Morning Crypto Briefing: BTC Stabilizes Under $29K, ETH Licks Wounds Pre-US Core PCE Data

Key Points

• Cryptocurrency markets are consolidating following a bearish Thursday session in tandem with calm macro trading conditions.
• Markets are awaiting the release of key US Core PCE inflation data at 1230GMT that could affect Fed tightening expectations.
• Bitcoin was last trading just under $29,000, having held up better than the broader crypto market this week.

State Of The Market

In fitting with a sense of calm across markets as trading conditions cool off ahead of the release of key US April Core PCE inflation data at 1230GMT, cryptocurrency markets are seeing some stabilization on Friday following Thursday’s bearish session. Total crypto market capitalization is currently about 1.0% lower on Friday in the $1.18 trillion area, having hit more than two-week lows just above $1.15 trillion on Thursday.

As a reminder, altcoins led the losses on Thursday while bitcoin (a relative safe haven in the crypto space) held up better. Downside came despite upside in US (and global) equities, which would normally lift the highly risk-sensitive crypto sector, and despite a recent pullback in long-term US bond yields and the US dollar (both of which are at or close to monthly lows on Friday).

Normally lower yields help crypto owing to the lower “opportunity cost” of holding non-yielding assets (like crypto), while a weaker buck can boost foreign demand for USD-denominated assets (like crypto). Total crypto market cap currently looks on course to end the week about 7.5% lower, marking a record-breaking eighth successive week in the red.

The crypto bulls will be hoping that markets can at the very least end the week on a high if upcoming US inflation data lends support to the idea that price pressures have peaked, thus removing the pressure on the Fed to tighten its monetary policy settings so quickly. Prices are expected to have risen at a pace of 0.3% MoM and 4.9% YoY in April, according to the Core PCE Price Index, after prices rose 0.3% MoM and 5.2% YoY in March.

A shift in expectations for Fed policy in the past six to seven months has been a key reason why crypto has pulled back so aggressively from last November’s record levels. The Fed has in that time pivoted from insisting that inflation was “transitory”, thus not warranting a policy tightening response, to realizing the error of their ways and signaling an intent to lift interest rates back to at least neutral (around 2.5%) in order to tame inflation, as well as begin shrinking its balance sheet.

This shift sent the US dollar and US bond yields surging, whilst weighing heavily on US equities (particularly tech/growth names), creating a toxic environment for crypto.

Price Action Update

Bitcoin was last trading just below the $29,00 level, down a little over 1.0% on the day, but having rebounded well from a brief stumble to fresh two-week lows at $28,000 on Thursday. Bitcoin has held up better than the rest of the cryptocurrency market this week, sending its crypto dominance to at one point on Friday as high as 47% (its highest since October 2021).

However, the world’s largest cryptocurrency by market cap is still on course to have dropped just over 4.5% this week and looks on course to record a record ninth successive week of losses.

Turning to ethereum, the world’s second-largest cryptocurrency by market cap is probing earlier monthly lows at $1,701 and is at present trading in the mid-$1,700s, down a further 1.2% on Friday after sliding more than 7.5% on Thursday following a break below key support at $1,900.

The cryptocurrency is on course to have dropped more than 13% this week, an eighth successive week in the red. Its underperformance versus bitcoin this week has seen it’s crypto market dominance drop from above 19% to current levels around 18%.

In terms of some of the other major non-stablecoin altcoins, the native tokens of layer 1 blockchain protocols Avalanche, Solana and Cardano are underperforming the broader market and down between 5-8% on the day according to CoinMarketCap data, following what has already been an ugly week of losses.

Another notable mover was GMT, the native token of the world’s most popular move-to-earn crypto platform StepN, which collapsed more than 35% on Thursday from highs close to $1.40 per token to current levels below $1.0. The drop came after StepN announced that it would be halted GPS services to users located in China as of 15 July, meaning owners of the platform’s non-fungible token (NFT) “shoes” will no longer be able to earn GMT tokens for their steps.

US CBDC Still A Long Way Off, Says Fed Vice Chair Brainard

Speaking in a testimony before the US House of Representative’s Financial Services Committee on Thursday, Vice Chairwoman of the US Federal Reserve Lael Brainard said that it could take as long as five years to develop a US central bank digital currency (CBDC). A Fed “CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money,” Brainard said in her statement, the text of which was released prior to the hearing.

Wall Street and major banks have expressed concern that an interest-bearing CBDC could disrupt the US banking system. Meanwhile, Circle, the issuer of the world’s second-largest US dollar-pegged stablecoin by market cap USDC, recently warned that any Fed issued CBDC might crush private sector stablecoin innovation.

Notable Stories: Former Binance Execs Launch $100M Crypto Fund, JPM Trails Inhouse Blockchain

Two former executives of the world’s largest cryptocurrency exchange Binance launched a $100 million venture fund on Wednesday that will focus on Web3 and blockchain development, as well as promote the adoption of crypto in emerging markets.

Reports emerged on Thursday that major global investment bank JP Morgan Chase & Co is trailing the use of an in-house blockchain for collateral settlement outside of market opening hours.

Coinbase Global has a structural advantage over its rival global cryptocurrency exchanges due to its security infrastructure and regulatory adherence, Cowen equity research analyst Stephen Glagola wrote in a note to clients on Thursday. Coinbase’s share price is up 15% over the past two days, though still trades with losses of more than 70% on the year.

In further exchange-related news, Huobi announced on Thursday that it has acquired Latin American crypto exchange Bitex as it looks to expand its presence in the region. Meanwhile, fellow Latin American crypto exchange Bitso announced on Thursday that it would be letting go of 80 employees. This comes after another Latin American crypto exchange (Buenbit) announced plans to lay off 45% of its staff earlier in the week citing the “global overhaul” of the tech industry.

In terms of notable regulatory commentary, US chairman of the Securities and Exchange Commission (SEC) Gary Gensler said on Thursday that the US has “dropped the ball” on crypto regulation. Pro-crypto SEC Commissioner Hester Peirce reportedly remarked that the recent collapse of UST means that crypto regulation will happen faster.