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Morning Crypto Briefing: Bitcoin (BTC) Recovers $20K Handle Following Weekend Turmoil

By:
Joel Frank
Updated: Jun 20, 2022, 13:04 UTC

Bitcoin and Ethereum fell to fresh annual sub-$18,000 and $900 lows over the weekend, but sentiment has since stabilized.

Crypto coins

In this article:

Key Points 

  • Bitcoin is back in the mid-$20,000s and Ethereum around $1,100, with both have recovered well from the weekend’s downside.  
  • But many analysts suspect the worst may be yet to come for crypto against a still unfavorable macro backdrop.  
  • Solana has shrugged off a Solend governance debacle and is eyeing a test of key technical resistance.

Bitcoin Price Recovers Back Into Mid-$20,000s, Ethereum To $1,100

It’s been a tumultuous few days in cryptocurrency markets. On Saturday, Bitcoin led a market-wide sell-off as it cratered from highs in the upper $20,000s to lows under $18,000, its worst levels since December 2020. However, the world’s largest cryptocurrency by market capitalization swiftly recovered on Sunday amid apparent dip-buying and is on Monday changing hands in the mid-$20,000s once again, in line with its pre-weekend sell-off levels once again. At current levels, BTC/USD is up an impressive 15% versus weekend lows.  

Volatility in Bitcoin that was seemingly a function of thin weekend liquidity, a stop-run and technical selling/buying dragged the world’s second-largest cryptocurrency by market cap Ethereum along for the ride. ETH/USD on Saturday briefly fell below the $900 per token level for the first time since January, but as of Monday is back to trading just above $1,100, a stunning 25% up from weekend lows.  

The rapid recovery after key levels of support was broken over the weekend in major cryptocurrencies will come as a relief to investors, but analysts continue to argue that risks remain tilted towards further losses given the unfavorable macro backdrop. Fed Chair Jerome Powell will be testifying before Congress this week and will elaborate on last week’s hyper-hawkish Fed policy shift, which saw the bank accelerate the pace of rate hikes to 75bps from 50bps and signal an intent to take interest rates well into so-called “restrictive” territory in the coming years to deal with inflation. 

Powell was keen last week to emphasize that the Fed will do whatever it takes to bring inflation in the US back under control, even if that means tolerating a higher unemployment rate (which would typically come about as a result of a recession). While the Fed signaled in its latest dot-plot last week that it doesn’t see rates moving above 4.0% in 2023, crypto investors should brace for the risk that inflation remains elevated and the Fed eventually has to raise interest rates to the 5-6% region. 

This would be catastrophic for risk assets like US stocks and crypto, which perform best when monetary conditions are accommodative as opposed to restrictive. US Purchasing Manager Index survey data on Thursday will give a timely update as to the health of the US economy as concerns about a US recession rise and could also impact stock/crypto risk appetite. Trade will be quiet this Monday with US markets shut for the Juneteenth public holiday. 

SOL Bounces To Test 21DMA, Key Downtrend Despite Solend Governance Debacle 

Turning now to some of the major stablecoins. Solana’s SOL has recovered back towards last week’s highs near $36 per token in tandem with the broader market bounce. SOL/USD doesn’t seem to have been much impacted by a governance debacle at Solend, the largest Decentralised Lending (DeFi) platform running on the Solana blockchain.  

On Sunday, a Solend governance proposal proposing to create “emergency powers” that would give Solend Labs the power to access a major whale’s wallet to mitigate the risk of a large liquidation. However, after a massive social media backlash, with Solend accused of going against the values that underpin crypto in creating powers to hack into a wallet, a new governance proposal that would rescind these “emergency powers” passed.  

SOL/USD is eyeing a test of its 21-Day Moving Average just above $36.00 and a test of a key downtrend that has been capping the price action since mid-May. A break above these levels could open the door to an extension of recent upside towards the next key areas of resistance around $45 and $48.  

Elsewhere, Cardano’s ADA was last trading near $0.50, up about 18% versus weekend lows. Binance’s BNB was last changing hands near $215, up 17% versus weekend lows. Dogecoin, meanwhile, was doing a little better and up over 20% versus sub-$0.05 weekend lows near $0.06 after Tesla CEO and precocious billionaire Elon Musk doubled down on his support for the coin via Twitter. Ripple’s XRP was last trading around $0.32 with focus as ever on the ongoing Ripple vs SEC lawsuit.  

