23rd February 2023

TLDR

• Reserve Bank of Australia set to increase rates again
• The trading week started off with a positive trend and bullish sentiment
• The Sandbox price surges on AI narrative
• BTC tests key technical level and ETH Shanghai upgrade coming
• Digital assets: soft landing or hard bounce?

The week ahead

February 23rd: the US Federal Open Market Committee (FOMC) to release meeting minutes that will highlight the discussions and decisions made regarding US monetary policy.

February 24th: Japan's year-over-year inflation rate, as well as consumer confidence figures from the United Kingdom and Germany, will be announced. These statistics will give an indication of the economic conditions in these countries.

February 25th: US will release personal income, spending and core PCE price index data for the month-over-month period. This information will be crucial in assessing the purchasing power of consumers and inflation pressures in the US.

February 28th: Durable goods orders will be released for the US, while France's year-over-year inflation rate and India's GDP will also be announced.

March 1st: Canada's GDP growth rate quarter on quarter, Australia's GDP growth rate quarter on quarter and China's NBS Manufacturing PMI will provide further insights into the economic performance of these countries.

Economic Calendar (tradingeconomics.com)

Market reflections

RBA continues to bring the pain.

Reserve Bank of Australia (RBA) revealed in its latest minutes it’s considering a super-sized 0.5 percentage point increase in interest rates due to concerns about persistently high inflation. This suggests that multiple rate rises are likely in the coming months, with investors now expecting interest rates to peak at 4.3 per cent in August.

The RBA's concern about the prospect of high inflation becoming entrenched was evident in its February board meeting, where it did not consider holding rates steady despite market expectations of an imminent pause. Instead, the RBA considered raising the cash rate by either 0.25 or 0.5 of a percentage point. While the board settled on a 0.25 percentage point increase, the minutes indicate there was an argument in favour of lifting the rate by 0.5 of a percentage point, given that inflation and wages data had continually exceeded expectations.

RBA members agreed ‘that further increases in interest rates are likely to be needed over the months ahead to ensure that inflation returns to target and that the current period of high inflation is only temporary.’

Seeking to return inflation to the 2–3 per cent target range while keeping the economy on an even keel, the Board appears resolute in its determination to return inflation to target.

The US Federal Reserve raises rates to 4.65%

The US Federal Reserve has announced their decisions regarding the implementation of its monetary policy stance. The Board of Governors unanimously voted to raise the interest rate paid on reserve balances to 4.65%.

The committee has taken this step to control inflation, which has been elevated recently. They want to achieve a maximum employment rate and inflation rate of 2% in the long run. The committee stated that they are committed to returning inflation to its target level. They will keep monitoring the labour market, inflation pressures and expectations, financial and international developments to assess whether they need to adjust monetary policy in the future.

Although there has been modest growth in spending and production, the committee is worried about the impact of Russia's war against Ukraine on the global economy. The committee will also continue reducing its holdings of Treasury securities and agency debt and mortgage-backed securities as previously announced.

Aussie wages continue to struggle.

JPMorgan's Chief Economist Ben Jarman noted the RBA's openness to the possibility of higher rates being required suggests the board is “less patient”, with evidence showing inflation and wages growth have exceeded forecasts. However, the wage price index released on Wednesday was underwhelming, causing the Aussie dollar to dip. A pay packet growth rate of 1.2 per cent or faster in the December quarter would challenge the RBA's view that wages growth would peak at 4.2 per cent.

This followed Wall Street's negative performance after retail giants Home Depot and Walmart reported expected declines in earnings due to a reduction in consumer spending brought on by higher interest rates.

The Reserve Bank of New Zealand increased its cash rate by 0.5% to 4.75%, which briefly impacted the Australian dollar after disappointing wages data.

The US Federal Reserve has raised its benchmark federal funds rate from almost zero to over 4.5% within 11 months and is now expected to raise it to 5.4% by midyear.

State of crypto

The crypto market continued to rally over the last trading week, as several major assets continued to display bullish sentiment into the weekly open. Bitcoin saw a weekly increase in its value by 11.42%, while Ethereum experienced a 10.89% uptick and XRP climbed by 3.89%. Presently, Bitcoin is trading at US$24,312, a 45.83% gain on the year, Ethereum is trading at US$1,639.50, a 37.12% gain on the year, and XRP is trading at US$0.3950, a 16.61% gain on the year.

