Crypto giant Bitcoin falls after Fed increases interest rate
(CNBC) - Bitcoin fell on Thursday after the US Federal Reserve indicated further interest rate hikes ahead and investors continued to monitor the fallout from the collapse of cryptocurrency exchange FTX.
It came after the world’s largest digital currency topped £18,000 Wednesday for the first in more than a month, trading as high as $18,356.50.
By 4:27 a.m Thursday. ET, bitcoin was trading around $17,667.89
Ether, which hit a more-than one-month high on Wednesday of over $1,350, also fell. The cryptocurrency was trading at around $1,286.97 at 4:27 a.m. ET.
Bitcoin fell from the $18,000 mark after the U.S. Federal Reserve raised its benchmark interest rate by 0.5 percentage points to its highest level in 15 years, and indicated there would be further hikes next year.
U.S. stocks fell after the Fed’s decision. Bitcoin has become closely correlated with U.S. stock indices, in particular with the tech-heavy Nasdaq.
Investors are also watching the continued fallout from the stunning collapse of FTX which led to the company filing for bankruptcy and the arrest of its high-profile founder Sam Banksman-Fried. Banksman-Fried has been hit with criminal charges by U.S. federal prosecutors as well as civil indictments from American regulators.
The company was accused of commingling FTX customer funds with assets from Alameda Research, Bankman-Fried’s hedge fund.
John J. Ray, the company’s new CEO, told lawmakers that what FTX was doing “is really just old-fashioned embezzlement.”
Meanwhile, Binance, the world’s largest crypto exchange, came under pressure after it paused withdrawals of the stable coin USDC this week, with investors fearing issues at the company. However, Binance resumed withdrawals after around 8 hours of downtime.
LONDON: Binance, the world’s biggest crypto exchange, saw withdrawals of about $2 billion in the last 24 hours, blockchain data firm Nansen said on Tuesday, as the platform said it had “temporarily paused” withdrawals of the USDC stablecoin.
Binance, whose dominance of crypto was cemented by the bankruptcy of rival exchange FTX, last week tweeted a so-called proof-of-reserves report by audit firm Mazars. The report showed its holdings of bitcoin exceeded customer deposits on a single day in November.
The $1.9bn figure marks the largest daily outflow since at least June, the Nansen data showed, and accounted for the majority of the $2.2bn in Ethereum-based withdrawals during the last seven days.
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“Binance’s withdrawals are increasing due to the growing uncertainty about its reserves report,” a Nansen spokesperson said.
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A spokesperson for Binance said: “People deposit and withdraw assets everyday for a variety of different reasons. User assets at Binance are all backed 1:1 and Binance’s capital structure is debt free.
“We always have more than enough funds to fulfil withdrawal requests,” the spokesperson added.
Crypto news outlet CoinDesk reported earlier that Binance saw outflows of $902 million on Monday.
The exchange is already under pressure from authorities. Splits between US Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation focused on Binance’s compliance with US anti-money laundering laws and sanctions.
The report sparked a drop of almost four percent in Binance’s BNB token.
Token swap”
The Nansen data came as Binance halted withdrawals of USDC, citing a “token swap” _ where digital token holders exchange their crypto coins, typically over different blockchains.
Binance said in September it would automatically convert user balances and new deposits of USD Coin and two other stable coins into its own stablecoin, Binance USD.
Zhao said on Tuesday swapping USDC with two other tokens—Paxos Standard and Binance USD—requires using traditional dollars at a bank in New York. “The banks are not open for another few hours. We expect the situation will be restored when the banks open.”
Crypto verse: Bitcoin wants to break its bond with stocks
(Reuters) - After months of tears and tantrums, bitcoin wants to split up with stock markets.
The cryptocurrency, which has been closely correlated with tech stocks for much of its torrid 2022, is staging one of its strongest efforts yet to break away.
Its 30-day correlation with the Nasdaq (.IXIC) slid to 0.26 last week, its level lowest since early January, where a measure of 1 indicates the two assets are moving in lock step.
The correlation, which shows the degree to which the two move in sync with each other over a 30-day period, has hovered above 0.75 for much of the year and at times has approached perfect unison - at 0.96 and 0.93 in May and September.
For some crypto backers, any bitcoin break-up from Big Tech is a sign of strength.
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"The latter’s growth has been somewhat tapped out, and investors are looking for the next growth industry. Bitcoin and crypto is one of those ‘next’ growth industries," said Santiago Portela, CEO of FITCHIN, a Web3 gaming ecosystem.
The nascent uncoupling does indeed coincide with a period of comparative calm and consolidation for the teenage cryptocurrency a year after it began its epic nosedive from the heady heights of $69,000 hit in November last year.
Bitcoin is hovering near one-month highs around $20,500 and rose over 5% last week, outperforming the Nasdaq’s 2% gain as dour quarterly results from Microsoft (MSFT.O), Alphabet (GOOGL.O), Meta (META.O) and Amazon (AMZN.O) weighed.
HODLERS HOLDING OUT
The crypto winter has been cold and hard, though.
The total market cap for cryptocurrencies has shrunk by more than a third to $984 billion from nearly $3 trillion in November 2021, according to CoinMarketCap.com.
Market participation has also dwindled, with the average daily trading volume of digital asset products falling to $61.3 million as of Oct. 25, far from the daily volumes of around $700 million seen last November, CryptoCompare data shows.
Nonetheless, months of persistent selling has failed to shake out the old hands, who are digging in despite a grim economic backdrop.
The dollar wealth held in bitcoins that haven’t been traded for three months or more is at an all-time-high, indicating accumulation by long-term holders or "HODLers", according to blockchain data firm Glassnode. The name for that group of diehard crypto investors emerged years ago from a trader misspelling "hold" on an online forum.
Furthermore, a record 55,000 bitcoin were withdrawn from the largest exchange Binance on Oct. 26, according to analytics platform CryptoQuant showed, flows that typically signal coins are moving to wallets for longer-term storage.
"The holder base of BTC has changed drastically from being heavily weighted towards speculators, which largely came in in 2021, to the near cult-like ‘HODLer’ community which would not sell their BTC in almost any macro circumstance," said Stéphane Ouellette, CEO at crypto derivatives provider FRNT Financial.
"The market is now looking to the Fed meeting next week for further confirmation of the risk asset/BTC correlation breakdown."
NEXT FOR FICKLE BITCOIN?
Samuel Reid, CEO of consulting firm Geometric Energy Corporation said heavy outflows from exchanges could potentially indicate some large buyers were "sniffing out" the end of the bear market.
Yet it’s anyone’s guess whether fickle bitcoin will begin to rally, or slide anew, or if it will swiftly rebound to the embrace of technology stocks.
For the foreseeable future, macroeconomics remain the driver of a market that remains highly speculative in nature.
"The more speculative crypto is, the more it is tied to macro," said Alex Miller, CEO of blockchain firm Hiro Systems.
"It comes back to, what are the use cases and what’s the productive capability of the asset? The more it’s being used for other things, the less it’ll be tied to macro."⚽️
