Last week, the price of Bitcoin fell to as low as $90,800, showing a correction phase. This was the first correction that occurred within 4 weeks after Donald Trump, the President-elect of the United States, won the presidential election on November 5th. In the meantime, the price of Bitcoin had vertically surged from $67,000 to over $90,000.
Looking at the asset prices last week, it was not only Bitcoin that experienced a correction. The Nasdaq was flat with a weekly price change rate of -0.06%, but the AI blue-chip Nvidia fell by -9.38%, and Tesla, the representative stock of the "Trump trade", fell by -3.18%.
Although the price of Bitcoin showed a double-digit decline at the beginning of the week, it quickly rebounded from the 27th and recovered the price, resulting in a weekly change of -1.65%. Solana (SOL), which had shown an explosive rise recently, fell by 5.90% during the same period.
The unique point is that the price of Ethereum (ETH), which has been sluggish throughout this year, has suddenly shown a good performance. Despite the fact that the price of Bitcoin, the top cryptocurrency, recorded a negative, ETH recorded a cumulative increase of 6.46% last week.
Looking at the data of cryptocurrency spot exchange-traded funds (ETFs) listed on the US market, the reason why the price of Ethereum was strong seems clear. Last week, about $550 million flowed out of the Bitcoin spot ETF over two days on the 25th and 26th, recording a net outflow of inflow funds on a weekly basis. However, Ethereum recorded net inflows for all 4 business days in the spot ETF, setting a record high for weekly inflows.
US Court: OFAC Sanctions on Tornado Cash Exceeded Authority
Why has so much money suddenly flowed into the Ethereum ETF this week? Analyzing the various events and price movements, it is highly likely that it is due to the US court's ruling on the 28th (local time) to invalidate the OFAC's sanctions on Tornado Cash.
In this ruling, the US Court of Appeals judged that OFAC had exceeded its authority with the sanctions, stating that "Tornado Cash's smart contracts are decentralized code designed to operate without human intervention, and are accessible to anyone, so they cannot be considered 'property' within the legal definition." This can be interpreted as meaning that the US government will find it difficult to regulate protocols that are sufficiently decentralized.
This was a boon for DeFi projects that had to fall under the suspicion of violating securities laws under the Gary Gensler SEC regime. As the news of this ruling spread, most DeFi tokens, including Lido (LDO), Uniswap (UNI), showed price increases of over 10%. With the confirmation that Tornado Cash, which anonymizes Ethereum transactions, is not illegal, the prices of forgotten privacy coins like Zcash (ZEC) also rose in tandem.
Will the upward trend of Ethereum continue? Industry analysts predict that this trend can continue for the time being. They are particularly focused on the fact that short positions on Ethereum on the Chicago Mercantile Exchange (CME) and demand for Ethereum spot ETFs are increasing simultaneously. This could be a carry trade similar to the one that appeared when the Bitcoin spot ETF was introduced and the price of Bitcoin rose.
If a carry trade is occurring on Ethereum now, and the upward momentum is not severely broken, it appears that it will not be difficult to rise to the short-term high of $4,000 recorded in March this year.
Powell's Mouth Aimed at Breaking $100,000
Last week, the price of Bitcoin quickly went through a correction and regained its footing. Since a bottom has been established, the upside potential is even higher than last week. Can it break through the $100,000 level this week?
There are about 2 potential negative factors that could block Bitcoin's breakthrough to $100,000. One is the concern that the Federal Reserve's Open Market Committee (FOMC) in December may decide to keep interest rates unchanged. There are 4 schedules this week related to this.
First, the US ISM Manufacturing Purchasing Managers' Index will be released on the 3rd (Tuesday), and the US Department of Labor's Job Openings and Labor Turnover Survey (JOLTS) and ADP Non-Farm Employment report will be released on the 4th (Wednesday). On the night of the 5th, the number of new unemployment claims in the US will be announced, and on the 6th, the US non-farm payroll and unemployment rate will be released. If all these indicators are favorable, the Fed may take a break from rate hikes in December and make a decision to keep rates unchanged.
There are also a series of public speeches by Fed officials. On the 3rd, John Williams, President of the Federal Reserve Bank of New York, will make a public statement, and on the 6th, Michelle Bowman, a member of the Federal Reserve, will speak. The speech by Jerome Powell, Chairman of the Federal Reserve, scheduled for 3am on the 5th, is particularly important. In his public speech in November, he hinted that the Fed could take a break from rate hikes in December to adjust the pace. Whether Powell changes or maintains his stance could determine the breakthrough to $100,000.
Another potential negative factor is the financial instability caused by the possibility of Japan's interest rate hike. According to the Japanese Ministry of Internal Affairs and Communications, the Tokyo consumer price index turned upward again in November after 3 months. As a result, concerns are growing that Japan may raise interest rates, causing the dollar-yen exchange rate to fall below 140 yen for the first time in a long time. If the dollar-yen exchange rate falls to the early 140 yen range, there is a possibility that the asset price collapse caused by the unwinding of the yen carry trade that occurred in August will be repeated.
Is there any good news about the Bitcoin price? Bitcoin prices have been showing bullish momentum, and there are hopeful forecasts. Some analysts explain that since the Bitcoin NVT (Network Value to Transaction) golden cross indicator is still not in a risky state, if the upward momentum remains, it can easily break through $100,000. The NVT golden cross is an indicator that can determine the buy and sell timing based on the ratio of the coin's market capitalization to the total amount of traded coins (NVT). This value is interpreted as overbought when it is above 2.2, and as oversold when it is below -1.6. The 30-day Bitcoin NVT golden cross is around 1.1, meaning there is still room for an upward move. However, the fact that the rate of long-term Bitcoin holders selling their coins has reached the highest level in the past 5 months should also be kept in mind when responding to price changes. This typically tends to increase the downward pressure on Bitcoin prices. I wish all readers successful investments this week.
