China's Economic Headwinds Deepen, Crypto Markets Take a Breather

China's economy is encountering strong headwinds; last week, credit rating agency Moody’s downgraded the government’s credit rating from stable to negative.

As I highlighted in one of my earlier letters, the current situation confronting Beijing is primarily a result of the troubles in its real estate market, with Chinese property stock sales experiencing a decline of over 25% in the last year.

In the latest review, Moody’s also downgraded Hong Kong’s outlook, 22 local government financing vehicles, and the four largest Chinese lending banks.

While authorities in Beijing have maintained that the country’s macro outlook remains resilient, the writing on the wall paints a different picture.

China’s government has already implemented a couple of fiscal measures to address the challenges, especially in the real estate market. However, whether or not these measures are sufficient to turn things around is deemed 'bleak' at the moment.

Cooling Off After Recent Highs

The crypto market experienced a slight decline at the beginning of this week, with BTC's price down by 3.6% over the last 24 hours.

Although this sudden reset may have taken several investors by surprise, I would characterise it as a healthy retracement, especially considering that market sentiment had been leaning heavily towards overconfidence.

Now that overleveraged long positions have been flushed out, we could be entering a consolidation period, potentially witnessing some sideways price action as we approach the year-end.

Altcoin’s Trading Volumes Surge, Bitcoin’s Dominance Still Trending 
The recent rally in the crypto market has led to a substantial increase in altcoin trading volumes, reaching 67% — the highest level observed since March 2022.

On the other hand, Bitcoin's market dominance continues to hover around 50.1%, despite the robust momentum in its price action over the past few weeks.

Industry Shakers 

• El Salvador offers 'Freedom Visa' for $1 million crypto investment

  In 2021, El Salvador made headlines by giving Bitcoin legal tender status. Now, the country has launched a $1 million "Adopting El Salvador Freedom Visa" program, limited to 1,000 participants annually. This initiative, similar to Golden Visa programs elsewhere, invites applicants seeking residency and citizenship through a $1 million investment in either Bitcoin or USDT. 

• Montenegro to Extradite Terra Co-founder Do Kwon to the U.S.

  Montenegro has chosen to extradite Do Kwon, co-founder of Terra, to the U.S. rather than South Korea, where he is facing charges in both jurisdictions. The Montenegro court has sanctioned Kwon's extradition, and he is slated to serve a four-month sentence for document forgery in Montenegro. 

• Tether freezes all OFAC-sanctioned wallets

  Tether, the USDT stablecoin issuer, has declared the freezing of wallets belonging to individuals sanctioned by the U.S. Office of Foreign Asset Controls (OFAC), according to the company's recent announcement. Tether presented this action as a voluntary measure taken to "proactively prevent any potential misuse of Tether tokens and enhance security measures."