Last week equity markets failed again to excite as investors recovered from the tech sell-off the week before that hindered the Nasdaq. Wednesday saw a dip in the S&P 500, with the top US index currently sitting at 3,319. Here in Europe, the STOXX Europe 600 also saw a dip on Wednesday. It dipped further and opened today at 360. 

In crypto, bitcoin touched $11,000 various times, whilst other altcoins had varying weeks. Chainlink dipped again, whilst excitement around Uniswap tokens continued to drive interest in DeFi.

Bitcoin teases around $11,000

Relative to some of the stagnation we have seen in recent weeks, with the price often hanging around the $10,300 level, last week Bitcoin performed well. It surpassed $11,000 on Wednesday, jumping above and then below that mark before a slight retracement in the early hours of Thursday. Bitcoin is in a healthy position. Although it hasn’t hit $13,000 since June 2019, from a technical perspective it is feasible to expect its next target to be $12,500.

On Wednesday the Federal Reserve indicated that a cut to interest rates was not on the cards, especially given last month’s policy announcement, where Powell said that the Fed is now only targeting an average inflation of 2%, made at Jackson Hole. Portfolio managers were understandably disappointed with the Fed’s decision. However, the Fed’s dovishness is positive news for Bitcoin and shows how many other central bankers are thinking. This environment of dovish central banker policy, combined with the extensive fiscal stimulus we have continued to see is clearly a positive backdrop for bitcoin.

Chainlink sinks, Sushiswap flops, Uniswap pops

Chainlink, one of the darlings of the DeFi market, experienced another tough week as the consistent drop from $19 continued. One of the major beneficiaries of the DeFi boom, it was entirely caught up in the hype of the summer. As I highlighted in a newsletter last month (Bitcoin reserves drop – hodlers gonna hodl), the fallback we saw in Chainlink following its $19 achievement was always on the cards, and further retracements could be imminent. Although it did hit $17 at the end of last month, the pull backs have also been notable and we are now sitting at a much more appropriate $9.38.

But the retracement has not been exclusive to Chainlink. Many assets centered around DeFi protocols have also seen drops, and big stories in the sector such as Sushiswap (Chef Nomi has returned all funds to the SushiSwap community) and Uniswap (13,000 DeFi users have already claimed Uniswap’s new UNI token), have been driving both negative, and positive sentiment.

Every day sees a new story highlighting the massive amounts of capital tied up in DeFi protocols, or the continuously increasing size of its userbase. With great power comes a great need for regulation, or so the regulators say. Governments and regulators can no longer turn a blind eye to this relatively new part of the cryptoasset sector. 

DeFi is undeniably becoming more popular with consumers and retail cryptoasset investors, and rule makers will be looking at how they can help facilitate responsible investment and participation in the sector, and prevent consumers being caught out.

Despite these teething issues, there are still several opportunities to be had. Uniswap is an example, having listed on various professional exchanges almost as soon as it was minted. The excitement around DeFi continues and doesn’t seem to be throwing in the towel any time soon, even if Sushiswap’s creator is. 

November launch of Eth 2.0 could be a go

Decrypt is reporting that Ethereum developers have emerged from the battleground of the testnet and submitted a proposal for the first phase of Ethereum 2.0. In August Vitalik Buterin gave an interview speculating that Ethereum 2.0 would be ready by the end of November. To his credit, and despite some people in the community’s misgivings, this seems to be on track.

As the platform moves from Proof of Work (PoW) to Proof of Stake (PoS), we can expect to see a gradual reduction in fees. A much-needed improvement on the platform. The benefits of PoS are potentially numerous: greater security, faster transactions, more decentralization. But the benefits on investors’ lips are the financial rewards that can be attained through staking.

Kraken wins US banking licence

Exchange Kraken last week secured a US banking licence, being the first cryptoasset exchange to do so. This is positive news, especially for a sector that many are sceptical of. This approval from US regulatory authorities shows consumers that crypto businesses are both secure and part of the financial system’s future.