BullionFX Market Report 05/05/23 

5 May 2023
by Bullion FX

Gold has run back towards last week’s highs of $2,050, breaking its resistance of $2,020 as mentioned in the previous report. Gold is currently hovering around the $2,050 resistance at $2,040 well positioned for a run.  

If Gold can push through the $2,050 support, and sustain that level, we may see a new floor price for gold around the $2,000 mark signalling the start of a bull run in gold markets.  

Fundamentally, gold markets are also aligned for a bull run. Historically gold has always lagged inflation by 12-18 months, and over the long term despite prices of property, vehicles, energy, and food rising – the corresponding prices in Gold have generally been consistent. This implies that gold should rally in 2023 by the same amount as inflation in 2022.    

The US Dollar index (DXY) has also lost further ground from last week, adding to upward pressure on gold markets, due to gold being priced over USD. The US Dollar Index is still trading along lower resistance. If the US Dollar breaks resistance to the downside, the market can expect a further rally in the price of Gold. This is more likely to happen now over last week, as the US Federal Reserve rate rise is now behind us with another consecutive rate rise on May 3. 

Bitcoin looks heading to finish the week close to where it started, with it residing at US$28,644 per coinmarketcap. After a sluggish start, Bitcoin is starting to move, and we expect the trend to be upwards.  

On Monday, the California Department of Financial Protection and Innovation (DFPI) announced that regulators had seized First Republic Bank. The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of First Republic and said it accepted a bid from JPMorgan Chase Bank.  

To put this into context, First Republic had a little more than $US200 billion ($301 billion) worth of assets and approximately 7,000 employees. At the time of writing, we witnessed a sell off of PacWest Bancorp, Western Alliance Bancorporation, Zions and Comerica.  

Ethereum followed a similar trajectory to Bitcoin this week but is currently at US$1,867, after being at US$1,880 one week ago.  

Binance’s native BNB token led losses among top 10 tokens, falling 4.58% per coinmarketcap.com.  

Overall NFT trades continued a downward trajectory of close to 5% lower for the week. However, NFT volumes are expected to commence trading upwards following the Opensea upstart competitor, Blur, announcing its new lending offering. The new lending platform titled ‘Blend’, is described as the “peer-to-peer perpetual lending protocol” per its whitepaper that supports arbitrary collateral, including NFTs.  

Moving outside of the technical analysis of the week, some of the big news was coming on the regulatory front with proposals around new taxes on crypto miners in the US, changes to the tax environment on DeFi in the UK as well as movements in Hong Kong to encourage banking of the digital asset sector. 

US administration pushes for 30% electricity tax in swipe at crypto miners – In a recent blogpost, “The DAME Tax: Making Cryptominers Pay for Costs They Impose on Others”, the White House’s Council of Economic Advisers said that while crypto assets are virtual, “the energy consumption tied to their computationally intensive production is very real and imposes very real costs”. It noted that crypto miners’ high energy consumption has negative spillovers on the environment, quality of life, and electricity grids where these firms locate across the
country. The move follows a raft of legal threats against crypto exchanges by regulators in what industry insiders have said will drive crypto and blockchain technology out of the U.S.

UK Treasury seeks input on taxing DeFi staking and lending – The proposed regulatory changes seek to simplify how DeFi returns are taxed and reduce the administrative burden for taxpayers. Under the proposed legislative changes, crypto used in DeFi transactions wouldn’t be treated as a disposal for the purposes of tax, which usually trigger a Capital Gains Tax (CGT) event. Instead, CGT would apply — and a taxable event would occur — when cryptocurrencies are disposed of in a non-DeFi transaction.  

Taiwan to Release New Rules for Crypto in September – The FSC is creating a new bureau that will be dedicated to the crypto sector, adding to its four existing bureaus.  

Hong Kong regulator requires banks to open accounts for crypto firms – The Hong Kong Monetary Authority (HKMA), via a late April circular noted it has called on banks to provide services to cryptocurrency firms before receiving a license.  

Nigeria SEC prepares new digital asset rules – The Nigerian SEC is considering allowing licensed digital exchanges to list tokens backed by certain assets. According to the Nigerian SEC’s head of securities and investment, Abdulkadir Abbas, the authority plans to only authorize listings of tokens based on assets like equity, debt or property. It was noted that licence applications will have to undergo a year of “regulatory incubation,” allowing the SEC to study their operations and render their services in the country. 

Venmo will enable fiat-to-crypto payments this month – Users of the mobile payment service will also be able to receive crypto through a QR code or external crypto address. At Consensus 2023, Paypal (parent Co of Venmo) announced, “we are going to be enabling on-chain transfers from Venmo wallets, meaning that you can buy crypto on Venmo and send it to another Venmo user; you can send it to a PayPal user; you can send it to [an] external wallet; you can send it to your hardware wallet”. 

Coinbase opens Bermuda-based crypto derivatives exchange – Coinbase International Exchange allows institutional clients to invest in Bitcoin and Ether via perpetual futures contracts that can offer up to five times leverage. Coinbase said it is committed to its services and operations in the U.S., but added that it wishes to explore opportunities in jurisdictions outside the U.S.  

Mauritius central bank plans CBDC pilot in 2023 – The central bank has achieved significant progress since setting up a sandbox in December 2022 and is considering cross-border transactions for future phases.  

Crypto.com launches ChatGPT-based AI user assistant Amy – The crypto exchange launched its AI user assistant to inform users about industry insights, including real-time token prices, projects and historical events.  

Standard Chartered’s crypto subsidiary Zodia Custody bags $36m – Zodia said that the funds would be used to boost geographic expansion and increase the company’s coverage. The firm will also use the funds to improve its interchange and off-exchange settlement services as it seeks to protect client assets that are traded on crypto exchanges. SC Ventures and SBI Holdings are the main backers. 

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BullionFX Ltd operates a digital currency exchange registered with multiple regulators. BullionFX only offers spot conversion between digital currencies including $GOLD and $BULL.  

Digital asset prices are highly volatile; this communication does not constitute an offer or solicitation to buy or sell any products or securities. It is important to exercise caution and conduct your own research and due diligence when considering any investment or product decisions. Any decision to use or invest in these products should be made based on your own assessment of the risks, benefits, and legal requirements. Any APR shown is an estimate of rewards you will earn in cryptocurrency over the selected timeframe. It does not display the actual or predicted returns/yield in any fiat currency. Not financial advice.  

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