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Morning Crypto Briefing: Bitcoin Price Stabilizes In Low-$22Ks After Monday’s Crash

By:
Joel Frank
Updated: Jun 14, 2022, 13:15 UTC

Cryptocurrencies are consolidating on Tuesday after Monday’s collapse triggered by Fed rate hike and recession fears.

Bitcoin

Key Points 

  • Cryptocurrencies are stabilizing on Tuesday in tandem with broader markets after Monday’s crash on Fed tightening/recession fears.  
  • Upcoming US economic data and the Fed’s rate announcement on Wednesday will be crucial for crypto as a result.  
  • Bitcoin was last licking its wounds in the low-$22,000s and Ethereum in the upper-$1,100s.  

State Of The Market 

Amid a broader stabilization in macro sentiment, as traders take stock of Monday’s outsized risk-off moves, cryptocurrencies are consolidating. Total cryptocurrency market capitalization fell over 12% on Monday, taking losses since Thursday to around 25%, but is moving sideways on Tuesday in the $920 billion area, which is its lowest level since January 2021. 

To recap, last Friday’s much hotter than expected US Consumer Price Inflation (CPI) data sparked fears that the Fed might need to accelerate the pace of rate hikes in the months ahead, which is one factor that has weighed heavily in risk assets (like crypto and stocks). Indeed, there were a series of well-timed articles in the likes of the Wall Street Journal on Monday about how the Fed is likely to hike interest rates by 75 bps on Wednesday rather than the previously expected 50 bps, articles which many respected macro commentators/industry insiders think was likely coordinated by the Fed to guide market expectations.  

As such a 75 bps rate hike on Wednesday is now the market’s base case. This sent US bond yields, particularly at the short-end, lurching higher and, as a result, we saw the US 2-year 10-year yield spread invert once again, which is seen as a signal of incoming recession. In wake of last Friday’s horrific US Consumer Sentiment figures, which many see as a signal that the US economy is close to/already in recession, 2s10s inversion hasn’t come as much of a surprise.  

Of course, these recession fears have been another major factor weighing heavily on risk assets like crypto and stocks in recent days, alongside fears about tighter monetary policy. This week’s US Retail Sales data, scheduled for release on Wednesday, will be important in that context, with traders keen to assess consumer strength. Ahead of that, US Producer Price Inflation data out on Tuesday at 1330BST should show that inflation remains elevated, as last Friday’s CPI figures did. With the macroeconomic backdrop remaining ugly, crypto traders should caution against aping back in just yet, with near-term crypto rallies still very much at risk of being sold.  

Bitcoin Price Stabilizes In Low-$22,000s, Ethereum Trading Under $1,200  

After cratering more than 15% on Monday, making it (unusually) one of the worse performing cryptocurrencies of the day, Bitcoin has stabilized in the low-$22,000s on Tuesday, above earlier session lows around $20,800, but still down about 1.0% on the day. The recent drop to the low $20Ks means Bitcoin’s market cap is now under $430 billion and its recent underperformance versus peers means its dominance has fallen back to just above 46% from above 48% just a few days ago.  

Ethereum, meanwhile, is stabilizing in the upper $1,200s, down a further just over 2.0% on Tuesday, but above earlier session lows in the $1,070s. Its losses since last Friday now stand at around 35%, taking its market cap to under $150 billion, its lowest level since January 2021.  

In terms of the major non-stablecoin altcoins, stabilization is the dominant theme. Binance’s BNB is flat on the day in the $220 per token area and just above annual lows, having been close to $300 just a few days ago. Cardano’s ADA is over 5.0% higher on the day just below $0.50, with support having come in around $0.45, though the cryptocurrency is still down substantially from its levels in the mid-$0.60s just last week. Ripple’s XRP is stable at annual lows just above $0.30, having been above $0.40 just a few days ago while Solana’s SOL is higher by about 1.5% on Tuesday just under $30 per token, having been above $40 just a few days ago.  

Michael Saylor’s MicroStrategy, El Salvador Nurse Hefty Unrealised Bitcoin Losses  

Bitcoin maximalist Michael Saylor’s software company MicroStrategy is now sitting on an unrealized loss of well over $1 billion on its bitcoin holdings, various crypto media outlets have been reporting this week. The company began purchasing Bitcoin in August 2020 and has since accrued nearly 130,000 bitcoins, which at current prices are worth under $3.0 billion. Much of MicroStrategy’s funding to buy these bitcoins has come from the issuance of junk bond sales. The company’s stock (ticker MSTR) fell over 25% on Monday in tandem with the recent Bitcoin collapse.  

