5 Things to Know in Crypto Today: BTC Unable to Muster Recover Back Above $23.5K

Key Points

• Cryptocurrency prices are a tad higher on Thursday, but Bitcoin remains capped under $23,500 and Ethereum under $1,850.
• Concerns about the weakening global outlook combined with continued rate hikes is weighing on sentiment.
• Coinbase is set to benefit from Ethereum’s merge, argued JP Morgan.

Bitcoin Rises from Lows But Remains Capped Under $23.5K

Cryptocurrency prices have regained some poise on Thursday after falling on Wednesday as investors digested stronger than expected core US Retail Sales figures for July and what analysts said at the time was a slightly more dovish than expected tone to the minutes of the Fed’s July policy meeting. Still the rebound is quite shallow, with Bitcoin only up just over 0.5% on Thursday and still trading below $23,500.

Ethereum, meanwhile, was last trading higher by about 0.75% on the day and still under $1,850, with the top two largest cryptocurrencies by market cap down 3.5% and 4.5% respectively on the week. Following weak Chinese data earlier in the week and a worsening of the Eurozone energy crisis, concerns about global growth weakness has overshadowed optimism about US inflation having probably peaked.

Analysts said that hawkish commentary from influential ECB policymaker Isabel Schnabel on Thursday, who told Reuters that the Eurozone inflation outlook had continued to worsen since last month’s 50 bps rate hike, solidified expectations that the ECB will implement another 50 bps rate hike next month, despite signs that the Eurozone economy is in recession. Stagflation/continued central bank rate hike worries are thus likely capping crypto upside on Thursday.

Looking ahead, crypto traders will be monitoring US weekly jobless claims figures and the Philadelphia Fed manufacturing survey for August, both set for release at 1230GMT, ahead of the release of US existing home sales numbers at 1400GMT.

Fed Minutes Recap

The minutes reiterated that the Fed thinks that further interest rates hikes remain appropriate and that interest rates are seen needing to remain at “sufficiently restrictive” levels for some time in order to bring multi-decade high inflation back to the central bank’s 2% target.

But the minutes did not outline any preference for a 50 or 75 bps rate hike at the upcoming September policy meeting, instead saying that the bank would be data-dependent. Additionally, the minutes showed that Fed officials do expect the pace of rate hikes to slow at some point, and many policymakers were concerned about the risk that the Fed might tighten financial conditions too much.

“People were thinking the Fed would massage the minutes to add in some hawkish commentary but it’s not there,” said popular macro news/analysis service ForexLive in a tweet. As such, markets responded by paring back on Fed tightening bets. According to the CME Fedwatch tool, the implied probabilities of a 50 vs 75 bps rate hike in September are now at 63.5% and 36.5% respectively from closer to 40% and 60% prior to the minutes.

For a more in-depth analysis on how cryptocurrencies responded to the data at the time, click here.

The Fed also commented on the digital asset space. The minutes said “while the recent turmoil in digital asset markets had not spread to other asset classes, these participants saw digital assets’ rising importance and growing interconnectedness with other segments of the financial system as underscoring the need to establish a robust supervisory and regulatory framework for this industry that would appropriately limit potential systemic risks”.

Coinbase Set to Benefit from Ethereum Merge, Says JP Morgan

Coinbase Global, the largest US-based cryptocurrency exchange, is set to benefit from Ethereum’s upcoming “Merge” from Proof-of-Work (PoW) to Proof-of-Stake (PoS), a transition that will end the Ethereum PoW mining industry, but offer ETH token holders a new way to generate yield via staking.

According to JP Morgan, Coinbase will be able to generate $650 million a year in staking revenue, assuming the ETH price remains close to $2,000 and staking yields around 5%. Coinbase has a 15% market share in ETH assets, more than its 7% share of the overall cryptocurrency market. The largest US cryptocurrency exchange began offering ETH staking to its institutional clients.

HUSD Stablecoin Loses 1:1 Peg to USD

HUSD, a nearly $150 million market cap, (allegedly) fully USD-backed stablecoin issued by Stable Universal Limited, lost its 1:1 peg to the US dollar on Wednesday and has been unable to recover. It was last changing hands around $0.92.

According to a tweet by Huobi, the exchange is “aware of the current liquidity issues associated with the HUSD stablecoin” and “will work together with HUSD’s issuer to find a solution and restore its stability as soon as possible.

We are aware of the current liquidity issues associated with the HUSD stablecoin, which is issued by Stable Universal Limited and built on the Ethereum network.

— Huobi (@HuobiGlobal) August 18, 2022

Stablecoins have been in focus this year following the dramatic collapse of Terra’s USD-pegged algorithmic stablecoin USTC (previously UST), which collapsed amid a bank run after the market cap of LUNC (which acted as collateral for USTC) fell below the market cap of USTC. Regulators have been monitoring the risks presented by stablecoins as a result.

Fractional NFT Ownership Protocol Rebrands, Unveils $20M Funding Round

Non-fungible Token (NFT) fractional ownership protocol Fractional is rebranding to call itself Tessera. The team behind the protocol said in a blog post that “NFTs are transforming how people interact, build community and view governance, so we’re transforming, too – from a simple smart contract to full-blown NFT infrastructure to support the future of collective ownership”.

Tessera (formerly Fractional) also announced that it had conducted a $20 million funding round, raising money from the likes of crypto investment giant Paradigm, Uniswap Labs Ventures and Yunt Capital.

We're entering a revolutionary new phase of NFTs and excited to announce a new name powered by the close of our Series A!

Fractional is now Tessera, reflecting our ambitious vision as the place to own and govern NFTs, together 💪💪https://t.co/FRhwnIICVj

— Tessera (@tessera) August 17, 2022