First Mover Asia: Is Bitcoin's ride past $24.1k a stopping point or sign of further gains?

ALSO: Shaurya Malwa writes that Waves’ decision to abandon the stablecoin model underlines a decline in this sector stemming from the Terra UST implosion and other debacles.

Good morning. Here’s what’s happening:

Prices: Crypto investors may have been expecting a 25 basis point rate hike, but the Fed's announcement didn't stop them from sending bitcoin and other cryptos higher. Will crypto assets move higher as more economic data pours in?

Insights: Waves' USDN token is exiting its stablecoin model in an XTN rebrand. What is the significance?

Prices

BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin Embraces the Fed's Latest Rate Hike

By James Rubin

The Federal Reserve decreed that a 25 basis point rate hike the world would see.

Bitcoin was moved and pushed past its former $23,000 threshold groove.

At least for a few hours following the central bank's much anticipated dovish tilt, the largest cryptocurrency by market capitalization was feeling poetic, recently trading at $23,967, a roughly 3.7% gain over the past 24 hours. BTC soared past $24,100 at one point Wednesday after lingering below $23,000 for much of the past week.

Investors seemed more interested in Fed Chair Jerome Powell's comments Wednesday that the U.S. central bank's inflation fight was far from over than his remark that "[the] disinflationary process has started." The Fed is still looking to slash inflation to 2% from its most recent 6.5% level in December.

How long bitcoin continues to trade in its current range near or above $23,000 remains unclear with some market observers believing that prices will retreat, but others highlighting more optimistic signs, including the Fed's last two more moderate rate hikes. "Historically, as interest rates rise moderately, as opposed to aggressively the average returns and bitcoin increase massively, more so than traditional assets since the speculators return quickly to buy as the credit and money become more available," CoinDesk Indices Managing Editor Jodie Gunzberg told CoinDesk TV's "First Mover" program.

Gunzberg noted "evidence of the number of bitcoin on wallets of OTC desks rising in January, a signal that "institutional investors such as hedge funds that typically use these desks for large transactions" were buying bitcoin, pushing up its price."

Ether fared even better on Wednesday, jumping close to $1,680, a 5.7% rise since Tuesday, same time. Other cryptos spent much of their day in the green with Layer 2 network Optimism's OPT token, a big winner a week ago, climbing almost 25%, and Layer 1 blockchain Aptos Network's APT token rising more than 9% to continue its momentum from January. APT surged 387% last month.

Equity markets also embraced the Fed announcement with the tech heavy Nasdaq and S&P 500, which has a strong technology component, rising 2% and 1%, respectively. Less than three months ago, with inflation lingering above 7%, a heftier increase seemed more likely. "Markets have been proved right today as the Federal Reserve announced a lower-than-previously-indicated rate hike of 25 bps," Oliver Rust, head of product at independent inflation at economic data-aggregator Truflation, wrote in an email.

Still, investors will be eyeing new data over the next two days, including jobless claims, and fourth quarter earnings from tech giants Amazon and Google, which in recent weeks have both announced mass layoffs tied to recessionary concerns. On Wednesday, social media platform Meta Platforms (META) reported that it had continued to lose massive amounts of money in its fledgling Facebook Reality Labs (FRL) division, which comprises its augmented and virtual reality operations. FRL accounted for a loss of $4.3 billion in the quarter, better than the consensus of analyst estimates for a loss of $4.4 billion and up from a loss of $3.7 billion in the third quarter.

In its January markets report, CoinDesk Indices noted that bitcoin's nearly 40% monthly increase was its largest since October 2021 near the end of the last bull market and 12th best month in its history, and that other digital assets had fared even better. "Crypto made a comeback in January as the macroeconomic environment turned brighter with decelerating inflation and expectations the Fed will dial back the pace of interest rates," the report said, adding that a falling dollar was further buoying the market and that "as inflation and interest rates moderate, it also propels bitcoin more than traditional assets historically."

Gunzberg highlighted cryptos' rising volatility relative to "traditional asset classes," a sign of optimism. "The change in sentiment on the macroeconomic backdrop is driving crypto buying especially from the speculators," she said. "It's the first stop where investors play as the credit and the money become more available."

Biggest Gainers

Asset	Ticker	Returns	DACS Sector
Loopring	LRC	+14.9%	Smart Contract Platform
Polygon	MATIC	+11.6%	Smart Contract Platform
Cosmos	ATOM	+10.9%	Smart Contract Platform

Biggest Losers

There are no losers in CoinDesk 20 today.

Insights

Waves’ USDN Token Abandons the Stablecoin Model in XTN Rebrand

By Shaurya Malwa

Stablecoins formed a distinct sector in the past bull market cycle, with centralized tokens like USD Coin (USDC) and Tether (USDT) reaching billions of dollars in market capitalization even as their decentralized counterparts mostly failed to maintain the $1 peg.

Terra’s UST was perhaps the poster boy of failed stablecoins. The algorithmic token, which relied on a basket of assets that supposedly backed its $1 value, fell over 90% to a few cents as the Terra ecosystem imploded last May. Prices of Terra’s luna tokens suffered even more, falling 99% within days to nearly zero.

Those declinesinesat wereas because of stemmed from how algorithmic stablecoins like UST operated. One UST could be redeemed or minted for exactly $1 worth of LUNA at any time. In theory that helped UST retain its value and created demand for both tokens.

Traders could continuously buy and sell LUNA and UST to maintain the peg and profit by doing so, incentivizing them to maintain UST’s peg.

Terra’s horrors have dissuaded decentralized finance (DeFi) developers from launching algorithmic stablecoin projects. Some, like the recently-launched Djed on Cardano, have shifted and positioned themselves as an overcollateralized token – with $1 worth of djed backed by between $4 to $8 worth of Cardano-based tokens.

Some of the few surviving DeFi stablecoins are changing their models and rebranding entirely.

Neutrino, which issued the USDN stablecoin on Waves blockchain, floated a community vote last year to move away from an intended $1 peg altogether. The vote was passed earlier this week.

“Before the 2022 bear market, USDN was a reliable option for those looking to store value,” Neutrino developers said in a recent post. “With the current setup, clearly, USDN can not withstand the unprecedented market volatility. However, the team and community believe USDN can still perform a valuable use case in the Waves ecosystem by pivoting to a different model.”

USDN was among the several stablecoins that depegged last year.  – iIt lost 9 cents in August, a slip that Waves founder Sasha Ivanov defended at the time.

The pivot to XTN will see the coin being collateralized by a basket of tokens from the Waves ecosystem, with its value floating based on supply and demand and the Backing Ratio (BR).

The BR represents the total value of all assets held in collateral against the circulating supply and will target a 100% ratio, making the price tend towards $1 for increased stability.

The role of SURF, a token issued to recapitalize USDN reserves, will still exist be performed during the pivot, with 10% of reserves being automatically converted from SURF to XTN when the BR reaches 115%.

The roadmap for the pivot to XTN includes the development of functionality in January, the release of a technical litepaper in late January, and a full rebrand of USDN to XTN in mid-February.

The addition of $15 million of ecosystem tokens as collateral through governance will occurtake place between February and April.

Important events

11:00 a.m. HKT/SGT(3:00 UTC) Bank of England Monetary Policy Report

12:15 p.m. HKT/SGT(4:15 UTC) European Central Bank Monetary Policy Decision Statement

9:00 p.m. HKT/SGT(13:00 UTC) Australia S&P Global Services PMI (Jan)