What happened last week

In its recent FOMC meeting on Wednesday night, the Federal Reserve announced its decision to maintain interest rates unchanged at a target level of 5.25-5.50%. The central bank cited a cautious approach to inflation and economic recovery as the primary factors behind this decision. This move reflects the Fed's commitment to carefully monitor the economic landscape amidst uncertainties, such as supply chain disruptions and the ongoing COVID-19 pandemic, before making any significant adjustments to monetary policy. In Switzerland, the SNB has also decided to leave the reference rate unchanged at 1.75%, in a move to prevent further appreciation of the USDCHF exchange rate, amongst others.

Oil Prices on the Rise

Hedge funds are causing the price of Brent crude oil to soar substantially, showing a continued rally since late June 2023. Russia and Saudi Arabia decided to cut down on oil production until December, and this, along with other cuts by OPEC+, caused Brent crude prices to hit $95 per barrel. Hedge funds buying a lot of oil contracts in recent weeks has made this price rise faster, about 30% since June. These funds now hold a record number of contracts, equivalent to over 500 million barrels. Some experts worry this price increase isn't due to strong demand but rather these cuts. They also fear that if prices go above $100 per barrel, more oil might flood the market. This could lead to problems with central banks and lower global oil demand. Higher oil prices are already affecting other markets, with airline stocks dropping and energy stocks rising.

Potential US Government Shutdown

In the US a potential government shutdown (albeit temporary) could loom if the Congress is not approving a spending bill to allocate funds to the 438 government agencies. This process is done yearly, and generally ends by September 30th. The underlying dispute behind the fund’s allocation is the dispute between far-right Republicans and other lawmakers. In short, federal workers would not receive any salary payments and a myriad of services would be disrupted, such as the postal service, military, law enforcement, national parks, and scientific research departments, to name a few. In a worst case for crypto, it might potentially impact the decision making process from the SEC with regards to the approval of the spot Bitcoin ETF, for which the government agency has various applications to check.

Crypto Adoption Fund by Nomura

Nomura, Japan's largest investment bank, has launched a Bitcoin Adoption Fund through its digital asset subsidiary, Laser Digital Asset Management. This fund, which is the first of its kind from the company, offers institutional investors direct exposure to Bitcoin. It provides long-only exposure to Bitcoin and uses Komainu as its regulated custody partner. Nomura, with over $500 billion in assets, aims to offer investors a way to benefit from the long-term potential of Bitcoin and plans to introduce more digital adoption investment solutions in the future. The fund has been registered as a mutual fund in the Cayman Islands.

Mt. Gox Saga Continues

The distribution of bitcoins to former Mt. Gox exchange users, originally scheduled for this October, faces indefinite delay due to problems in the creditor claim assessment process. The exchange's collapse in 2014, resulting in the loss of 850,000 bitcoins, has left creditors waiting for nearly a decade. The trustee is actively working to resolve the issues, but the precise timeline for returning the bitcoins remains uncertain, causing frustration among those awaiting the recovery of their assets.

---

Our take

The main market event this week was the FOMC meeting in the US, which left the crypto markets relatively unimpressed. The decision to keep the interest rate at the current target range of 5.25-5.50% with potential rate hikes towards the end of this year, is in line with market expectations, as measured by the CME Fed Funds futures contracts. On the weekly chart, Bitcoin is up +0.48%, continuing the sideways trading trend from the previous months. Remaining in the low-volume, low-volatility environment, it appears that the market remains in a cautious position on the look out for more clarity in the macroenvironment, specifically the cooling off in prices, which in turn, would allow a less hawkish or even somewhat dovish practices from central bankers. Until more clarity arrives, crypto-specific events on the horizon, such as the spot ETF approvals in the US as well as the upcoming Bitcoin halving in April next year, could spark some short-term volatility.

---

The week ahead

Monday, 25 September

• Binance will file a reply in SEC case.

Thursday, 28 September

• 10PM CEST: US Fed Chair Powell Speaks at a town-hall event.

Friday, 29. September

• 2:30PM CEST – US Core PCE Price Index m/m, forecasted to sustain 0.2%.