Furthermore, the market capitalisation of Bitcoin has witnessed an uptick of 1.47% by the end of the week, resulting in a current dominance of 0.35%. Additionally, the overall crypto market cap has risen by 9.91% during the week, bringing the total market capitalisation to US$1.064 trillion.

Alt Action

Welcome to our new section, where each week we’ll take a closer look at some of the biggest moving alt coins on the exchange. Today, we’re diving deeper on SAND.

Sandbox price surges on AI narrative

Launched by Pixowl, The Sandbox (SAND) is a digital asset and cryptocurrency that is native to the Sandbox, a decentralised virtual gaming world that allows players to create and monetise their own gaming experiences. This week, the native token of The Sandbox “SAND” surged in price, reaching a peak of US$0.879 before returning to the US$0.85 range on Monday.

According to the DailyCoin, the surge could be due to a developing AI narrative around the coin, including recent metaverse announcements on collaborations with high-profile companies such as Toei Animation, plus the launch of the first land sale of the year.

SAND has been performing exceptionally well since the start of year, gaining approximately 100%.

How far can it go in 2023?

Trade SAND now on BTC Markets!

The Big 3

Bitcoin: US$25,000 technical hurdle?

Bitcoin has been making a comeback after the tumultuous events of last year. However, the digital currency is now facing a significant obstacle at the $US25,000 mark, struggling to remain above it since February 16.

The recent recovery of the currency seems to be partially driven by the belief that the US Federal Reserve has done enough to control inflation without triggering a recession. As a result, market participants are optimistic about the future of the currency.

Sceptics, however, are warning that US economic resilience will lead to higher-for-longer borrowing costs that could undo the optimistic mood. The crypto sector also faces a US regulatory crackdown after a string of collapses across the industry. The next week or two could be critical for Bitcoin, according to Matt Maley, Chief Market Strategist at Miller Tabak + Co, stating that “whether it can break above $US25,000 soon or not should be very important.”

Trade BTC now on BTC Markets!

Ethereum: Shanghai upgrade

Ethereum's Shanghai upgrade is a major change coming in March 2023 that will let validators withdraw staked assets. Validators have so far staked around 16 million Ethereum to secure the network and this change, which is in line with Ethereum Improvement Proposal-4895 (EIP-4895), will allow validators to withdraw their staked assets freely. It also includes smaller EIPs to reduce gas fees for developers during periods of high activity.

The upgrade may have significant implications for validators with staked assets on chain, but analysts view the likelihood of withdrawals as low, given Ethereum's dominance in the DeFi space and strong staking yields. Other upgrades to the Ethereum protocol are likely to come later in 2023, including improvements to enhance scalability.

Trade ETH now on BTC Markets!

XRP: Rally anticipated at conclusion of SEC case.

Market participants expect to see significant growth in the coming months for Ripple’s native coin XRP. Ripple CEO Brad Garlinghouse has expressed optimism that a resolution to the company's ongoing legal battle with the US Securities and Exchange Commission (SEC) will be reached in 2023.

The SEC filed a complaint against Ripple in December 2020, alleging that it issued unregistered securities and fraudulently raised US$1.3 billion. Ripple's XRP token has an all-time high of US$3.4, and investors are hopeful that the coin's value will rise significantly if the SEC case is resolved in the company's favour. Garlinghouse believes that a decision on the legal issue will be made in 2023, possibly in the first half of the year.

Trade XRP now on BTC Markets!

Crypto news

Hong Kong issues first tokenised green bond.

The Hong Kong government has issued its first tokenised green bond, valued at HKD 800 million (USD 101 million), in collaboration with The Bank of China, Crédit Agricole CIB, and HSBC. The 365-day bond has a yield of 4.05% and will finance eco-friendly projects.

The bond's lifecycle processes, including coupon payment and secondary trading settlement, will be digitalised, and conducted on a private blockchain network. The Hong Kong Monetary Authority had been exploring tokenised green bond issuance since 2021, and the bond is the first green bond issued by a government globally.

Will digital assets have a soft landing or hard bounce?

