BTC could suffer its second monthly downturn of 2023, while ether seems headed for its first losing month.
Bitcoin continued a month-long stagnancy, logging a fourth consecutive week of less than 2% in price movement. Directionally, the largest asset by market capitalization closed the week down 1.3%, after rising 0.3% the week prior. With 10 days remaining in July, Bitcoin is poised to log its second losing month of 2023.
Ether followed a similar trajectory though its trading range has been wider with this week’s 1.63% decline following f a 3.24% increase last week. Ether has yet to log a losing month this year, but will need to surpass $1,934 over the next 10 days to maintain its winning streak. ETH was recently changing hands at $1,897, up 0.2%. July has been a historically positive month for digital assets.
BTC and ETH’s seven-day performance ranked them 26th and 29th in a list of cryptocurrencies with a market capitalization of $1 billion or more.
The weekly leader was peer-to-peer lending platform Maker (MKR), which rose more than 30% over the most recent seven days, and is up more than 120% year-to-date. XLM performed strongly as well, increasing more than 20% over the identical period. The currency which tends to correlate tightly with XRP is up 117% year to date.
They also stood out among the CoinDesk Market Indices (CMI) weekly rankings within their respective sectors.
XLM ranked first in the CMI currency sector, while MKR led in the DeFi sector.
Overall Currency and DeFi sector performance within the CMI universe was muted this week, with DeFi finishing up 1.3% and the currency sector falling 0.5%. The computing sector led all sectors this week, increasing 6.4%.
The leading component within the computing sector was Chainlink (LINK), an oracle network which serves as a bridge between on-chain and off-chain environments. The asset, up 45% year-to-date, rose close to 20% this week.
The CMI weekly laggard was the Smart Contract Platform sector, which was held down by EthereumPoW (ETHW), and MultiversX’s (EGLD) underperformance.
What’s on tap for next week
Investors next week will be eyeing Wednesday’s Fed Interest Rate decision.
The CME Fedwatch tool is currently assigning a 99.8% probability that the central bank will boost rates 25 basis points (bps). .
Markets will also likely be scrutinizing Federal Open Market Committee (FOMC) Chair Jerome Powell’s comments following the rate decision. Given recent macroeconomic data, Powell is likely to echo his comments from the past month that while inflation has declined, it remains unacceptably high and that the Fed will have to renew its prescription of monetary tightening.
Next week’s U.S. central bank interest rate decision and the bitcoin options expiry are unlikely to move markets, which have been stuck for weeks.
In another day of crypto market drudgery, bitcoin (BTC) briefly feinted higher Friday before settling back into its increasingly familiar environs below $30,000. The largest digital asset by market capitalization was recently trading at $29,904, up 0.3%.
Ether (ETH), the second largest cryptocurrency, remained largely unfazed during the day, lingering at around its weekly low below $1,900. Major alternative cryptocurrencies – so-called altcoins – including SOL and XRP recovered some of their losses endured earlier in the day.
MKR, governance token of decentralized finance lender MakerDAO, defied the broader market and enjoyed double-digit gains, buoyed by the activation of a token buyback program.
But micro-cap token CNC cratered as much as 75% during the day following a 1,700 ETH – some $3.2 million – exploit of Conic Finance, a Curve-adjacent decentralized finance protocol.
The CoinDesk Market Index, which tracks the performance of a basket of digital assets, inched up 0.3% in the last 24 hours, underscoring a somewhat tepid trading day. Investors will be eyeing a likely Federal Reserve interest rate increase and bitcoin options expiry next week.
In an email, Rachel Lin, CEO and co-founder of decentralized derivatives exchange SynFutures noted that the week started with enthusiasm over a favorable ruling in the Ripple-SEC case as investors expressed hopes for an altcoin season. But BTC and ETH failed to break resistance and returned to their weekly range lows, weighing on the market.
“[Bitcoin] options data reveal high open interest in $31,000 and $32,000 Call Options, denoting strong resistance at these levels,” Lin said. “The past day has been more favorable, with call options trading nearly 3x the volume of put options.”
“Fundamentally, the outlook remains bullish as money continues to flow into the crypto ecosystem,” she added. “This could represent a brief reversal, potentially leading to a move up to $34,000 if BTC achieves a sustained breakout above $31,500.”
