Cryptocurrency prices were edging up recently as core consumer prices spiked higher for a second consecutive reading.
The headline consumer price index for the month of September was estimated to have risen 8.2% from last year, down from the 8.3% pace recorded in August but faster than the consensus forecast of 8.1%.
How Will the Market Price Bitcoin?
Bitcoin was up slightly to 19,122.33 in afternoon trading on Oct. 13, according to data firm CoinGecko. Ether, the native currency of the ethereum blockchain, was up nearly 1% to $1,268.49, while dogecoin was up 1.3% to $0.058729.
"Crypto markets dumped upon receiving the news that the consumer price index was up 8.2%," said Frank Corva, senior analyst for digital assets at Finder. "While this number is down slightly from last month, it’s still extremely high."
This isn’t good news for risk-on assets like cryptocurrencies in the short term, Corva noted, "as people have less discretionary funds to use speculating in the nascent crypto market."
"However, with the US dollar and fiat currencies around the globe dramatically losing their purchasing power, the big question now is: Will the market begin to price Bitcoin more like a hedge against currency devaluation and less like a risk-on asset?" he said.
Corva noted that in September 2022, the Invesco QQQ ETF (QQQM) fell about 13%, and the SPDR S&P 500 ETF Trust SPY fell 9.3%, while the price of Bitcoin fell only 1.6%, according to Finder's BTC Price Predictions Report.
"This may be some indication that the market is beginning to look at Bitcoin as something other than a tech stock." he said.
The Crypto-Stock Connection
Cryptocurrencies have been linked to the stock market, but Winston Ma, managing partner of CloudTree Ventures, said that in recent weeks, the crypto-stock correlation has weakened somewhat, although it still remains positive.
"By contrast, the first half of 2022 mostly saw cryptocurrency market and public stock indexes moving in high correlation, said Ma, author of "Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse,"
"For the last month, BTC, for example, has mostly remained in the $19,000 to $20,000 range, whereas the Dow Jones and S&P 500 had their worst month since March 2020," he said.
Ma said that this seems to suggest that the crypto market is showing a bit more resilience than the public equity market, as the risk of recession looms
"So the question becomes: will the two markets continue to move in lockstep or diverge?" he asked. "Only time will tell."
NFTs Under Probe
The Securities and Exchange Commission is reportedly probing Yuga Labs and other NFT creators as it explores whether certain NFT sales break federal laws.
David Lesperance, managing partner of immigration and tax adviser with Lesperance & Associates, said the probe is also looking at the distribution of the ethereum-based apecoin cryptocurrency.
"As always, the key legal question is whether NFTs are securities," he said. "The answer…if yes…will have a dramatic impact on the entire crypto and NFT market."
Lesperance turned his attention to failed crypto lender Celsius Network, which filed for bankruptcy in July, another casualty of the cryptocurrency market crash. The company halted customer withdrawals in June.
More than $4.5 billion is owed to roughly 1.7 million Celsius customers and more than 100,000 creditors, according to the company's bankruptcy filing.
"To add further injury to insult, customers of the failed Celsius are discovering that both their identities and transaction history have been made public," Lesperance said. "This is because they are now creditors in the Celsius’ bankruptcy case."
"Providing a list of creditors is standard in bankruptcy filings, and absent regulation, crypto customers are just ordinary creditors who have to line up with others," he added.
Lesperance said normally "there are privacy rules for regulated financial institutions but … we'll, see 'absent regulation.' ”
"It’s one more issue that regulators will be looking to deal with in the near future," he said.
