The Upward Trend In Virtual Currencies May Not Last Forever

Financial markets have seen impressive gains in recent weeks. The question on everyone's mind is whether this is the beginning of a long-term bull market in cryptocurrencies or just a brief ray of sunshine before more rain.

Personally, I stand by what I have said many times. So now everything is macro-trading. 

The recently observed positive sentiment could be due to the fact that inflation has declined year-on-year, according to the latest CPI readings. This is, of course, a positive thing, but macroeconomists are divided into two schools of thought. One group is increasingly convinced that improved inflation measurements will give the Fed an incentive to ease monetary policy soon, halting or even lowering expected rate hikes.

Looking at the market movements in recent months, we can infer that many market participants are believers in this idea.

But turning to the other camp of macroeconomists, such positivity may not last long, and as Federal Reserve Chairman Jay Powell recently stated, for now, some believe that tackling high inflation remains the top priority.

In other words, a temporary improvement in inflation is not enough to persuade central bankers to change their tune, and a change in policy is not imminent. If this were the more likely scenario, the market would move volatilely sideways before a full-blown bull run in risky assets occurs. crypto lens

Cryptocurrencies are currently experiencing the largest valuation increase since the bear market began in November 2021. Countless technical indicators are turning positive, likely attracting momentum traders looking to capitalize on the move.

Surprisingly, this rally has yet to see a significant decline, and its characteristics may remind many OGs of the 2019 rally that followed the previous cycle's lows.

Liquidity has also flowed into other illiquid crypto assets, and certain assets like Lido have benefited tremendously from this trend.

Such a rise is likely caused by internal rotation in the crypto market and does not represent an increase in liquidity inflow into the market. The reason for Lido's recent rise is due to its offering of liquid staking derivatives and staking time while awaiting the Shanghai upgrade that will allow Ethereum network stakers to directly stake ETH locked in beacons. It fits well with the current trend towards shorter platforms, which allows for chains. .

noteworthy news

China introduces digital Yuan smart contract functionality. 

China has taken a major step in developing its central bank digital currency (CBDC), the digital yuan, by adding smart contract functionality through an e-commerce app. Meituan, one of the country's largest food delivery and lifestyle services. . China is leading the way in CBDC development among major countries, and in 2020, it began testing the use of CBDC for retail transactions and asset purchases. Following Davos' remarks on the WEF, we will likely see more initiatives around the world.

EU lawmakers are tightening requirements for banks holding cryptocurrencies. 

The European Parliament's Economic and Monetary Committee has voted to impose strict regulations on banks wishing to hold cryptocurrencies. The final proposed changes to the European Union's 2021 package to align capital requirements for banks with international standards will require banks to treat cryptocurrencies as a high-risk asset class, according to a recently leaked document. This news is not surprising considering the financial situation facing crypto-focused banks such as Silvergate, which reported a net loss of $1 billion in the fourth quarter of 2022.

Genesis files for bankruptcy. 

In the last newsletter, I pointed out that the imminent threat of FTX infection could wipe out several more players, especially his DCG or its subsidiaries. The latest victim of this debacle is crypto financier Genesis Trading, which filed for Chapter 11 bankruptcy protection in Manhattan federal court on January 19th. Unsurprisingly, this news did not shake the market too much, given that this was what most stakeholders expected. The National Australia Bank is creating a stablecoin called AUDN. 

The National Australia Bank has created a new stablecoin called AUDN that allows corporate customers to transact using Australian dollars. AUDN is designed to work on both the Ethereum network and the Algorand blockchain and is backed 1:1 with Australian dollars held by NAB. This stablecoin is primarily used for payments between multiple parties. Meanwhile, the country's central bank is working on a central bank digital currency (CBDC) project, with pilots expected to be completed by mid-2023.

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