Good morning. Here’s what’s happening:
Prices: Bitcoin and ether began the business day in Asia in the red.
Insights: Centralized exchange tokens' gains are an unlikely story given the problems with FTX's FTT token. What's next?
By Sam Reynolds
Bitcoin-Tech Stock Correlation to Be Tested Again as Wall Street Kicks Off Earnings Season
Bitcoin and ether began the business day in Asia in the red, with the world’s largest digital asset by market value down just under 4% on the day to $22,795 and the latter down 4.8% to $1,568. Investors are eyeing a busy week in the U.S. with an underwhelming earnings week expected, as well as another interest rate hike.
“The Q4 earnings season for the S&P 500 continues to be subpar," wrote FactSet analyst John Butters in a note published earlier. "While the number of S&P 500 companies reporting positive earnings surprises increased over the past week, the magnitude of these earnings surprises decreased during this time. Both metrics are still below their 5-year and 10-year averages.”
Refinitiv data shows that analysts expect S&P 500 earnings reported this week to decline 3%, with tech down 8.7%.
Investors are also looking to another – but smaller – interest rate hike this week, with the results of the last Federal Open Market Committee meeting coming out on Wednesday. Investors believe the Federal Reserve will hike rates by 25 basis points (bps) which would be the smallest rate increase in almost a year.
All of this continues to test the correlation bitcoin is reported to have with the stock market.
“There doesn’t seem to be any indication that crypto will stop moving in response to Fed policy decisions, though Ethereum’s upcoming Merge is one of the more important events in crypto’s recent history,” Riyad Carey, research analyst at Kaiko, told CoinDesk in a previously provided note.
Centralized Exchange Tokens Post Solid Gains in January Despite SEC Interest
By Sam Reynolds
Exchange tokens are also following this trend and have posted double-digit growth during the last month. Binance’s BNB, Crypto.com’s CRO and KuCoin’s KCS are all squarely in the green.
Normally this wouldn’t be much of a surprise because the rise of these tokens correlates with an increase in volume on exchanges. Right now, it’s a healthy, vibrant market and exchange token prices reflect this.
But this is forgetting what happened in the last days of December.
As part of a complaint filed against FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison, the Securities and Exchange Commission (SEC) laid out the case as to why FTX’s former exchange token, FTT, is a security.
"If demand for trading on the FTX platform increased, demand for the FTT token could increase, such that any price increase in FTT would benefit holders of FTT equally and in direct proportion to their FTT holdings," the SEC wrote in its complaint. "The large allocation of tokens to FTX incentivized the FTX management team to take steps to attract more users onto the trading platform and, therefore, increase demand for, and increase the trading price of, the FTT token."
This could describe many – but not all – of the exchange tokens on the market. And because Ellison has signaled her intent to cooperate with law enforcement, the SEC’s claims were not contested. When this was unsealed in December, it should have been a day of reckoning for the exchange token sector.
OKX, for instance, specifically shies away from that description of its exchange token.
“The native token was never a big part of our business or treasury. Our native token was always designed to engage our most active customers and give them a way to seek discounts through activity on the platform,” is how an OKX executive described the token in an interview with CoinDesk.
The market may have priced in the idea that the SEC might not be able to do a lot about how it thinks exchange tokens are securities.
Exchanges that offer these tokens don’t have much of a nexus to the U.S. They are located offshore, not run by Americans, and don’t allow U.S. residents on the platform.
But BitMex also thought it was safe from U.S. regulatory oversight by doing the same thing, and we all know how that turned out.
8:30 a.m. HKT/SGT(00:30 UTC) Australia Retail Sales s.a. (MoM/Dec)
3:00 p.m. HKT/SGT(7:00 UTC) Germany Retail Sales (YoY/Dec)
5:00 p.m. HKT/SGT(9:00 UTC) European Central Bank Lending Survey
A big week in markets as the U.S. Federal Reserve meets to decide how high to raise interest rates amid signs of lower inflation and a cooling economy. Coinbase Institutional Head of Research David Duong joined "First Mover" to discuss. Johns Hopkins University Professor of Applied Economics Steve Hanke weighed in with his recession outlook. Also bankruptcy expert Dov R. Kleiner of Kleinberg Kaplan joined to discuss the latest in the FTX, Celsius Network, and Voyager Digital bankruptcy cases. Plus, crypto exchange Gemini is reportedly under investigation over FDIC claims.
Sandbox’s SAND Surges 90% Since Start of Year Ahead of Token Unlock: The unlock, scheduled for mid February, will release 12% of the token’s supply.
Crypto-Focused VC Firm Pantera’s Liquid Token Fund Lost 80% in 2022: The fund took a 23% hit in November in the aftermath of FTX's collapse.
Elon Musk Wants Twitter Payments System to Accommodate Crypto, FT: DOGE spiked on the news.
BlockFi's Crypto Mining Assets May Be Headed to Market After Bankruptcy Hearing: The crypto lender’s quest to get its hands on $580 million of Robinhood shares originally owned by FTX founder Sam Bankman-Fried has taken another turn, the court was told.
Binance Partners With Mastercard to Launch Prepaid Crypto Card in Brazil: The card will allow payments with 13 cryptocurrencies, including bitcoin, ether and Binance USD.