In the first half of October, bitcoin experienced a consolidation phase as the asset oscillated between $19K and $20K. Bitcoin managed to break out on both levels, however, both breakouts were restored swiftly. As bitcoins’ price remains relatively stable, the entire crypto market has transitioned into a period of sideways movement. International financial markets seem to experience difficulties as there still isn’t a clear indication if the markets have bottomed out, or if more downside is to come.
On October 13th, the latest Consumer Price Index (CPI) was released. Following last month's CPI, it again exceeded the expected inflation number. The month-on-month inflation was 0.2% higher than expectations, the year-on-year came out at 0.1% higher than expectations. Markets lifted their eyebrows as the Core CPI, the CPI minus volatile goods such as food and energy also continued to exceed expectations by 0.2%. This might indicate that there isn’t any room for a pivot of the Fed anytime soon. This caused some market volatility causing Bitcoin’s price to drop from $19K to $18K. However, in the hours and days after we saw a strong bounce in the markets. As the year continues, it seems that financial markets experience less volatility as more economic data is released.
After the initial capitulation followed by the sideways-moving market, the expectations were that most users and miners would leave the space. However, according to on-chain metrics, Bitcoins’ hash rate reached an all-time high during the first week of October. Hashrate is the leading security metric for the Bitcoin network as it indicates how quickly new hashes are calculated. Higher hash rates mean more computational power on the network. The increase in the hash rate ensures that the network is more secure as it becomes more difficult and expensive to attack the network. The increase in the hash rate is caused by various factors.
During 2021 and most of 2022, the global economy experienced a shortage of chips, which caused the price of Graphical Processing Units (GPU), a crucial processor in mining equipment, to skyrocket. As a result of an increase in the supply of GPUs, prices dropped significantly, causing miners to take advantage of the falling GPU prices to upgrade their mining equipment and strengthen their position in the market. Other important factors of the increase are the improved regulations towards crypto miners and the Ethereum Merge, causing ETH miners to move ecosystems. Currently, the hash rate continues to set all-time highs, illustrating the strengthening of the crypto industry.
During the first two weeks of October, the internet service provider Google announced that they will accept crypto payments for cloud services. Google will be able to receive these payments through integration with Coinbase’s custody service called Coinbase Prime. Google will start accepting crypto payments early next year. At first, these payments will only be accessible to a selected few companies which are involved in the industry.
In addition to Google, BNY Mellon, America’s oldest bank and the world’s largest custodian bank, launched its New Digital Asset Custody Platform. With the new platform, a select number of clients will be able to hold and transfer Bitcoin and Ethereum. BNY Mellon has chosen this direction as they aim to meet the client demand for a trusted provider of both traditional and digital asset servicing. In a recent survey, the custodian observed that almost all institutional investors (91%) expressed interest in investing in tokenized products. Additionally, 41% of institutional investors now own bitcoin in their portfolios, and another 15% expect to do so in the next two to five years. Which illustrates the increasing demand for institutional solutions and the ongoing interest in digital assets.
On the 6th of October, the BNB Chain, the blockchain of crypto exchange Binance, was exploited by a bad actor, which made off an estimated $100M. The actor was able to exploit the BSC Token Hub, a cross-chain bridge that enables the transferring of assets across blockchains. For example, users lock an asset on a particular blockchain and a representative of the asset is created on the BNB chain. The actor was able to exploit a bug in a smart contract that aids in operating the bridge, making it possible to create new BNB, the native cryptocurrency of the chain. The user created a total of 2M BNB, which was worth a total of approximately $600M.
When the exploit came to light, the BNB chain was halted for validators to upgrade their systems to combat the hack. As the chain was halted, most of the funds remained in the explorer's wallet while $100M remained unrecovered. The attacker was able to transfer the unrecovered funds to Ethereum, Fantom and Polygon before the chain was halted. When cryptocurrencies are transferred among blockchains, the trail becomes more challenging to track. So the question remains if the stolen funds can be recovered. In the month of October, eleven DeFi hacks occurred which resulted in $718M worth of stolen funds. The significant losses further display the demand for higher security in the storage of digital assets, such as custodial wallet services.
In one of our earlier newsletters, we announced that Hodl was nominated for the Cashcow awards 2022 in the category of Best Dutch Crypto fund. We asked for your help by voting for Hodl and we are glad to announce that Hodl has proceeded to the final round of the awards.
To win the final round of the award, we would highly appreciate it if you cast your vote for Hodl. You can find Hodl’s nomination at the 9th question. If you don’t have a preference for the other questions, you can simply skip those by voting N.V.T. (Non-applicable). The voting round closes at 12:00 PM Saturday, October 29th 2022. Cast your vote through the link below!
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