Regulators: Even After FTX, S.E.C. Chair Sees No Need for New Crypto Laws

Stablecoins: Adoption grows as more than $7T settled with stablecoins in 2022

BNB: BNB Chain now has more unique addresses than Ethereum, developer says

Payments: Visa Unveils Plans For Auto-Payments From Self-Custodied Wallets

Miners: Bankrupt Crypto Miner Soars in Move Reminiscent of Hertz

Exchanges: OKX Unveils 2nd Proof-of-Reserves Report, Promises Monthly Publication

It was a relatively quiet week in crypto with the total market capitalization fluctuating between $827.5 billion and $790.0 billion. For Bitcoin (BTC), the largest cryptocurrency, that meant the exchange rate of BTC/USD remained steady between $16,400 and $17,100. As of Friday morning, Bitcoin was trading toward the middle of that range, around $16,800, after investors reacted positively to newly reported US data points. Those included slower growth in personal consumption expenditures (PCE), signaling cooling inflationary pressures, and softening durable goods orders. Though continually weaker macro data suggests the US and global economies continue to inch toward recession, it also means that central banks are likely moving closer to easier monetary policy.

Aggressive tightening measures, like those employed by the US Federal Reserve, have racked more speculative “risk assets” like Bitcoin and other cryptocurrencies throughout 2022. However, with inflation now consistently trending lower and other market indicators signaling broad slowdowns and contractions in several pockets of the economy, MRP feels the US has passed the point of “peak hawkishness”, a term we began utilizing back in August to describe our assertion that, although the Fed will continue raising rates into 2023, the size and pace of hikes had reached maximum velocity at 75bps across several consecutive meetings. Our expectations were confirmed this month as the FOMC chose to raise by just 50bps. Moreover, as Fed Chair Jerome Powell noted in a recent speech at the Brookings Institution, “Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.” 

Passing the “peak” of aggression will lead to gradually smaller hikes and an ultimate top in the Fed Funds rate, from which rates will once again begin falling when an eventual recession inevitably bites. While no one can predict the point at which slowing inflation will be compounded by a rolling over in employment data (the two sides of the Fed’s dual mandate), signs of increasingly protracted periods of unemployment for those out of work have begun to appear in continuing jobless claims data, total nonfarm hirings have fallen to a 21-month low, and a wave of layoffs have been announced by several of the US’s largest corporate entities.

Monetary policy has a significant impact on the price of Bitcoin and, therefore, the digital asset ecosystem as a whole. Finding the “peak” in the pace of tightening could very well coincide with a bottom in cryptocurrency valuations. Utilization of on-chain analysis could provide a bit of context to the timing since, just as the Fed was reevaluating the size and pace of rate hikes, the spent output profit ratio (SOPR) – simply the price of BTC sold/price paid for BTC on Bitcoin network transactions – had fallen to a 4-year low of 0.875 on November 18. As Renato Shirakashi, the developer of SOPR explains: “When SOPR > 1, it means that the owners of the spent outputs are in profit at the time of the transaction; otherwise, they are at a loss.” Essentially, a significant dip below 1 on the SOPR can indicate a broad capitulation event and a flushing out of forced sellers, uncertain hands, etc.

Per Glassnode, this most recent downturn in the ratio rivals a decline last seen in December 2018. That plunge in the SOPR almost perfectly pegged the ultimate bottom of crypto’s 2017-2019 bear market, as the price of BTC hit $3,250 on December 16, 2018. Bitcoin’s recent trough was close to $15,600, an increase in price of nearly 5x since the SOPR last reached such suppressed levels.
 
Though the SOPR gauge suggests many owners of Bitcoin continue to sell at a loss, not everyone is so panicky. The percentage of BTC’s circulating supply that has not moved in one year or more remains just slightly off its recent all-time high of 66.9%, slipping to 66.6%. Waves of accumulation by long-term adopters, even as BTC’s market price continues to decline or stagnate, is not only a testament to the faith that Bitcoiners have in the asset and its network, it also sets the stage for an eventual supply shock when macro factors are better aligned toward the environment that typically leads to crypto bull markets. Just as Bitcoin’s price has made higher highs and higher lows across several pronounced cycles going back to 2011, so too has the proportion of supply that is becoming relatively illiquid.

October 18, 2022: Fallout From Ethereum “Merge” Bolsters Bitcoin’s Hash Rate as Some Criticisms Still Linger →

October 7, 2022: Ethereum’s Post-Merge Era Conquers Key Goals, Yet Centralization and Regulation Concerns Linger →

August 8, 2022: BTC Rebound Set to Revitalize Crypto Miners Bent by Bear Market Pressure →

June 22, 2022: SEC Decision on Key Bitcoin ETF Application Looms as Grayscale Preps Lawsuit, Dissent Rises From Within →

June 2, 2022: Sweeping Ethereum “Merge” Set For Launch as Soon as August, Solidifying New Proof-of-Stake Consensus →

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