Morning Crypto Briefing: Bitcoin Tumbles Back Below $30,000, Focus On Upcoming US Jobs Data

Joel Frank
Updated: Jun 2, 2022, 13:27 GMT+00:00

Cryptocurrencies fell sharply on Wednesday as strong US economic data, hawkish Fed commentary spurred Fed tightening bets and de-risking.

Coins & dollars

Key Points

  • Crypto markets tumbled on Wednesday, erasing earlier weekly gains as US stocks fell and US yields/USD rose.
  • The de-risking was attributed to strong US data and hawkish Fed commentary.
  • Bitcoin is now back under $30,000 and ethereum in the low $1,800s as macro focus turns to US jobs data.

State Of The Market

Cryptocurrency markets experienced a sharp pullback on Wednesday, erasing their outperformance earlier in the week, weighed amid a drop in US equity prices on the day, as well as a further rebound in long-term US bond yields and the US dollar. Total cryptocurrency market capitalization fell back to the low $1.20s trillion area from earlier weekly highs above $1.30 trillion, losing nearly 6.0% on the day.

Market commentators attributed Wednesday’s equity market downside/US bond yields and USD upside to a combination of further hawkish rhetoric from Fed policymakers and the stronger than expected May ISM Manufacturing PMI survey. Worries about worsening US economic growth, as well as US inflation that looks like it may have peaked, have weighed on the outlook for Fed tightening in recent weeks, weighing on the US dollar/US yields and offering (some) support to stocks and crypto.

But a US economy that is holding up better than expected (as per the latest ISM data) might embolden the Fed to press ahead with the faster pace of tightening that the equity/crypto bulls are keen to avoid. This might explain some of the intra-day de-risking seen on Wednesday. In the weeks ahead, markets are likely to remain at the whim of shifting expectations about US inflation, growth and Fed policy, amid unusually elevated uncertainty regarding all of these themes, so traders should be prepared for choppy conditions.

Trading conditions on Thursday are calm as investors look ahead to upcoming US labor market data releases that could spark fresh cross-asset volatility, starting with US payroll company ADP’s estimate of private employment change in May at 1315BST. At current levels around $1.225 trillion, total crypto market cap is around 7.5% below earlier weekly highs around $1.326 trillion.

Bitcoin Drops Back Under $30K, Altcoins Also Suffer

Bitcoin, having dipped more than 6.0% on Wednesday back from earlier session highs near $32,000, is on Thursday trading just below the $30,000 level. That means the cryptocurrency’s on the week gains have now been pared to less than 2.0%, having at one point on Tuesday stood at more than 10.0%. At current levels, bitcoin’s market cap is around $570 billion, while its crypto market dominance has remained stable near multi-month highs in the mid-46% area.

Continued inflows into Canada’s Purpose Bitcoin Exchange Traded Fund (ETF) over the past few days suggest that dip-buying demand remains robust. The total number of bitcoins held by the fund hit a record high of 43,701.7 on Tuesday, according to data on Glassnode, though this was admittedly just before the latest minor pullback on Wednesday.

Separately, falling bitcoin miner profitability amid the decline in bitcoin’s price in May has been in focus. According to data, daily miner revenue had fallen below $30 million by the end of May, down from above $40 million at the start of the month, near its worst levels over the past 12 months. That marks a more than 60% pullback from record daily revenues of around $80 million last April.

Despite this, the bitcoin network has maintained a relatively high hash rate, which at 211.82 exahashes per second (Eh/s), is only about 16% below the record high of over 250 Eh/s it hit at the beginning of last month, Bitinfocharts data on Thursday showed. Crypto analysts said that in past bear markets, miners have temporarily powered down their rigs, with some arguing that reluctance to do so this time around could be indicative of expectations for a near-term rebound in bitcoin’s price. Glassnode data on Thursday showed that miner to exchange wallet flows of bitcoin hit a four-month high, which some analysts said could suggest minors are looking to sell some of their bitcoin holdings in order to tide themselves over in the short-term.

