Ukraine), and inflation that was already at its highest level in 40 years before the Russia-Ukraine war," Hayes wrote.
Feature: Q&A with FTX President Brett Harrison.
CoinDesk's Helene Braun spoke with FTX President Brett Harrison at the World Economic Forum in Davos, Switzerland, last week. Here are some highlights:
I want to talk a little bit about the correlation between the crypto market and the stock market. Do you think that correlation will break at some point in the future, and if so, what do you think could break it?
Right now, we are in a global environment where assets are falling. That's true for stocks, bonds, broad-based futures of various types, and cryptocurrencies, and there are many macroeconomic factors contributing to these downward movements. There are also factors specific to cryptocurrencies, for example, everything that has happened to the Terra ecosystem. We're seeing that as cryptocurrencies become more prevalent, more and more institutions are adding cryptocurrencies to their portfolios, which means that when cryptocurrencies are looking for selling opportunities, they're as much in the line of fire as anything else in a downturn. When in doubt, in some sort of violent downturn, all correlations go to one, everything goes down. Right now, as prices fall across the board, of course there's going to be a high correlation between these assets. As the market starts to recover, I think we'll see more growth, idiosyncratic moves between cryptocurrencies and traditional equity markets.
Do you see more institutional investors exiting or entering the market during the current sell-off?
That's a good question. I think it's really going to be a mix. There will be some institutions that think this might be the perfect time to get back into the market on the cheap. We're going to see some that feel that even though the contagion from the Terra meltdown has been contained to some extent, they might see that as a reason to be more skeptical of crypto as an entire asset class and hold back on investing, whether it's public or private. So we'll see a mix over time, but in general, there's been so much capital flowing into the private equity space in cryptocurrency. There are a lot of teams building new infrastructure and developing new projects, so we'll probably see a lot of those investments come back over time.
The full Q&A (and a video of the interview) can be found here: FTX's Harrison says stablecoin demand will survive Terra collapse
- Indian exchange CoinSwitch Kuber unveils crypto rupee index The Crypto Rupee Index (CRE8) will track the performance of the Indian rupee based on the eight largest crypto assets.
- Joachim Wuermeling called decentralized finance a "casino," while the Financial Stability Board is preparing a regulatory framework for the crypto sector.
- Crypto custody firm Qredo adds blockchain analytics to FATF 'travel rule' offering Qredo brings its APIs to global push for crypto AML compliance.
- Solana halted by bug related to certain cold-storage transactions Validators restarted the network after four hours of downtime by disabling so-called "persistent nonce transactions," which are popular with some exchanges.
- What is Tether? How USDT works and what makes it valuable Tether's USDT is the most popular stablecoin and is used by many traders. However, it is not without controversy. Here's what you need to know.
Today's newsletter was edited by Bradley Keoun and produced by Parikshit Mishra and Stephen Alpher.