Algorithmic Stablecoin Trouble Continues 

The Tron blockchain’s algorithmic stablecoin Decentralised USD (USDD), which many in the crypto space see as a copy and paste of Terra’s ill-fated UST stablecoin, continues its slow decline. USDD was last trading below $0.95, having fallen to as low as $0.92 on Sunday, despite claims by Tron founder Justin Sun that the stablecoin is substantially over-collateralized.  

Elsewhere, Magic Internet Money (MIM), another USD-pegged algorithmic stablecoin, has also lost its 1:1 peg to the buck in recent days. According to CoinGecko, MIM/USD fell as low as $0.975 on Sunday before rebounding to current levels around $0.99, with the token’s platform Abracadabra facing accusations on social media of having accrued $12 million in “bad debt”.  

Cryptocurrency markets will be watching a hearing in the US Congress this week on the topic of stablecoins, with the Fed having recently made a few criticisms about them in a recent monetary policy report.  

FTX Expands Canadian Presence, Binance Suspends Withdrawals/Deposits Through Brazil’s Pix App 

FTX, one of the fastest-growing cryptocurrency exchanges in the world, this weekend entered into an agreement to purchase Canadian platform Bitvo. The acquisition comes as FTX looks to expand its presence in Canada, with the purchase expected to complete sometime in Q3 2022, subject to regulatory approval. “We are delighted to enter the Canadian marketplace and continue to expand FTX’s global reach,” FTX CEO Sam Bankman-Fried said in a statement. “Our expansion into Canada is another step in proactively working with cryptocurrency regulators in different geographies across the globe,” he added.  

Elsewhere, the world’s largest cryptocurrency exchange Binance suspended deposits and withdrawals through the Brazilian government’s online payment platform Pix last Friday. The split with Pix comes after the end of a deadline set by the Brazilian Central Bank (BCB) for all Pix providers to implement new Know Your Customer (KYC) requirements. But Binance deposits and withdrawals via Pix could soon return, with the exchange in the process of buying Brazilian securities brokerage firm Sim;paul Investimentos, which has already secured approval from the BCB and Brazil’s Securities and Exchange Commission.  

Number of NFT Platforms in China Increases 5x Since February 

According to a report published this weekend by local Chinese press, the number of Non-fungible Token (NFT) platforms operating in the country has increased five-fold since February 2022 to over 500. The report noted that the rise in the number of platforms operating in the country comes as the popularity of digital collectibles rises, with Chinese tech giants Tencent and Alibaba also showing interest in the space and filing multiple trademarks. According to the Chinese press, the government continues to view the NFT market unfavorably, believing it to be filled with speculation that poses risks to investors.  

Regulatory Landscape 

In a semi-annual monetary policy report released last Friday, the Fed noted that “recent strains experienced in markets for stablecoins… and other digital assets have highlighted the structural fragilities in that rapidly growing sector”. “Generally, stablecoins that are not backed by safe and sufficiently liquid assets and are not subject to appropriate regulatory standards create risks to investors and potentially to the financial system, including susceptibility to potentially destabilizing runs,” the Fed’s report continued.  

The report criticized the “concentrated nature” of the current stablecoin market, pointing out that total stablecoin market cap is currently concentrated in the USDT, USDC and BUSD coins. Stablecoin “vulnerabilities may be exacerbated by a lack of transparency regarding the riskiness and liquidity of assets backing stablecoins,” the report added. Fed Chair Jerome Powell will deliver a two-day testimony this week before the US Senate and House of Representatives where he will discuss the monetary policy report. He may comment on stablecoins.  

Separately, a group of 14 US Senators signed a letter addressed to the US Environmental Protection Agency arguing the benefits of crypto mining, which can have a “substantial stabilizing effect on energy grids”. The letter argued that mining can utilize flared gas and renewable energy sources and that “digital assets, and their related mining activities, are essential to the economic future of the United States.” 

Meanwhile, over in Russia, state-owned Gazprom Neft has entered into a partnership with BitRiver, Russia’s largest crypto mining hosting service provider. Under the new agreement, Gazprom Neft will provide BitRiver mining centers with electricity generated from petroleum gas. BitRiver will also develop the necessary digital infrastructure to utilize energy from Gazprom flare gas.

About the Author

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018. Joel specialises in the coverage of FX, equity, bond, commodity and crypto markets from both a fundamental and technical perspective.

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