BullionFX Market Report – August 12, 2023

Gold prices hovered around $1,917.00 per ounce as investors braced for make-or-break US inflation data this week that would shape the Federal Reserve’s upcoming interest rate decision. High-interest rates have raised the opportunity cost of holding non-yielding bullion, which has declined more than 7% since reaching near-record highs in May. 

Although gold demand was weak last month, prices rose 3.1% in July. Analysts noted that ongoing market uncertainty and solid central bank demand continue to support precious metals markets. Outlook for gold would regain shine when markets move into the price in a greater probability of rate cuts and US dollar softness. Bullion sales are up 146% from the dismal sales reported in July 2022. 

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Bitcoin is correcting gains and trading below $29,800; the world’s largest cryptocurrency by market cap could start another increase if it stays above the $29,400 support zone. Data shows that the Bitcoin Coinbase Premium index has recently seen a surge, a sign that buying from US investors may contribute to the recovery. Recently, however, as news has started to come out that the probability of the BTC Spot ETFs being approved in the US is increasing, the indicator has turned around and is now heading up. During this same period, Bitcoin has observed a recovery rally in which the price briefly touched $30,000.

Ethereum price aims for a fresh increase above the $1,880 zone. The world’s second-largest currency by market cap could rally unless there is a close below the $1,830 support. The number of addresses on the Ethereum network with balance has hit a new all-time high of 104,076,868. This means that these addresses now hold at least one wei, the smallest unit of Ethereum, in a figure representing a significant rise from the figure in the previous year.

PayPal on Monday launched a US dollar-backed stablecoin to help facilitate payments as its latest addition to its suite of crypto services. It’s the first such move from a major U.S. financial institution. The new asset, called PayPal USD (PYUSD), was designed to address the “emerging potential” to “transform payments in Web3 and digitally native environments.” Its launch comes as market participants await a vote in Congress on a critical stablecoin bill, which has just advanced to the House with three other crypto bills for the first time. The stablecoin is an ERC-20 token issued on the Ethereum blockchain, something that could make transactions costly because of the high gas fees on the mainnet.

Layer 2 network Mantle Network has passed a community proposal to stake up to 200,000 $ETH from the Mantle Treasury. The proposal includes the establishment of the Mantle Economic Committee and authorises a cumulative limit of up to 200,000 $ETH for staking strategies, with a separate cap of up to 40,000 $ETH for the Lido ETH staking strategy. It also involves building stETH-ETH and mntETH-ETH LP trading pairs on Ethereum L1 and Mantle L2 DEX.

Tether, the company behind the world’s most popular stablecoin USDT, acquired 1,529 bitcoin in the second quarter of 2023. The purchase confirms that the company follows the plans it delineated earlier this year. In May, Tether announced to Allocate 15% of Profit to Purchase Bitcoin. Some analysts say Tether is now the 11th largest Bitcoin holder. Tether is also very active in the Bitcoin mining sector. Tether announced a mining arm in Uruguay in collaboration with a local licensed company and invested in Uruguay’s energy production.

Aptos is leveraging Microsoft’s infrastructure to deploy new products that combine artificial intelligence and blockchain, including a new chatbot called Aptos Assistant. This chatbot will answer user queries about the Aptos ecosystem and provide resources for developers building smart contracts and decentralised applications. Microsoft’s Azure OpenAI service powers the chatbot. Furthermore, the two companies have also agreed to explore blockchain-based financial service solutions, including asset tokenisation, payment options, and Central Bank Digital Currencies (CBDCs), to expand blockchain use cases. Aptos will run validator nodes on Microsoft Azure to enhance the security of its network.

In less than a week, 12 Ethereum-related futures ETFs have been submitted to the US SEC. The wave of Ether-based ETF applications was kicked off by Volatility Shares lodging its filing for the Volatility Shares Ether Strategy ETF on July 28th. Several Ethereum Futures ETF Applications Submitted Reached 12 An ETF tracking Ethereum futures would invest in futures contracts that are traded on the CFTC-regulated Chicago Mercantile Exchange (CME) rather than directly holding the underlying asset. The SEC has never approved an ETF that tracks Ether futures contracts. On the other hand, Bitcoin futures ETFs have been around since October 2021.

The US Federal Reserve has started a new program to supervise novel activities in the banks it oversees. The program will focus on novel activities related to crypto-assets, distributed ledger technology (DLT), and complex, technology-driven partnerships with nonbanks to deliver financial services to customers. In addition, the US central bank also provided additional information on the process for a state bank supervised by the Federal Reserve to follow before engaging in specific dollar tokens or stablecoin activity. According to a statement, national banks are allowed to use distributed ledger technology or similar technologies to conduct payment activities as principal, including by issuing, holding, or transacting in dollar tokens. Still, they must demonstrate that they have had control to conduct the activity safely and soundly and obtain approval.

The US government’s stance on cryptocurrencies remains enigmatic. On the one hand, regulatory authorities are stepping up their enforcement actions, closely pursuing cryptocurrency institutions. In the first six months of 2023 alone, the SEC has taken legal actions against institutions including Genesis, Kraken, Binance, and Coinbase. On the other hand, the US government is the most significant Bitcoin holder. According to Glassnode, as of July 27th, the US government held approximately 207,189 BTCs, roughly 1% of the total Bitcoin supply, valued at about $5.68 billion. Although these Bitcoins have been confiscated from lawbreakers without any cost, unlike other governments, the US hasn’t been in a rush to convert them into cash and has opted to retain ownership.

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