Good morning. Here’s what’s happening:
Prices: Bitcoin continues its slow upwards push, while South Korea's market remains strong with diversified interest, says Matrixport's Markus Thielen.
Insights: The U.S. Federal Reserve is likely to raise the interest rate 25 basis points on Wednesday. Will it be finished with monetary hawkishness? An crypto market analyst weighs in.
A Resilient Korean Crypto Market
Good Morning, Asia.
As East Asia begins its business day, bitcoin and ether continue to climb, buoyed by another chapter of banking unrest and cooler-than-expected jobs data. Bitcoin is opening at $28,644, while ether is up 2% to $1,869.
While crypto traders continue to eye U.S. economic data, a new narrative is forming in South Korea – and one usual metric has been thrown out of whack.
During a recent appearance on CoinDesk TV, Matrixport’s head of research, Markus Thielen, said that Korea’s retail-focused crypto market continues to be strong. Korean traders, in particular, are interested in gaming, altcoins and XRP, which continues to surge in Korea.
"We have also seen this in the last bull market at the end of 2017, when [XRP] accounted for 50% of all the volume, and it was predominantly traded in Korea," Thielen said.
Thielen also notes that specific altcoins are surging in Korea, including mass vehicle ledger and serum.
Bitcoin, for its part, remains at 48% dominance.
Despite this, data from CryptoQuant shows that the Korean “kimchi” premium remains weak. Without the buying pressure on Korean exchanges, there doesn’t seem to be the same price premium as before. Perhaps because the market is now interested in things other than bitcoin.
No End to Rate Hikes?
Is tomorrow the end of interest rate hikes as we have recently known them?
Maybe, Oliver Rust, head of product at inflation data aggregator Truflation, suggested in an email.
On Wednesday, the U.S. central bank is widely expected to raise the rate by 25 basis points for a third consecutive time. The Federal Reserve has increased the rate by 525 basis points over the past 14 months. But whether it continues this aggressive monetary policy or retreats remains uncertain, Rust wrote.
“With the U.S. banking sector suffering a credit crunch following recent bank failures, and a buyout of First Republic … only just secured by U.S. regulators and JPMorgan, the Fed will be weighing its rate decisions carefully from this point on,” Rust wrote. “However, if inflation refuses to budge, we could well see another hike, despite tighter credit conditions. It’s worth remembering that while a 5% inflation rate is lower than last year, it still points to rapid price rises from already elevated levels.
He added: “Even if this hike turns out to be the Fed’s last, we don’t expect rates to come down from these levels any time soon.”
Fed critics have accused central bankers of spurring the current banking crisis through overly hawkish monetary policies. They had been hoping the bank would suspend its diet of rate hikes.
But Rust noted that the Fed has likely felt compelled to raise the rate amid mixed signals that suggest the economy is still revving too hot, which would mean inflation is not under control. Most notably, despite an unexpectedly weak Job Openings and Labor Turnover Survey (JOLTS), the job market remains robust.
He added that inflation, which has steadily declined over the past six months to its current 5% is likely to reverse at least slightly amid OPEC’s cut in oil production and increased demand for energy from China, which has reopened its economy. “This increase is already being reflected in the prices of energy commodities,” he wrote.
Rust wrote that against the current backdrop, another 25 basis points rate hike from the Federal Reserve is all but inevitable. After that, the central bank is likely to adopt a wait-and-see approach to evaluate the economic impact of its decision. After all, rates will have increased by a whopping 500 bps since March 2022, which is a lot for any economy to swallow.”
8:15 p.m. HKT/SGT(12:15 UTC) United States ISM Services PMI (April)
Bitcoin’s decline on Monday contrasted with the asset’s lack of movement over the past six weeks. Storm Partners managing partner Sheraz Ahmed joined "First Mover" to discuss the recent macro catalysts impacting the crypto market. Plus, a new report shed light on crypto asset evaluation and trends in the South Korean market. Matrixport’s head of research and strategy, Markus Thielen, shared his findings. And, OPNX, a bankruptcy claims exchange set up by the founders of collapsed hedge fund Three Arrows Capital, has been formally reprimanded by Dubai's crypto regulator.
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