First Mover Asia: Crypto Trading Firm Amber CEO Argues Bitcoin Can Still Be an Inflation Hedge; Cryptos’ Surprising Rebound

Good morning. Here’s what’s happening:

Prices: Bitcoin and other major cryptos were holding the same range they’d occupied prior to the latest inflation figures.

Insights: The CEO of crypto trading firm Amber says that there’s no better asset for holding value than bitcoin.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover,our daily newsletter putting the latest moves in crypto markets in context.

Bitcoin’s Counterintuitive Rebound

By James Rubin

So much for conventional wisdom.

The hotly anticipated Consumer Price Index (CPI) arrived hotter than expected, the type of reading that usually sends riskier assets spiraling down.

Instead, bitcoin did the reverse on Thursday, recovering from an early stumble to regain its now familiar perch over $19,000. The largest cryptocurrency by market capitalization, which was recently up more than 2% and trading above $19,600, has been occupying a narrow band between $19,000 and $21,000 for much of the past month, hamstrung by concerns about untamable inflation and the rising prospect of a harsh recession.

“What we saw today was the culmination of a month long build-up in protection purchasing and build up in implied and realized volatility,” Jon Campagna, head of trading and capital markets at crypto investment fund CoinFund, wrote to CoinDesk in an email.

Campagna noted the pronounced declines in bitcoin and ether one-day trading volumes from the previous night following the CPI report, and a “similar dynamic” in equities markets. “The ViX (CBOE Volatility Index) actually declined 4.5%!” he wrote. “The CPI number was hot, but it was an expected level of hot. This caused a relief rally as the put protection was sold and books were adjusted to slightly increase risk.”

The 8.2% CPI, up 0.1% from last month’s figure, and 6.6% core inflation reading, which does not include volatile food and energy prices, offered the latest reminder of inflation’s stubbornness. Both readings represented four-decade highs.

Ether and other major altcoins followed bitcoin’s Thursday pattern, plunging steeply before rapidly recovering lost ground. The second largest crypto in market value was recently changing hands below $1,300, roughly flat from Wednesday, same time. GALA and DOT were among the day’s big gainers, recently rising more than 3% and 2%, respectively. ADA sank slightly. The CoinDesk Market Index (CMI), a broad-based market index that measures the performance of a basket of cryptocurrencies, recently increased by 0.52%.

Stocks

Crypto prices dovetailed with equity markets, which also sank early before rebounding with a vengeance with the tech-focused Nasdaq, S&P 500 and Dow Jones Industrial Average all climbing well over 2% to break six-day losing streaks as short-term sellers may have looked to benefit from recent plunges. The underlying conditions that have concerned markets, however, remain in full force with the U.S. central bank now even more likely than pre-CPI to stay on course for another 75 basis point rate hike – or perhaps higher. Mortgage rates in the once torrid housing market now stand at a two-decade high near 7%.

Meanwhile, at an Institute for International Finance (IIF) event on Wednesday, Jamie Dimon again called crypto tokens “decentralized Ponzis” even as he praised aspects of blockchain technology. The JPMorgan CEO has been among crypto’s most prominent critics, intermittently voicing his concerns about security, even as his bank has been fined billions of dollars for its own violations of statutes.

In written comments to CoinDesk, Mark Connors, head researcher at Canadian digital asset firm 3iQ, said that today’s activity had not changed the recent economic and investment backdrop. “Lots of cross currents,” Connors wrote. “Nothing resolved except that inflation is more persistent than expected.”

Connors added optimistically that bitcoin had been less volatile than the Nasdaq on Thursday. “That is a material difference, and one we believe will persist as equities drop.”

He added: “The recent outperformance of BTC and ETH in Q3 and today’s lower volatility profile are NOT an accident. The tourists are gone from crypto, BTC is on the right side of the halvening, crypto regulation is accelerating – critical to Institutional adoption and equity risk is massively underestimated.”

Crypto Trading Firm Amber CEO Says Bitcoin Can Still Be an Inflation Hedge

By Shaurya Malwa

Crypto markets have largely mirrored the downtrend in major equity indexes, including the previous month’s sharp price corrections. .

Bitcoin and ether, the two largest cryptocurrencies by market capitalization, have fallen over 70% from all-time highs in 2021. Solana has dropped over 85%. The steep declines have been antithetical to bitcoin and other cryptocurrencies’ envisioned role as a hedge – similar to gold – against the real-world economy and popular financial instruments like stocks or bonds.

Crypto faithful have recently started questioning bitcoin’s hedging role as more speculative than real. But some traders, including Michael Wu, the co-founder of crypto trading firm Amber, have counter-argued that market dynamics explain recent falling prices instead of buyer sentiment.

“It is a bit early to say crypto failed as an “investment hedge,” Wu, recently told CoinDesk. “Short-term correlations say more about overall liquidity conditions, as we are on a rate-hiking cycle and supply-demand dynamics as most crypto investors are also tech investors and had to reduce their portfolio across the board, rather than fundamental drivers.”

Wu added: “Bitcoin is still a better form of storage of value than anything else that existed before, and Ethereum along with the decentralized digital economy being built upon it offers tremendous value as a tech infrastructure investment,” Wu said, stressing the “need to be more patient” to see the value propositions of alternative currencies play out over the next few years or even decades.

Wu and similar types of investors are taking a long-term approach toward cryptocurrency investments that actively avoid chasing short-term movements, and instead, embrace a structural shift from traditional finance to the crypto ecosystem.

“If we zoom out beyond the short-term trading horizon which crypto folks are too used to focusing on and look at the long-term structural trends, we will see that the fundamental investment values in crypto as an asset class have continuously become stronger and stronger over time,” Wu said.

Devcon Bogota 2022

11:30 a.m. HKT/SGT(3:30 UTC) Export and Import Price Indexes (Sept./YoY)

In case you missed it, here is the most recent episode of “First Mover” on CoinDesk TV:

Bitcoin Falls After Hotter-Than-Expected Inflation Report; OCC Chief Hsu on Banks’ Crypto-Related Activities

The Consumer Price Index (CPI) report for September showed inflation ran hotter than expected in spite of interest rate hikes. Crypto markets were down across the board. Bob Iaccino of Path Trading Partners joined “First Mover” to discuss what happens next. To discuss the future of crypto regulation acting Chief of the Office of the Comptroller of the Currency (OCC) Michael Hsu and former SEC Branch Chief Valerie Dahiya of Perkins Coie LLP joined First Mover.

Ether Becomes Deflationary for First Time Since the Merge: Coinbase: The number of tokens fell by 4,000 over the last week as more ether was burned verifying transactions than was created, the report said.

Stablecoin Issuer Tether Cuts Commercial Paper Holdings to Zero:The company has been gradually replacing its commercial paper holdings with U.S. Treasury bills.

Police Complaints in This Indian District Are Going on the Polygon Blockchain:“This is very close to my heart,” tweeted Polygon’s co-founder Sandeep Nailwal, citing corruption in local police departments that can lead to the manipulation of public complaints.

Bitcoin Sinks After US CPI Report Shows Inflation Hotter Than Expected:The “core” Consumer Price Index, seen as a more steady indicator of inflation, rose 6.6% from a year prior – a four-decade high.

China’s CBDC Transactions Reach $14B as Uptake Slows, South China Morning Post Reports:Transaction volume in e-CNY has only increased by 14% in 2022 from the end of last year compared with the 154% growth recorded in the last six months of 2021.