Gm,
BTC is currently trading around $45,800, representing a 0.6% drop on the day. Ether was also down nearly 2% to $3,800.
Both cryptocurrencies have seen consistent selling pressure during trading hours in the APAC region. Pretty much all of the YTD gains made by BTC and ETH, 60% and 40%, have occurred during American trading hours (8am to 6pm EST) as seen in the graph below.
The crypto market is no stranger to dents in its momentum and the US Federal Reserve and other major central banks unwinding liquidity-boosting stimulus packages is no different. LFG inflation :(
Nov. 10 and the ATH’s of $69,000 for bitcoin seems a far cry away given the 30% decline over the past 6 weeks. There has been a consistent trend over Q4 with many sellers dominating the market during the APAC trading hours of 8am to 4pm Beiing time. We again saw this trend continue despite the best efforts taken by the People’s Bank of China (PBOC) to soften the blows caused by Evergrande, the Chinese property development company.
As we’ve seen over the course of the pandemic, interest rate cuts made by central banks are done to inject liquidity into the economy. As such, hedges against inflation like bitcoin and gold usually react positively to rate cuts. Despite this, the 0.5% cut made by the PBOC has resulted in asian equities flashing red alongside the futures market which is tied to the S&P 500.
The 0.5% cut would suggest that China has been too cautious compared to the Fed and the Bank of England who recently announced rate hikes in 2022. In addition to the cautious rate increase, impending lockdowns are disrupting Beijing’s ability to improve market sentiment. Unlike Europe, China takes a no BS approach when it comes to lockdowns - “1 case” and everything closes down. Sure, its good to act quick, but when one of the biggest nations in the world shuts down, the knock on effect it causes to the global supply chain is detrimental.
The above chart shows the second highest spike in cases since January 2021. So while the new spike is only 136 cases, this has not stopped China shutting down in the past. The world, its supply chain and distribution channels need to be ready for the impact that this could potentially cause.
Given the impending lockdowns, supply chain distribution and elevated global price pressures, it’s squeaky bum time for central banks to decide whether they have any room left for liquidity injection to prioritise growth. For example, if we look back to 2020, inflation in the US was well below the 2% target compared to where it stands now at 6.8% as of November, which is a four decade high.
It is worrying times indeed for central banks who will be urged by the IMF to contain inflation as quickly as possible.
Markets
As of 20th December 2021
(source: coinmarketcap)
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Meme of the week
About Me
My name is Michael Burke, and I started working in the blockchain space about 4 years ago, firstly with Deloitte, now with R3, where I help our customers build enterprise solutions utilising the Corda platform. My interest in blockchain and cryptocurrency stems from the sheer potential of the technology to completely transform industries and value chains for the better.