Separately, various crypto media outlets have put El Salvador’s unrealized loss on its Bitcoin holdings at somewhere in the region of a much more modest $40 million. The Central American nation announced Bitcoin as a form of legal tender last September, much to the derision of the IMF and other international financial institutions. “When they tell me that the fiscal risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile,” the country’s Finance Minister Alejandro Zelaya said on Monday. “The fiscal risk is extremely minimal,” he continued, noting that current unrealized loss only represents about 0.5% of the country’s national budget.  

91% Of Respondents Plan To Invest In Crypto Within 6 Months – BoA Survey 

91% of the respondents in a survey released by Bank of America (BoA) on Monday said they plan to invest in crypto within the next six months, despite difficult market conditions at the moment. In its survey of 1,000 existing and potential crypto users, 30% said they do not plan to sell any of their crypto in the next six months, while around 30% said they had not sold any over the last six months.  

The average transaction size was about $25 with PayPal and Coinbase the most frequent platforms used, the survey found, whilst BoA also said its survey revealed increased interest in the use of crypto for payments. 39% and 34% of respondents said they had already used crypto as a form of payment to make online and in-person purchases.  

Crypto made up less than 10% of the investment portfolio of 65% of respondents to the BoA survey, while 15% held more than 25% of their portfolio in crypto.  

Crypto Winter: Crypto.com & BlockFi Announce Layoffs, But Binance Bolstering Workforce 

As cryptocurrency and digital asset valuations continue to crater back from their 2021 highs, many crypto firms continue to struggle. Crypto exchange and payments service provider Crypto.com announced on Tuesday that it will be letting go of 260 employees or around 5% of company staff. Meanwhile, crypto lending/borrowing service provider BlockFi will let go of around 20% of its employees due to current difficult market conditions.  

However, Binance has “a very healthy war chest”, CEO Changpeng Zhao said at the crypto-focused Consensus 2022 conference over the weekend. “In fact, we are hiring right now,” Zhao continued, adding that the company also plans to continue its expansion with increased mergers and acquisitions. Binance currently has 2,000 openings, Zhao stated.  

BAYC Amongst The Casualties As NFT Valuations Collapse, DeFi TVL Also Still Dropping 

The chilling impact of the ongoing crash in cryptocurrencies in recent days on Decentralised Finance (DeFi) is evident in the continued decline of Trade Value Locked (TVL) in smart contracts across various protocols/chains. According to DeFi Llama, total TVL across DeFi had fallen to around $73.3 billion as of Tuesday, down from above $95 billion just one week ago, and down over 65% from earlier annual highs north of $200 billion.  

The Non-Fungible Token (NFT) space has also been taking a battering. The price floor to get your hands on one of the 10,000 Bored Ape Yacht Club (BAYC) NFTs had collapsed to around $90,400 as of Tuesday, its lowest level since August and down a further 12% in the last 24 hours. Just seven days ago, the BAYC price floor was around $160,000 and at the end of April, was above $400,000. That meant the floor price market cap of the BAYC collection (if every NFT was to sell for the lowest price currently on offer) fell back below $1 billion mark.  

In NFT-related news, French fashion giant Lacoste on Monday announced its launch of a new collection of NFTs as part of its UNDW3 (which stands for “underwater”) project. 11,212 NFTs will be released for 0.08 ETH each, with the company saying it wants to leverage the project to build an online community and engage with its customers in a new way. “Collectors will be able to access a pioneering ecosystem and digital, physical, and experiential benefits in the world of the crocodile, such as co-created products exclusively for them,” Lacoste said in a statement. 

Regulatory Landscape: NYC Mayor To Urge NY Governor To Veto PoW Moratorium 

New York Mayor Eric Adams is reportedly set to request that New York State Governor veto a bill passed by the state’s Senate at the start of June that would impose a two-year moratorium on new Proof-of-Work cryptocurrency mining projects that are powered by fossil fuel energy. The New York Senate recently passed the bill amid concerns about the environmental impact of cryptocurrency mining. The bill has been criticized by those within the crypto community, who have warned New York State officials that its passage into law would have a chilling impact on the crypto industry in the state.  

Bank of England Governor Andrew Bailey, speaking in a testimony before the UK Parliament on Monday, reiterated his anti-crypto stance and explained that he continues to believe that crypto has no intrinsic value. Bailey highlighted the weekend news that UK-based crypto borrowing/lending service Celsius has opted to halt withdrawals and transfers, which Bailey said marked the latest example of “another blow-up in a crypto exchange”.  

The CEO of Binance Australia Leigh Travers said in an interview with Cointelegraph on Tuesday that he thinks regulatory clarity for the crypto sector will prove that the industry “holds itself to a higher standard” than many industry critics believe. “The crypto industry wants to see regulation,” Travers remarked. A lack of regulatory clarity was cited by Australia megabank Commonwealth Bank of Australia (CBA) as the main reason why it axed a pilot program where it would have offered crypto trading services to its clients.  

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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