Bitcoin’s October rally appears to have put the cryptocurrency on a firm footing ahead of central bank meetings in the U.S., U.K., and Australia to assess the stickiness of inflation and determine policy response.

The top cryptocurrency rallied nearly 40% in October, hitting a fresh record high of $66,975 as investors cheered positive seasonality and the launch of futures-based bitcoin exchange-traded funds (ETFs) in the U.S. That was the biggest single-month percentage rally since December 2020, according to CoinDesk data.

While key indicators favor a positive follow-through in the coming months, it may not be a smooth ride if the impending scaling back of stimulus, also known as the taper, by the U.S. Federal Reserve (Fed) and other major central banks rocks equity markets.

“Bitcoin bullish sentiment remains at fever-pitch, highlighted by NFT. NYC [the annual non-fungible token event] whipping the financial capital into a frenzy,” Jehan Chu, managing partner at Hong Kong-based Kenetic Capital, told CoinDesk in a WhatsApp chat. “[However], if public markets falter on the back of Fed bond purchase tapering, BTC could be dragged into a small correction after breaching all-time highs last week.”

Wednesday’s Fed meeting is widely expected to conclude with policymakers announcing plans to begin tapering the monthly $120 billion in asset purchases that have triggered unprecedented risk-taking across all corners of financial markets over the past 18 months.

Analysts told CoinDesk last month that the Fed taper is priced in. So, the market reaction will depend on the Fed’s language on inflation and the timing of the first interest rate hike.

Several policymakers have recently said that inflation is proving to be more sticky than previously expected. Meanwhile, bond traders and interest rates futures have ramped up bets on early rate hikes.

On Friday, analysts at Goldman Sachs brought forward their forecast for the first rate hike to July from Q3 2023, according to Bloomberg. The investment banking giant expects the second rate hike in November 2022, followed by two hikes in 2023 and 2024.

Fed funds futures are now pricing hikes beginning early in the second half of 2022. The U.S. two-year Treasury yield, which is more sensitive to short-term interest rate/inflation expectations than the 10-year yield, nearly doubled to 50 basis points in October.

While equities and bitcoin have remained resilient, things may change if the Fed statement carries fewer references to inflation being “transitory”. That would perhaps imply policymakers’ growing discomfort with high inflation and validate fears of faster rate hikes, in turn, bringing selling pressure to equities and bitcoin.

ByteTree Asset Management’s Charlie Morris told Bloomberg that bitcoin is a “risk-on inflation hedge”. The cryptocurrency’s gold-like store of value appeal mainly attracts buyers when global financial markets see strong demand for growth-sensitive assets. However, bitcoin mostly takes a beating when global markets wilt.

Aside from the Fed meeting, investors will keep an eye on Tuesday’s Reserve Bank of Australia’s (RBA) meeting and Thursday’s Bank of England’s rate decision and Friday’s U.S. nonfarm payrolls report. Money markets expect the BOE to hike interest rates this week.

Major Chinese tech giants Ant Group, Tencent, and JD.com signed a “self-regulation” convention on non-fungible tokens (NFTs) with state organizations on Sunday, according to an Ant Group WeChat post and Chinese media.

• China’s big tech appears to be facing increasing pressure over its involvement with NFTs. The market hype around the unique digital assets appears to have made regulators worried that NFTs are edging too close to crypto trading, which has been practically banished from China in large part for creating too much market speculation.
• The “Digital Culture and Creative Industries Self-Regulation Convention” is made up of 11 tenets that align with central government aims: “enabling the real economy; promoting national culture; supporting the development of the industry; adhering to the original letter of the law; ensuring value support; protecting consumer rights; working with controllable consortium chains; maintaining cybersecurity; ending virtual currencies; preventing speculation and financial risks; and preventing money laundering.”
• The National Copyright Trading Center Alliance, the China Academy of Fine Arts, state broadcaster CCTV’s Animation Studio, and Hunan Museum also signed the convention along with Tencent’s cloud division and JD.com’s technology subsidiary.
• Ant Group and Tencent recently changed references to NFTs on their websites and platforms to “digital collectibles,” likely to put more distance between their products and crypto markets.
• Red Date CEO Yifan He confirmed that the companies were trying to distance their “digital collectibles” from crypto in a Friday conference. Red Date is building the Blockchain Services Network, a government-backed internet of blockchains. The Beijing company launched its own NFT infrastructure at the conference.
• In its statement on the name change, AntChain, Ant Group’s blockchain arm, all but said that it wanted to appease regulators who think the name “NFTs” causes too much speculation. The company conducts its digital collectibles business in compliance with regulations and opposes market speculation, AntChain said.
• NFTs have up to this point mostly been exempted from China’s crackdown on crypto.

