Crypto Markets Play a Waiting Game

Bitcoin is at 57,600, just 0.71% down from this time last week, as Bitcoin’s rangebound sideways struggle continues. Bitcoin continued its decline at the opening of Wall Street trading on September 11, as positive U.S. macroeconomic data failed to buoy the markets.

Source: Brave New Coin Liquid Index

Bitcoin briefly fell below $56,000, before recovering, despite the release of August’s Consumer Price Index (CPI) report, which indicated inflation was cooling as expected. The CPI showed a 0.2% increase month-on-month and a 2.5% rise year-on-year, according to data from the U.S. Bureau of Labor Statistics. “The all-items index rose 2.5 percent for the 12 months ending August, the smallest 12-month increase since February 2021,” the bureau stated in a press release.

Traders Are Waiting for Confirmation

CME Group’s FedWatch Tool showed market sentiment shifting toward a smaller 0.25% interest rate cut at the Federal Reserve’s fast approaching September 18 meeting, with odds rising to 85% from 66% the previous day.

Despite the likelihood of the first U.S. rate cut since 2020, Bitcoin traders remained cautious. After months of sideways attrition, traders are waiting for confirmation of a rates cut, rather than trying to front-run something that might not happen, and be caught out.

Confirmation of this risk-averse environment came from CryptoQuant’s weekly report that shows that Bitcoin has decoupled from gold, signaling a shift in market behavior. While gold (XAU/USD) hit a new all-time high in dollar terms in August, Bitcoin’s price fell, leading to a negative correlation between the two assets.

“Bitcoin has decoupled from gold. As gold reached a fresh record high, Bitcoin prices declined, turning their correlation negative,” CryptoQuant explained.

Periods of negative correlation between Bitcoin and gold typically indicate a “risk-averse environment,” where investors prefer traditional safe-haven assets like gold. As a result, Bitcoin has mirrored the broader stock market’s downturn.

CryptoQuant wrote that their bull/bear market indicator is indicating bear marketing conditions.

Source: CryptoQuant

As Expected No Crypto In Debate

U.S. presidential candidates Kamala Harris and Donald Trump sparred over a range of issues, from abortion rights to the war in Ukraine, but cryptocurrency wasn’t part of Tuesday’s debate. Crypto, although not mentioned directly, remains a significant issue in this election cycle. According to consumer advocacy group Public Citizen, crypto firms have already spent $119 million in 2024, mostly directed at super PACs like Fairshake PAC. Trump is perceived as more crypto-friendly, vowing to end what he calls an “unlawful and un-American crackdown” on the industry. His choice of running mate, J.D. Vance, is also supportive of crypto, and Trump has pledged to advocate for Bitcoin miners. Several key figures in the crypto world are backing Trump, including Gemini co-founders Tyler and Cameron Winklevoss, who donated $2 million in bitcoin to his campaign. In contrast, Harris supporters organized a town hall under the banner of Crypto4Harris, with plans for further fundraising events.

North Korea Targets ETFs

The United States Federal Bureau of Investigation says that North Korean scammers and hackers are targeting firms associated with cryptocurrency exchange-traded funds (ETFs). Despite the billions of dollars invested in these crypto ETFs, investors might be too quick to assume their assets are fully secure.

North Korean hacker groups like the Lazarus Group are well-known in the cryptocurrency industry and are suspected of executing numerous hacks against prominent exchanges and blockchain protocols. Officials fear these groups could target crypto-backed ETFs by going after their underlying assets.

While stock market ETFs require robust systems to track and replicate the underlying asset prices accurately, fund managers of spot crypto ETFs must provide custody—either themselves or through a third party—of the actual digital assets to match their total assets under management (AUM). These substantial holdings present attractive targets for hackers.

Source: FBI

Moreover, although investors have poured billions into crypto ETFs, the majority of these funds are uninsured. If North Korean hackers were to successfully breach the backing assets, the consequences could be disastrous.

.Coinbase Global, the custodian for the majority of the ETF holdings has sophisticated security infrastructure with multiple layers that hackers would need to breach before causing significant damage. The prospectus from BlackRock’s iShares Bitcoin Trust ETF indicates that Coinbase Global—the fund’s custodian—offers an insurance policy of up to $320 million. While this amount may seem substantial, Coinbase reportedly custodies $269 billion in digital assets, meaning the insurance policy covers only about 0.12% of its AUM.

New UK Bill Says Crypto Assets Are Personal Property

The United Kingdom has introduced new legislation aimed at determining whether Bitcoin and other cryptocurrencies can be classified as “personal property” under local laws. In a notice on September 11, the UK government announced that the proposed Property Bill would address the legal status of non-fungible tokens (NFTs), cryptocurrency, and carbon credits. The bill seeks to create an additional category for property under UK law, recognizing digital assets as “things.”

“It is essential that the law keeps pace with evolving technologies, and this legislation will ensure that the sector can maintain its position as a global leader in cryptoassets while bringing clarity to complex property cases,” said Labour MP and Minister of State Heidi Alexander.

The government stated that the new law would provide legal protections for individuals and companies against fraud and scams and assist judges in resolving disputes involving digital assets, such as those in divorce settlements.

The legislation stems from a 2023 report commissioned by the UK Ministry of Justice, which concluded that “some digital assets are neither things in possession nor things in action, yet the law of England and Wales treats them as capable of being personal property.”

This bill marks one of the first initiatives by the Labour government to address digital assets and blockchain regulations since the party came to power after the July 4 election. However, experts suggest that further action on the bill may be delayed due to Parliamentary recesses and the upcoming party conference season.

Indodax Exchange Hacked

Indonesian crypto exchange Indodax has experienced a significant security breach, resulting in the loss of approximately $22 million across various cryptocurrencies.

In response, the exchange has disabled its mobile and web applications to investigate the attack. On September 11, blockchain security firms including PeckShield, Cyvers, and SlowMist reported an attack on Indodax’s hot wallets. The hacker managed to steal substantial amounts of Bitcoin and other digital assets.

Source: Indodax

According to SlowMist’s investigation, a vulnerability in Indodax’s withdrawal system allowed the attacker to withdraw funds from the hot wallet. Meanwhile, Cyvers suggested that the breach may have also involved attacks on systems like the signature machine.

The stolen assets include over $1.42 million in Bitcoin, $2.4 million in Tron’s TRX, $14.6 million in various ERC-20 tokens, $2.58 million in POL, and $900,000 in ETH from the Optimism blockchain. Cyvers detected more than 150 suspicious transactions across multiple networks, noting that the hacker had begun converting the stolen tokens into Ether. Typically, hackers use services like Tornado Cash to anonymize the funds after converting them into ETH.

Indodax responded by temporarily shutting down its operations to conduct a thorough investigation. In a statement, the exchange reassured users:

“We are currently undergoing full system maintenance to ensure everything operates smoothly. During this period, the INDODAX web platform and application will be temporarily unavailable.”

Indodax assured its customers that their assets remain secure despite the breach.