Good morning. Here’s what’s happening:
Prices: Bitcoin soars past $43,000 before retrenching but was still up for the day.
Insights: The reasons for a Singapore regulator’s decision to place crypto fund DeFiance Capital on an “Investor Alert List” was unclear.
Technician’s take: Momentum is turning bullish over the short term.
Bitcoin (BTC): $42,725 +3.5%
Ether (ETH): $3,011 +3.2%
There are no losers in CoinDesk 20 today.
Bitcoin, ether and other major cryptos are in the green
Bitcoin leaped past $43,000 before retrenching well under this mark, but was still recently up nearly 4% over the previous 24 hours. Ether soared past $3,000 for the first time in two weeks, a more than 3% gain, and most other major altcoins in the CoinDesk top 20 by market capitalization were well into the green.
Bitcoin was changing hands at about $42,700. Cardano’s ADA and Polkadot’s DOT rose over 7% at certain points. Axie Infinity token AXS and shiba inu (SHIB) were up over 5% and 3%, respectively.
CoinDesk’s Market Wrap on Tuesday noted that some analysts have approached the spike in prices with caution because of uncertainty about the appetite for risk.
In an interview with CoinDesk TV’s “First Mover” program, Mark Chandler, managing director and chief market strategist for capital markets trading firm Bannockburn Global Forex, said that more hawkish monetary policy could hurt crypto in the long term. “Crypto is acting more like a risk asset than an inflation protection,” he said.
But in the short term, Chandler attributed crypto’s rise the past few days to improvement in equity markets, particularly the Nasdaq. “That is a kind of rally that risk assets like and that’s why crypto is primarily rallying,” Chandler said.
The tech-focused Nasdaq jumped nearly 2% on Tuesday, while the S&P 500 rose 1.1%
Chandler said ether had been outperforming bitcoin because investors have been intrigued by a number of projects that promise “to increase the efficiency and reduce its carbon footprint. That might be attracting some money and help explain why ether is doing better than bitcoin.”
But he said he was also concerned the U.S. central bank would not be able “to engineer a soft landing” that brings down inflation without recession. The Federal Reserve increased interest rates 25 basis points last week as was widely expected to combat rising inflation, and on Monday, Fed Chair Jerome Powell suggested in a speech that future increases this year could come in 50-basis point increments.
Chandler noted the Fed had “revised growth down, inflation higher, interest rates higher” but not unemployment. “Many people are going to be surprised that we do not get a rise in unemployment.”
Singapore loses some transparency
Singapore has been celebrated as crypto’s natural home in Asia.
Its judiciary and regulators are fair, quick and efficient, the air is clean and the population speaks English fluently. Its strongman founder, Lee Kuan Yew, believed that prosperous nations are ones where the rich aren’t above the law; civil servants are handsomely paid to help ensure they are immune to bribes. Judges must rule on commercial disputes citing case law, not thinking about favors and connections.
But a strange thing happened this week in Singapore’s crypto scene. DeFiance Capital, one of the many crypto funds registered in the city, was put on an “Investor Alert List” by the Monetary Authority of Singapore, the central bank and regulator.
“The Investor Alert List provides a list of unregulated persons who, based on information received by MAS, may have been wrongly perceived as being licensed or regulated by MAS,” is how MAS describes it.
MAS didn’t respond to a CoinDesk query to provide a detailed explanation of why DeFiance Capital was placed on the list and not any of its peers, such as Three Arrows Capital, that are registered in the city.
DeFiance Capital told CoinDesk that “inclusion on the IAL carries no implication of legal impropriety but simply indicates that DeFiance Capital, like many other crypto-native VCs in Singapore, are not yet regulated by MAS.”
But DeFiance Capital is also unsure what happened.
“We are currently trying to understand how this issue came about. Prior to this we were proactively working with MAS to communicate our operations in Singapore,” the fund said in an email to CoinDesk, noting that its investment activities and operations remain unaffected.
Although being on this list doesn’t signify any sort of wrongdoing, that might be lost on casual observers when they see a fund’s name – and not that of its peers – on an “alert list.”
For Singapore, this is surprising. The entire place differentiates itself from its peers by the transparency of its regulatory process. Regulatory black holes, where things are considered on a whim or royal fiat and not explained, are for other countries, not a place vying to be Asia’s dominant financial hub.
The cryptocurrency is up 4% over the past 24 hours and is attempting to establish a higher price range on the charts.
A decisive breakout above $46,000 is needed to shift the four-month-long downtrend. Typically, price rallies stall after retracing 50% of the prior down move, similar to what occurred in September 2021 around the $50,000 price level.
Still, a bearish set-up remains on the monthly chart, which means upside could be limited.
1 p.m. HKT/SGT(5 a.m. UTC): Japan leading economic index (Jan.)
Marc Chandler of Bannockburn Global Forex joined “First Mover” to provide market analysis as investors weigh Fed Chair Jerome Powell’s inflation comments. Also joining were Ava Labs President John Wu from the Avalanche Summit in Barcelona, and Joe Vezzani of social intelligence for crypto platform LunarCrush.
“There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability.” (U.S. central bank Chair Jerome Powell) …. “During multiple trips to the 10-megawatt facility, CoinDesk didn’t observe any staff or security guards (cameras and bright spotlights might be enough to deter would-be thieves). Locals told CoinDesk that during winter months, homeless people are known to wander in through the open doors, seeking a warm place to sleep.” (CoinDesk writers Cheyenne Ligon, Fran Velasquez, for Mining Week) … “For a start, bitcoin is in vogue, but so is ESG. Big investors are more interested in BTC than ever before. They also want to put their money in sustainable investments.” (Zach Bradford, CEO of mining company CleanSpark) … “Mr. (Jake) Sullivan (national security adviser) said there will be “new designations, new targets” for sanctions inside of Russia. And he said the United States will make new announcements about efforts to help European nations wean themselves of their dependence on Russian energy.” (The New York Times)
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Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.