Read more: BSN Architect Red Date to Launch NFT Infrastructure in China

Crypto mining rig maker Bitmain appointed Zhou Feng as its legal representative and general manager, the company said in a WeChat post.

• Zhou was a key deputy to Bitmain co-founder Zhan during a battle for control of the world’s biggest crypto mining machine manufacturer between Zhan and co-founder Wu Jihan. Zhan will continue to serve as Bitmain’s chairman.
• Zhou’s rich experience in supply chain management will “surely write a more brilliant new chapter,” the WeChat post said.
• The news was announced at an Oct. 28 staff meeting to celebrate its eighth-year anniversary. At the meeting, Bitmain also gave the “Same Boat Award” to employees that have been with the company for over five years.
• Legal representatives are the cornerstone of Chinese corporate authority as they are entitled to act on the company’s behalf.

Bitcoin may be the alpha dog of crypto, but for many small retail investors these days, dogecoin and shiba inu are the pick of the litter.

Binance subsidiary WazirX, India’s largest cryptocurrency exchange, suffered outages as traders jumped into the fray, buying shiba inu and stressing out the platform’s servers to the point that trade executions were delayed this past Wednesday. Over half a billion dollars’ worth of trades were done on WazirX that day, the highest of any crypto exchange in India, CEO Nischal Shetty tweeted.

“It basically brought down our exchange,” Siddharth Menon, one of WazirX’s co-founders and its chief operating officer, said on CoinDesk TV’s “First Mover” program Thursday morning. “The kind of active numbers and the active users that we saw in the last 48 hours has actually shocked us. We were not ready for it. We were all ready for the bitcoin move, but we were never ready for shiba inu.”

Menon suspects that there is some amount of unit bias at play. That’s where a novice trader is prone to buy a lot of one kind of cryptocurrency because the price of one unit of it is relatively small compared with, say, bitcoin even though one can buy the same dollar amount in bitcoin as the low-priced coin.

For investors who are dipping their toes in the water with a relatively small amount of money, a low-priced coin can make one feel a little richer. For example, as of this writing, $620 buys 0.01 BTC. On the other hand, it buys about 10 million SHIB.

What the data show

And while some “smart money” is starting to appear to be trading shiba inu and dogecoin, “whales,” or large investors, remain in the more familiar seas of bitcoin and ether.

That can be seen in average trading volume.

Bitcoin and ether average trade sizes are larger than those of dogecoin and shiba inu on almost every exchange. On Coinbase, bitcoin’s average trade size is hovering at around $2,000, while ether trades average $1,600. On the other hand, the exchange sees average trades for dogecoin and shiba inu of roughly $800.

“This suggests price action is mostly retail-driven,” said Clara Medalie, strategic initiatives and research lead at digital asset data provider Kaiko, adding that on Binance, the average trade for bitcoin and ether is about $2,000. That figure is $1,200 for dogecoin and $900 for shibu inu.

“While average trade size isn’t a perfect gauge for institutional investment – most large traders break apart their orders into smaller sizes – we can still observe clear trends that correspond with waves of interest,” she said.

Dog days

Yet the data shows that meme coins face their own cycle, Medalie noted.

“It is interesting to note that average trade size for nearly all assets has increased considerably since the start of the bull run last November,” Medalie said. “With meme tokens such as DOGE and SHIB, we can observe spikes during the initial fervor and then sharp declines once the excitement wears off.”

And all crypto moves at least somewhat together, including how large trades get. “We can also observe that bitcoin, ethereum and doge seem to have similar trend lines for average trade size, strongly correlated to mini-bull runs,” Medalie said, pointing out that trade sizes for all assets spiked right before the May crash.

Meanwhile, meme coins serve another purpose.

