Here’s what happened in blockchain and crypto this week.
It has been another volatile week across global markets. Cryptoassets briefly tumbled on Thursday, with Bitcoin dropping to $18,370, amid a 40-year high in the U.S. core CPI reading. However, stocks and crypto staged a remarkable comeback later on in yesterday’s session, erasing most of the losses experienced earlier this week. After recovering by more than 4% from its Wednesday lows, the S&P 500’s choppy week continued on Friday, with US equities paring some of Thursday’s gains. Meanwhile, the ETH/BTC cross ratio continued to trend lower this week, hitting a multi-month low at 0.066 yesterday despite a reduction in ETH supply for the first time since the Merge.
US core inflation, which excludes food and energy, rose by 6.6% yoy in September while headline inflation came in at a hot 8.2% yoy, slightly higher than expected. While the elevated levels of inflation are to a large extent attributable to the energy sector, US natural gas prices have now tumbled for eight consecutive weeks – the longest string of weekly losses since 2001 as mild weather and record production ease fears of a winter supply crunch. Elsewhere, the International Monetary Fund (IMF) slashed its global growth outlookto just 2.7% for 2023, warning the world economy is headed for “stormy waters”.
Given the hot CPI readings, the market is now pricing in a near 100% probability of a 75 basis points rate hike by the Fed in Novemberwhile some market participants are also expecting to see another 75 basis points in December. Meanwhile, the 10-year US Treasury yield surpassed 4% for the first time since 2008 while the US 2-year note rose to 4.5%, its highest level since 2007. In the U.S. housing sector, the average 30-year fixed mortgage rate is approaching 7% for the first time since 2002.
Despite the smooth Ethereum Merge, the blockchain’s token has recently underperformed many other cryptoassets, with ETH shedding more than 20% in dollar terms following the highly anticipated event. This week, weekly ETH supply growth turned deflationary for first time ever (see also story below). A recent Coinbase report shed some light on staking rewards, supply growth and maximal extractable value (MEV). Staking rewards have increased from 4.5% APR to 5.8% after the Merge (for users running their own nodes) while the rate of ETH issuance has decreased post Merge from 4.5% yoy to just 0.45% yoy – or even 0.17% yoy after including burned ETH.
The global cryptoasset market capitalization currently amounts to $965 billion – down from $983 billion since Friday last week, with bitcoin accounting for 38.4%. Among the Top 30 cryptoassets by market cap, Quant (QNT) outperformed, gaining 21.6% over the week. During the same period, the price of bitcoin (BTC) decreased by 3.0% to $19,335 while the price of ether (ETH) dropped by 3.2% to $1,307. The total value locked (TVL) in DeFi sits at $53.8 billion – down from the $55 billion last week – with Ethereum accounting for about 57.8% of TVL.
This Week’s Headlines
Notable Deals and Fundraising
Manuel Trojovsky, Head of Crypto Investments & Research
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