Financial market updates

ECB, FED, BOJ Rate hikes

‍

In a significant week for central banks worldwide, the U.S. Federal Reserve and the European Central Bank raised borrowing costs by 0.25%, while maintaining flexibility for their upcoming September meetings. Meanwhile, the Bank of Japan unexpectedly eased its yield curve control policy, a key component of its approach to keep interest rates low and boost the economy. This unexpected move led to speculation about potential major alterations to Japan's extremely low borrowing costs.

‍

Changes in central bank monetary policy can impact the crypto market, though the relationship isn't always direct or straightforward. Higher interest rates typically strengthen the local currency, which could potentially make assets priced in that currency (like Bitcoin priced in USD or EUR) more expensive for foreign investors, potentially lowering demand. However, cryptocurrencies are often seen as alternative investments and can be used as a hedge against traditional financial systems. So, some investors might flock to crypto when central bank policies are perceived as risky or inflationary. The easing of monetary policy by the Bank of Japan could create a more favourable environment for crypto in Japan if it leads to lower interest rates and encourages more risk-taking.

Curve Finance Hacked

‍

Curve Finance, a stablecoin exchange crucial to Ethereum's decentralised finance (DeFi) ecosystem, was targeted by hackers due to a re-entrancy bug in Vyper, a programming language that supports parts of Curve's system. This bug, which can deceive smart contracts by making repeated calls to a protocol to syphon off assets, has put more than $100M in cryptocurrency at risk and has already resulted in around $50M being drained. The hack also negatively impacted the price of Curve's native CRV token, which dropped by 12%. Additionally, panic surrounding the exploit prompted the lending protocol Aave to disable its CRV borrowing function. A bot operator, however, managed to "ethically steal" nearly $5.5M back from the hacker. In response to the hack, investors started withdrawing their capital from Curve, leading to a decrease in the total value of assets locked on Curve from over $3B to $1.7B.

Accumulator Season for BTC & ETH

‍

Bitcoin (BTC) hovered just below $29.5K, while Ether (ETH) dipped slightly to $1,864 amid what QCP Capital dubbed 'accumulator season.' This term refers to a strategy where investors steadily buy coins at lower prices in anticipation of a potential price surge, as the market expects increased volatility and a significant BTC price rise by year-end due to factors such as the Blackrock spot ETF ruling and Bitcoin Halving. Notably, Galaxy Digital's Mike Novogratz highlighted the impact of Larry Fink's shift in stance on Bitcoin, and suggested an ideal portfolio for risk-tolerant young people includes Alibaba shares, silver, gold, bitcoin, and ether. Joe DiPasquale of BitBull Capital noted Bitcoin's resilience against macroeconomic or technical events like the recent Curve Finance exploit, and advised investors to accumulate Bitcoin during opportune moments and practise vigilant risk management.

‍