Road blocks and ramp-ups
Cryptocurrency analyst, Saxo Bank
Summary: As Chinese crypto miners become a casualty of the US trade war, advances are seen elsewhere, as Bitcoin spikes on news about Tether and asset manager Fidelity announces a new digital asset business.
This week the entire crypto market cap fell by 3% to around $210 billion. Ethereum fell by more than 8%. However, Bitcoin finished the week relatively flat, trading slightly lower by a third of a percent. This past week there has been a lot of developments in the market regarding infrastructure, institutional demand, and stable coins.
Trade war hits Chinese miners
In our new Q4 outlook which was released today, we cover emerging markets and the relation to the cryptocurrency industry. We cited China as a dominant force in the crypto mining industry, however its hardware manufacturers may be under threat from recent US trade tariffs. Based on a recent classification of crypto mining hardware, it is now subject to an over 25% import tax when shipped to the US. This could affect the recent valuation numbers of the three largest miners which are looking to IPO soon on the Hong Kong stock exchange.
Bitcoin price spikes on Tether news
On Monday the price of Bitcoin spiked as the stable coin tether broke its peg to the dollar. Tether which claims to be backed 1:1 to the US dollar fell as low as to $0.85 on Kraken, while Bitcoin traded on Bitfinex at a $1,000 premium. This price action was a result of news released stating that Tether and Bitfinex, one of the largest exchanges, were having banking troubles (again). This caused massive selling of Tether into the market resulting in a price bump in cryptos and a devaluation of Tether. Typically, arbitrageurs keep the price of Tether close to $1, however, selling pressure was too large and too fast for effective arbitrage. The price of tether has returned slightly below $1 but in response to the mayhem around the largest stable coin on the market by over 45x, exchanges have begun listing its competitors such as the Winklevoss GUSD.
Fidelity announces new digital asset business
One of the largest asset managers, with over $7 trillion under management, announced the creation of an institutional platform for digital assets. The 100-employee subsidiary will provide institutional grade custody and execution services to its clients, and it is set to launch in early 2019 to the public. The firm is onboarding customers now. This announcement is huge considering the clientele and capital of Fidelity, as this initiative will allow for more capital to flow into digital assets, as enterprise-grade custodianship is seen as a necessity for institutional adoption. However, this is no guarantee that the capital will follow just yet, as Coinbase recently closed down its institutional offerings citing a lack of demand.
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.