During the first two weeks of October, the market experienced a period of consolidation as Bitcoin’s price continued to oscillate between $19K - $20K. As Bitcoin’s price remained relatively stable, the market didn’t experience significant rises or drops. The only event that caused significant price action was the publication of the US Consumer Price Index (CPI) which again came in higher than expected. This caused Bitcoin’s price to drop from $19K to $18K which, however, was restored relatively quickly, continuing the sideways movement. Besides the disappointing economic data, there were several hacks in the sector which resulted in hundreds of millions in lost assets. You can read more about the events of the first half of the month in our market update of October.
During the second half of October, Bitcoin continued to oscillate between $19K and $20K until the 25th when Bitcoin managed to break its resistance of $20K. Bitcoin is currently attempting to convert its old resistance level to a support level, after which an upwards trajectory could be possible. The market is still in a state of uncertainty as the next meeting of the Federal Open Markets Committee (FOMC) is closing in. On November 3rd, the FOMC will make its decision for the next interest rate hike. At the time of writing, 80% of the market is expecting a 0.75% rate hike. The moment of publishing and the following press conference will most likely result in higher levels of volatility. A lower-than-expected rate hike or a dovish position during the press conference may lead to some relief in the financial market.
Over the past year, the Eurozone has endured high levels of inflation reaching record levels in various countries including the Netherlands, where it reached 14,5% in September. In contrast to the Federal Reserve, the European Central Bank (ECB) has been more hesitant to raise the interest rate as it feared economic setbacks. However, as inflation continues to increase, the ECB is forced to take more drastic measures. On the 27th, the ECB held its monetary policy meeting in Frankfurt, the council concluded that the interest rate will be increased by 0.75%, hiking the rate to 2%. The ECB aims to cool down the runaway inflation but it remains unclear if the interest rates will have a positive effect as the winter closes in and the high gas prices may cause additional pressure on the inflation numbers.
In September, the Basel committee, an international committee for bank supervision, published a report which covers banks’ exposures to crypto assets. Overall, nineteen banks submitted crypto assets data and the report concludes that the crypto assets exposure reported by the banks is approximately $9.4B. The cryptocurrencies with the highest exposure are Bitcoin and Ether with 31% and 22% respectively, additionally, instruments with either Bitcoin or Ether as the underlying crypto assets amounted to 25% and 10% respectively. Most banks (seven) obtain their exposure to crypto assets by providing custody and wallet services, which lately has been a sector of interest for various institutional organizations. The exposure to cryptocurrency is an interesting development as banks have viewed cryptocurrency as a threat for a long time.
The growing exposure to cryptocurrency by banks was followed by an increased exposure for worldwide payment providers. On October 27th, Visa announced it has filed two trademark applications for a wide range of cryptocurrency products and services. The application consists of managing cryptocurrency transactions, wallet services, NFTs and more. Over the past two years, Visa has become increasingly active in the crypto sector. The payment provider enabled crypto payments for 80 million merchants and partnered with various exchanges and wallet providers. Visa hasn’t been the only organization filing trademark applications with regard to cryptocurrency. Over the past year, Paypal, Western Union, Formula One, Ford, Ebay, Meta and Mastercard all filed trademark applications, displaying the ever-growing interest among organizations in the sector.
The downward movement of Bitcoin has caused some financial harm to various cryptocurrency organizations. Over the past year, exchanges such as Gemini, Coinbase and BlockFi had to lower their workforce as the market lingered on. However, asset manager Fidelity has other plans as they announced that they will hire an additional 100 employees, increasing the digital asset department to 500 team members. The digital asset department of Fidelity focuses on bigger institutions that can store and trade digital assets on their platform. It seems that the asset manager observes possibilities in the sector with the increase in workforce. Additionally, Fidelity announced the listing of Ether as Bitcoin was the only tradeable asset on the platform.
On the 27th of October, Elon Musk officially completed the acquisition of news platform Twitter for $44B. In earlier April, Musk agreed to acquire the platform, however, it was the beginning of a long legal battle that is now finalized. The news of the acquisition was well received by the crypto community as Musk has been an advocate for crypto. Currently, rumors are circulating that Musk is going to implement blockchain technology into Twitter, creating a blockchain social media system. These rumors originate from released texts of the legal battle between Musk and Twitter, in which Musk describes this plan. Further released texts show Musk and Twitter founder Jack Dorsey discussing the platform and how it should never have transformed from a protocol into a company.
The market believes that the implementation of blockchain technology can combat the problem of the current bot and scam issues on Twitter. Users would then pay a small amount of cryptocurrency in order to tweet, comment or repost, making it extremely difficult for scammers to use mass communication. Furthermore, cryptocurrency exchange Binance is an equity investor in Twitter as they invested $500M into the acquisition. For now, it's mostly speculation and rumors, however, Twitter is no stranger to cryptocurrency as the company previously enabled Bitcoin tipping through the Lightning Network. When these plans are officially confirmed, it will be a breakthrough for social networks, blockchain technology and cryptocurrency.
The sideways movement of the month of October has led to a small increase of the Hodl funds. The Hodl.nl Genesis Fund, the Hodl.nl Consensus Fund and the Hodl.nl Oracle Fund ended respectively at a Net Asset Value (NAV) of €3.24, €3.28 and €0.36.
Earlier this year we mentioned the international interest in the Hodl formula. After months of developments, we are happy to announce that Hodl has made its first international expansion. In close collaboration with Carré de Finance, a well-known financial services provider in Switzerland and Luxemburg, we are launching the Hodl Numeri fund in Luxembourg. Hodl Numeri aims to provide Luxembourgian investors with a professional and accessible approach to investing in the emerging industry. The new fund will adopt a similar structure and strategy as the Hodl.nl funds, the fund will be managed by highly skilled analysts and will also benefit from our algorithmic trading software. Numeri is the first addition to the Hodl Group and in the coming months we will share more insights into our further expansion and developments.
On 12-14 October, members of the Hodl team attended Bitcoin Amsterdam, the biggest Bitcoin event in Europe. During the event, our research analysts and sales representatives listened to various industry leaders such as Adam Back, who spoke about the current state and the development of the market. The sentiment among the attendees has remained relatively the same, the market has taken quite a hit. However, the underlying technology is still revolutionary and the adoption isn’t halting, which reminds us that the showed interest isn't for short-term goals.
One of the most bespoken topics during the event was the implementation of more DeFi to the Bitcoin network. Currently, most of Bitcoin´s DeFi protocols are located on its sidechain RSK network, which only holds approximately 3,200 BTC. To attract more users and capital to the network, more developers are exploring the possibility of DeFi solutions. This is an interesting development as most DeFi protocols are located on Ethereum, if Bitcoin succeeds, it could provide a more competitive market in the offering of financial services.
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