Priced-In Spot BTC ETF
In an interview with CoinDesk TV’s “First Mover” program, Will Peck, head of digital assets for asset manager WisdomTree, said that it was “tough” to pinpoint a near-term bitcoin price target. But he also suggested that the impact of the Securities and Exchange Commission (SEC) approving a spot bitcoin ETF from any of the financial services giants that filed applications last month, including WisdomTree, was uncertain.
“An underlying question is how much institutional money there might be out there,” Peck said.
Lawrence Lewitinn, head of content at The Tie and CoinDesk TV contributor, said that neither the U.S. central bank’s likely 25 basis point rate (bps) on Wednesday nor the end-of-month options expiry would likely stir bitcoin from its current lull.
“We’ll see for the most part prices stay flat, at least for the upcoming,” Lewitinn said. “Unless there’s some exogenous variable, some sort of crazy news story – who knows what [SEC Chair Gary] Gensler could do. But all things being equal, we’re probably going to end up at about $30,000, a slow week.”
Crypto prices have risen sharply since BlackRock’s filing for a spot bitcoin ETF. Of the 149 assets in the CoinDesk Market Indices (CMI), 144 rose during the week.
Thirty days ago, bitcoin was nearing its first losing month of 2023, but today the asset is hurtling toward its strongest performance since March. Ether is following suit, and still has yet to post a losing month for the year.
Bitcoin and Ether are aligning on direction and momentum.
The CoinDesk Indices Bitcoin Trend Indicator (BTI) now signals that bitcoin has entered a significant uptrend phase, following its 15% increase this week.
Bullish catalysts over the past two weeks have started to thaw the frigid crypto winter. The catalysts include bitcoin and ether’s omission from a list of digital assets mentioned in U.S. Securities and Exchange (SEC) lawsuits against crypto exchange giants Binance and Coinbase, and more recently the spot bitcoin ETF filings by BlackRock, Invesco and WisdomTree. Rising jobless claims, a sign that the U.S. central bank’s hawkish monetary policy is slowing the economy, have also been encouraging.
The Ether Trend Indicator (ETI) is now also flashing an uptrend signal, a step above its prior neutral reading.
Momentum for both assets rose sharply this week with their respective Relative Strength Index (RSI) readings jumping 43% and 46%, respectively since Monday.
Not surprisingly the currency sector led Coindesk Market Index (CMI) sectors.
The CoinDesk Market Index rose 11% this week. As of publishing, the trailing five were BTRST (-13.4%), QNT (-5.9%), BTT (-5.0%), MXC (-1.3%), and LUNC (-0.4%)
Among the five CoinDesk Market Index (CMI) sectors, the currencies sector outperformed, as all 20 assets in the sector were positive.
Bitcoin Cash (BCH) and Onyxcoin (XCN), led the way, up 33% and 28% respectively. MINA and XLM were sector laggards, yet still up 8.8% and 9.3% respectively.
The DeFi sector trailed, while still rising 5.8%. Rocketpool (RPL), the third largest asset in the index, weighed on performance, falling 2.6% on the week.
What’s ahead in the upcoming week?
Can crypto prices maintain their momentum? Bitcoin has breached the upper range of its Bollinger Bands on four consecutive days, while its RSI level of 75 indicates that the asset is in overbought territory.
Traders leery of the current rally may view this as an opportunity to take profits. The extent to which BTC is or is not moved on to centralized exchanges will be worth monitoring.
Historically, BTC has tended to move higher, even when accompanied by large RSI figures. Trading volume peaked on Wednesday, and fell the two days following. The trajectory of momentum will be worth monitoring, for clues as to whether recent buying pressure is waning.
Macroeconomic data will be light, with the notable exception of Friday’s Personal Consumption Expenditure (PCE) report.
While the Consumer Price Index (CPI), gets most of the attention specific to inflation, a quick read through of Federal Reserve Minutes shows that PCE is frequently referenced by Federal Reserve Officials.
The consensus forecast is that PCE increased 0.4% in May. A figure above that could stall recent price increases. A figure below will likely have the opposite effect.
Bitcoin and ether end the week higher, following the announcement of BlackRock’s Bitcoin trust application.
FOMC oran kararları, TradFi ayrışması ve bitcoin spot ETF tekliflerinin olduğu bir hafta, BTC ve ETH haftayı sırasıyla %0,88 ve %1,75 performansıyla tamamladı.
Beş CoinDesk Piyasa Endeksi (CMI) sektörü arasında Dijitalleştirme, son yedi günde genel olarak %1,4’lük bir gösterila başı çekti. Akıllı Platform Sözleşme bölümü, aynı dönemde %4,4 düşüşle tümünü takip etti.