Turning now to altcoins, ethereum also tumbled on Wednesday, dropping nearly 6.5% on the day back to the low $1,800s per token. At current levels on Wednesday near $1,820, ETH/USD is nearly 10% below earlier weekly peaks above the $2,000 level and is back to trading below its 21-Day Moving Average at $1,942.

Other major altcoins also suffered, with Binance’s BNB last down nearly 5.0% in the last 24 hours according to CoinMarketCap data and with Cardano’s ADA, Ripple’s XRP and Dogecoin all down a similar margin.

Meanwhile, Solana is the major underperformer of the major altcoins, down over 11% in the last 24 hours, with downside exaccerbated after its network was halted for over four hours due to a bug. Solana’s network has suffered from full or partial outages on at least seven other occasions in the past 12 months.

Crypto Adoption: 11% Of US-based Insurers Considering/Invested In Crypto, SK To Create Digital Assets Committee

On Wednesday, Goldman Sachs released its annual global insurance investment survey, revealing that 11% of US-based insurance firms are either interested in investing, or are already invested in crypto. The survey of 328 chief financial and investment officers, which included questions regarding cryptocurrency for the first time, revealed that globally, 6% of industry respondents are either invested or considering investing in crypto. Goldman’s latest survey follows similar surveys in recent months which have shown a significant minority of US-based asset managers are interested in investing in crypto, though many would be more likely to do so if there was an approved US bitcoin/crypto Exchange Traded Fund.

South Korea is planning the creation of a new committee specifically tasked with overseeing digital asset markets in wake of the collapse of Terra, which is believed to have impacted as many as 280,000 of the nation’s citizens, reported NewsPim on Thursday. The so-called Digital Assets Committee could be launched as soon as this month and would provide criteria to exchanges for them to list coins, will introduce new investor protections and will seek to monitor unfair trading practices.

This would make South Korea one of the leading nations in the world when it comes to the regulation of digital asset markets and, if successful, could provide a template for other countries to go off of. Many crypto analysts/proponents are of the opinion that a robust, fair regulatory framework would hasten the mainstream adoption of digital asset usage, as it would increase investor/consumer confidence in the technology.

In further news related to South Korea, the government has set up a $177.1 million metaverse investment fund, making it one of the first national governments to do so. The fund is part of the so-called “Digital New Deal” program recent set up to invest in emerging technologies and is will be directed by the country’s Information & Communications Technologies Minister Lim Hyesook, who referred to the metaverse as “an uncharted digital continent with indefinite potential”.

Elsewhere, influential US Federal Reserve policymaker John Williams on Wednesday warned his fellow central bank officials, academics and financial industry leaders to prepare for a fundamental change to money and payments. In remarks delivered at a workshop co-hosted by the NY Fed and Columbia University, Williams said that central bank digital currencies and stablecoins backed by safe, liquid assets have the potential for innovation.

In news relating to the adoption of cryptocurrencies as a means of payment, Chipotle, one of the most recognizable food chain names in the US, will now accept payment in bitcoin and other cryptocurrencies from customers.

Finally, in terms of notable commentary, billionaire tech entrepreneur Marc Andreessen this week compared Web3 and the emergence of blockchain technology to the rise of the internet back in the 90s. “I’ve never said it about any other kind of technology because I just wanted people to know like I don’t take the comparison lightly,” Andreessen remarked.

Exchange News: Victorious Argentina NFC Sponsored By Binance, FTX Trading Volumes Surpass Coinbase in May

Argentina’s national football club, which beat Italy on Wednesday to win The Finalissima following a spectacular performance from football megastar Lionel Messi, played under the sponsorship of the world’s largest crypto exchange Binance. Elsewhere, relative newbie crypto exchange FTX continues its ascent within the industry, with reports on Thursday suggesting that it had a higher total trading volume in May than US-based crypto trading giant Coinbase.

Elsewhere, KuCoin is reportedly set to launch its own decentralized crypto wallet that will allegedly feature cross-blockchain trading, DeFi and NFT functionality. Meanwhile, Nate Chastain, an ex-executive at the world’s largest NFT marketplace OpenSea, is reportedly being charged by US authorities of insider trading.

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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