(Alexander Kuptsikevich – FxPro Financial Services Limited)
Market picture
Bitcoin rose 1.1% on Monday, and on Tuesday morning, it “shot up” another 5.5%, adding 7.5% over the past 24 hours. This growth momentum has brought the price of the first cryptocurrency back above $20K, in stark contrast to the dynamics of falling markets and a strengthening dollar.
Ethereum added almost as much – 7% – rising to $1,385. Against this backdrop, total crypto market capitalisation jumped 5.5% to $970 billion, with top altcoins adding between 2.3% (XRP) and 8.1% (Solana).
While the Dow Jones index closed at its lowest since November 2020, the Nasdaq100 turned to growth after nearing the lows of June, and cryptocurrencies showed a strong surge. The outperformance of the riskiest assets is more typical of periods of great monetary stimulus. Therefore, the most relevant question is whether we are now seeing the first signs of a market reversal or a trap for naive bulls.
News background
According to CoinShares, investments in cryptocurrencies rose for the second consecutive week last week. Net inflows were $8 mln, Bitcoin investments were up $3 mln, and Ethereum investments were up $7 mln. Investments in funds that allow shorts on bitcoin were down $5 mln, the first decline in 8 weeks.
Bitcoin will continue to trade in a range of $17K to $25K, Glassnode expects. Intense US Federal Reserve monetary policy pressure and an unfavourable macroeconomic climate offset any essential positive developments in the crypto industry.
Dan Morehead, CEO of crypto hedge fund Pantera Capital, believes billions of people will use blockchain in the coming years, increasing the value of cryptocurrencies.
The SEC has demonstrated that it intends to “damage or destroy the cryptocurrency industry in the US”, said LBRY, a decentralised content publishing platform.
Technology giant Apple has allowed the sale of collectable tokens (NFTs) in apps on its devices, but the commission will be 30%, sparking outrage in the crypto community.
Bitcoin tops $20k as stock futures rise, dollar rally stalls
(CoinDesk Analysis Team)
Bitcoin firmed up early Tuesday, having remained rock steady during the recent crash of fiat currencies against the U.S. dollar.
The top cryptocurrency by market value rose over 5% to $20,350, according to CoinDesk data. Ether, the second largest cryptocurrency, rose 4% to $1,390.
The uptick follows a period of uncanny resilience to turmoil in traditional markets. Bitcoin traded between $18,000 to $20,000 in the past five days even as major fiat currencies like the British Pound, Japanese yen and Chinese yuan dropped sharply against the U.S. dollar.
The pound, in particular, fell to an all-time low of $1.035 on Monday as the government’s plan to implement the biggest tax cuts in 50 years while boosting government borrowing and spending amid high inflation spooked investors. The Chinese yuan fell to 7 per dollar, the lowest since May 2020, triggering fears of a rout in global commodities.
If that’s not enough, the S&P 500, Wall Street’s benchmark index, ended Monday at its lowest level of 2022, extending the past week’s 4.5% slide. The Dow dropped more than 300 points on Monday, finishing in bear market territory.
Bitcoin has historically moved more or less in lockstep with stocks. So, the cryptocurrency’s latest resilience has raised hopes of its eventual evolution as a safe haven asset.
However, it may be too early to conclude that the cryptocurrency has permanently decoupled from traditional markets.
The S&P 500 futures rose 0.7% early Tuesday, perhaps helping bitcoin cross above $20,000. The dollar index, which gauges the greenback’s value against major currencies, fell 0.46% to 113.58.
“The U.S. dollar is a mega bubble,” Charlie Morris, chief investment officer at ByteTree Asset Management, said. “The Fed is making a huge error by overdoing [tightening],” “When they reverse, there will be a flood of money into bitcoin and gold.”
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