Galxe’de (GAL) %14’lük bir dizi ve Braintrust’ta (BTRST) %2,2’lik bir dizi, Digitization’ın yükseliş hamlesini hızlandırdı. GAL koleksiyonunun tarihinde %10,6 artarken, BTRST yıl bazında %35 düştü.
GAL, 20 günlük hareketli ortalamasının %3,3 altında kalıyor ve mevcut Göreceli Güç Endeksi (RSI) değeri 44,06. RSI’sinin yönü, GAL fiyatlarındaki %21’lik artışa göre 10 Haziran’dan bu yana %69 artan bir yükseliş anlamına geliyor.
DeFi names Maker (MKR), Uniswap (UNI), and TruFi (TRU) also had strong weeks, rising 8.1%, 7.8%, and 7.5%, respectively.
Boba Network (BOBA), a Smart Contract Platform asset, was the week’s laggard, falling 5.5%.
Bitcoin and ether continued a recent decoupling from traditional finance, as their correlations with the S&P 500, Nasdaq and the Dow Jones Industrial Average (DJIA) trended negative.
BlackRock possibilities
The week’s most interesting development was BlackRock’s application to the Securities Exchange Commission (SEC) for a bitcoin spot exchange-traded fund (ETF).
Those well-steeped in the nuances of SEC applications will highlight that the application is technically for a “trust” and not a ETF.
Still, as BlackRock’s iShares Bitcoin Trust application is set to hold the asset as a commodity, it will operate in the same manner as existing commodity-based ETFs.
If approved, the ETF will offer exposure to retail investors via a third party, with the ability to enter and/or exit positions intraday.
The application’s timing coincides with an SEC crackdown on the industry, including last week’s lawsuits against crypto exchange giants Binance and Coinbase.
Given the SEC’s rejection of all prior spot BTC applications, and the perception of an agency that is hostile to digital assets markets, investors will be eager to see how it decides on the BlackRock filing.
With $9 trillion in assets under management, BlackRock is the largest asset manager in the world. Some observers may consider the application an endorsement of the asset class, as it will create a potentially sizable bitcoin buyer.
An approval would also cast doubts on previous rejections and likely spur a new wave of applications.
Since the announcement of BlackRock’s application, BTC is up approximately 4.5%.
Bitcoin trades flat to move one step closer to logging its first losing month of 2023. Ether rises slightly but also seems headed for a negative May.
Bitcoin and ether took slightly divergent paths during the last full week of May. While ether rose 1.5%, bitcoin moved little to recently trade at about $26,700, a little below where it stood last Friday.
Ether’s year-to-date performance gap to bitcoin has narrowed to single digits with ETH gaining 52% YTD versus BTC’s 60% increase. Since May, the ETH/BTC ratio has increased 6.7%. Still both assets are in line to have their first losing month of 2023.
BTC and ETH’s seven-day performance ranked them sixth and 14th among cryptocurrencies with a market cap of $1 billion or more.
The weekly leaders were Render Token (RNDR) and Tron (TRX), up 21.9% and 7.6% respectively, while LDO and ALGO lagged, declining 8.5% and 9.3%
Investors have been focusing on President Joe Biden and U.S. House Speaker Kevin McCarthy’s debt ceiling negotiations. While it’s widely expected that a deal will be reached ahead of the June 1 deadline, the two sides had yet to reach an agreement going into the Memorial Day weekend.
Markets were also weighing Friday’s Personal Consumption Expenditure (PCE) report showing U.S. prices rising more than expected in April. Core PCE, which excludes volatile food and energy prices, rose 0.4%, versus expectations of a 0.3% increase.
The unexpected increase reduces the likelihood that the Federal Open Market Committee (FOMC) will pause interest rate hikes during its June 14 meeting.
According to the CME Fedwatch tool, the probability that interest rates would remain at the current target rate of 5%-5.25% declined from 83% to 38% this week. The probability of a 25 basis point increase rose from 17% to 62%.
Drawdowns across multiple sectors
All six sectors in the CoinDesk Market Index fell this week, with the Smart Contract Platform sector declining the least (0.2%). The Culture and Entertainment sector had the roughest week, falling 4%.
Of the 156 individual assets across the base of CMI sectors, only 20 finished the week in positive territory. Another standout, albeit one with a market cap of less than $1 billion, was decentralized computation token ARPA, up 88%. ARPA is trading 167.2% higher on the month, and over 200% higher over the last 12 months.