Australian financial analysts believe that a stable macroeconomic environment combined with the cessation of bad news in the digital assets space has provided a platform for digital assets to start the year on a positive note.

Vimal Gor, Chief Investment Officer of Trovio Group stated that “Behaviour indicators have shown longer term investors (HODLers) have been accumulating Bitcoin versus short-term traders looking to take quick profits. And supply dynamics are also becoming more positive as we approach the next Bitcoin halving in 2024 and Ethereum supply becomes increasingly deflationary.”

At the time of publication, Bitcoin was up 50% and Ethereum up 40%, with longer term investors accumulating Bitcoin, while short-term traders are looking to take quick profits. The biggest unknown for digital assets remains regulation, with the SEC throwing cease-and-desist notices around. However, a stable market environment is beneficial for tech companies and digital assets.

BTC Markets updates

Mobile app portfolio enhanced functionality.

We recently made some exciting updates to our mobile app! Our app now has a new feature that makes it easier for users to see their total equity in AUD, and how it has changed over time. You can also see a summary of how diversified your portfolio is.

The upgrade is available for both iOS and Android devices, and we've made sure it's easy to use for visually impaired users too. We also fixed some bugs and improved the overall look and feel of the app.

In March, we'll be adding a dark mode option, and we're also working on adding withdrawal options. Make sure to update your app or download it from the App Store (if you have an iPhone) or the Google Play Store (if you have an Android phone). Read more about the release here.

BTC Markets features on Blockworks.co & Ausbiz.

Caroline Bowler, the CEO of BTC Markets, was recently featured in a commentary on Blockworks.co, a prominent financial media outlet for digital asset investors. The quote was taken from her appearance on Ausbiz earlier this week to discuss recent developments in the cryptocurrency market. Particularly, the increase in trading activity and positive deposits in Australian dollars on a week-to-week basis on the BTC Markets exchange.

She noted that this rise in retail trader liquidity may be due to US regulators' efforts to "clean up crypto," which have given traders a sense of comfort and may be responsible for the recent surge in trading activity.

Bowler also provided positive updates on the state of trading activity on the BTC Markets platform, including stablecoin inflows and positive Australian dollar deposits. She believes that this could be a sign of retail investors returning and the beginning of "green shoots in the market," though she warns that it is too early to say for certain. Bowler also noted that institutional investors have remained active in the market, given Bitcoin's relatively stable price over the past few months.

Despite pending regulatory involvement, Bowler remains optimistic about the future of cryptocurrencies. She believes that regulators' focus on the crypto space is a positive narrative for traders, who may find comfort in further government oversight. As Australian regulators introduce custody and licensing requirements, Bowler advises the industry to prepare for these changes. To watch the full interview, click here.

Scam Watch!

Beware of scams targeting cryptocurrency users.

We want to alert you to an alarming increase in scams targeting BTC Markets customers. Please note that our Customer Support Team will never cold call you to ask for personal information, request fund transfers, share passwords, or seek remote computer access.

We urge all clients to be extremely cautious of fake websites, bogus social media accounts, fraudulent social media posts, and deceptive callers impersonating BTC Markets representatives. Please do not provide any personal or credit card information via email or social media.

We've noticed that scammers are increasingly using celebrity profiles and their content to endorse investment scams, so it's crucial that you remain vigilant. For your safety, we have an Online Safety page on our website, which we strongly encourage you to review. Additionally, the Australian government's 'Scam Watch' website provides updated information on recognising, avoiding, and reporting scams.

If you have any concerns, please submit a support ticket through our platform. We're committed to keeping your account safe and secure, and we appreciate your cooperation in helping us achieve this goal.

Disclaimer: The information provided in this email is for general purposes only. It should not be construed as professional financial advice from BTC Markets Pty Ltd. BTC Markets is not a financial adviser, and you should consider seeking independent legal, financial, taxation or other advice to ensure that the information relates to your unique circumstances. BTC Markets is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this information contained within this email. Past performance is not an indicator of future performance. We note that we may, at any time, change the characteristics of the product. The information provided is intended for recipients in Australia. This information is not to be reproduced without permission.

Prices are accurate as of 10:00 AM AEDT, on 23/02/2023