Retail traders test out the experience of buying, holding and selling a small amount of cryptocurrency on new platforms by placing different types of orders and seeing how they get filled – or not. While holding $100 worth of bitcoin can be bought just the same, if not more easily, than $100 of dogecoin or shiba inu, it may take newbies a little bit of time to wrap their heads around that concept. What’s more, their experience with wild swings in meme coins will prime them for the volatile, though relatively “safer,” major cryptos like bitcoin or ether.

And when those novice traders finally realize that a single, low-priced meme coin will never surpass the price of bitcoin or ether as they currently trade (if shiba inu traded near bitcoin’s at around $62,000, its total market cap would be $36.5 quintillion, or 7,313 times the value of the earth’s estimated $5 quadrillion price tag), they may finally gain a little perspective, rid themselves of unit bias and use those meme coins instead to develop proper trader discipline.

Meme coins thus can be seen as the gateway for retail investors to become more experienced crypto traders.

An obedience school, if you will.

The bitcoin white paper was released 13 years ago today, on October 31, 2008.

The email containing the white paper was sent just after 2 p.m. ET on a mailing list for cryptographers. According to a copy of the email maintained by the Nakamato Institute, bitcoin’s pseudonymous creator, Satoshi Nakamoto, wrote at the time: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

“The main properties: Double-spending is prevented with a peer-to-peer network. No mint or other trusted parties. Participants can be anonymous. New coins are made from Hashcash style proof-of-work. The proof-of-work for new coin generation also powers the network to prevent double-spending,” Nakamoto went on to write.

Nakamoto’s paper received its first reply on November 2 from James A. Donald, who wrote back: “We very, very much need such a system, but the way I understand your proposal, it does not seem to scale to the required size.”

Bitcoin was later officially launched on January 3, 2009, the date on which the first block of transactions — known as the genesis block — was mined. 

A full copy of the bitcoin white paper is embedded below:

BitCoin White Paper by ZX Lee

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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This week’s “Long Reads Sunday” is a reading of EY Global Blockchain Lead Paul Brody’s latest essay for CoinDesk: “We Are Already Living in a Post-Scarcity World.”

See also: MicroStrategy CEO Michael Saylor’s 17,732 BTC Holdings Now Worth $1.1B

“The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Nuthawut Somsuk/iStock/Getty Images Plus, modified by CoinDesk.

Amazon Web Services (AWS) is searching for a specialist to foster digital asset underwriting, transaction processing, and custody in the cloud, according to a recent job posting.

The infrastructure giant wants to hire a Financial Services Specialist to work with global financial institutions and innovative fintechs, and “transform the way they transact digital assets (ex. cryptocurrencies, CBDCs [central bank digital currencies], stable coins, security-backed tokens, asset-backed tokens and NFTs [non-fungible tokens]) from price discovery to execution, settlement and custody.”

Amazon’s much-anticipated move into digital assets is expected to include some kind of payment token, a so-called “Amazon coin,” based on previous job postings. Meanwhile, AWS tailoring its infrastructure to things like cryptocurrency transaction processing and custody will likely be seen as a smart move, one that IBM is also doing.

”Working hand in hand with our sales teams, solution architects, ISVs and systems integrators you will help deliver the solutions that move customers towards end-to-end digital asset underwriting, transaction processing, and custody in the cloud,” said the AWS job ad.

Quick Take

• To date, Coinbase has listed 116 assets for trading
• Over 60% of newly added assets to the exchange were added in 2021
• The Block Research takes a look at the exchange’s listing process

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members of The Block Genesis.
You can continue reading
this Genesis research on The Block.

Quick Take

• Directors of Argo past and present have helped set up a handful of crypto investment vehicles trading on exchanges in London.
• These companies share directors and some even a registered office, and have raised millions to invest in some of crypto’s hottest but riskiest sub-sectors.

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Last weekend, Jack Dorsey set the internet alight when he proclaimed, “Hyperinflation is going to change everything. It’s happening.” That kicked off a mighty debate involving Cathie Wood, Elon Musk, Jeff Booth and others. At the heart of it is the question of whether inflation or deflation is the more powerful force in the months and years to come.

See also: Jack Dorsey Is Right About Inflation – Partly

“The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: OsakaWayne Studios/Moment/Getty Images, modified by CoinDesk.