The loss in finality meant that blocks could have been tampered with, and while it isn’t supposed to affect end-user experiences, it did lead to some inconveniences for some applications.
The Ethereum blockchain suffered two brief episodes last week where blocks weren’t finalizing – an unwanted bout of instability that presents risks to the blockchain’s security but isn’t considered dire.
There was a lot of confusion in terms of what the delay in “finality” meant for the functionality of the blockchain, prompting discussions about security concerns. So, it bears unpacking a bit.
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The cause of the temporary loss of block finality remains under investigation, though Prysm, a provider of client software used to run a node on the blockchain, just released a new version, describing it as “the first full release following the recent mainnet issues,” with “critical fixes.”
When data blocks don’t finalize, there isn’t supposed to be any downtime or difference in end-user experience. That said, a loss in finality can lead to some security issues like reorgs.
Reorgs occur when a blockchain produces more than one block at the same time, usually because of a bug or an attack. This means that a validator node temporarily creates a new version of a blockchain, which makes it difficult to properly verify if a transaction has been successful, while the old version of the blockchain continues to exist.
However, snowball effects from this incident led to some end-user jolts. DYdX, a leading crypto exchange platform, had to temporarily pause deposits because of one of last week’s incidents, and Polygon’s zkEVM also experienced some delays with deposits.
The chart shows a spike in missed validator slots last week as the Ethereum blockchain temporarily stopped finalizing transactions. (Glassnode)
So how does finalization work?
In a proof-of-stake blockchain like Ethereum’s, validators first have to propose a block that contains transactions. Once those are proposed, other validators have to sign off on the block to permanently add it to the blockchain, which takes about 15 minutes. Once it is approved, or “attested,” by two-thirds of validators, the block eventually becomes finalized.
Thus, finality is the point where transactions on a blockchain are considered immutable. Finality is supposed to guarantee that transactions within a block cannot be altered.
If finality cannot be guaranteed, the blockchain enters an emergency state called the “inactivity leak,” where validators receive penalties for not reaching finalization. When the state is triggered, it acts as a way to incentive the blockchain to start finalizing again. The incident last week triggered Ethereum’s first-ever inactivity leak.
The Ethereum community has acknowledged that the current timeframe for blocks to be finalized is too long.
“Having a delay between a block’s proposal and finalization also creates an opportunity for short reorgs that an attacker could use to censor certain blocks or extract MEV,” the Ethereum website shared in a blog.
Ethereum co-founder Vitalik Buterin was writing about finality seven years ago, an indication of just how important an issue it is.
When the first loss of finality occurred on May 11, developers immediately shared it over Twitter, saying they were going to deploy extra help to figure out what was going on. After 25 minutes, the issue seemed to have been resolved and the chain resumed finalizing.
Roughly 24 hours later, the chain stopped finalizing again for about an hour, which caused outages for some infrastructure providers.
In the past, finalization has temporarily stopped because of bugs in client software used to run the blockchain. Ethereum has multiple clients in the event that there is a flaw or glitch in the software, so there are other options, and the activity on the blockchain can keep running.
How did this affect the applications?
Tim Beiko, protocol support lead at the Ethereum Foundation, told CoinDesk the incident is “definitely significant, but it’s not something where Ethereum’s security or soundness is at risk or compromised.”
“Within minutes, things were corrected and within like a day or two clients had software patches to make sure that this specific case did not come up again,” he said.
The developers are still looking to understand what caused the blockchain to stop finalizing, and are expected to discuss a post-mortem report in their upcoming Consensus Layer call.
Beiko told CoinDesk that the incident did not get to a point “where we began to test the very extreme fallbacks in the protocol to deal with this stuff.”
The incidents did affect several applications that run on top of the Ethereum blockchain.
Jordi Baylina, technical lead at Polygon, said that the finality stoppage meant that deposits onto the Polygon zkEVM chain were delayed, and since the chain relied on Infura, an infrastructure provider which also temporarily had an outage as a result of the loss in finality, issues for individuals using the zkEVM compounded.
“You need to wait for the finality in layer 1 deposit to be available in layer 2,” Balyina said. “So until you don’t have finality, you cannot use [the chain] or you have the risk of double spending in layer 2.”
DYdX paused its deposits temporarily today due to the lack of Ethereum finality and said it was “continuing to monitor and investigate this issue.”
Despite this, Ethereum developers emphasize that the network did not go down.
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“Today’s incident has been a great fire drill. It looks like two or three issues came together (as is often the case). The chain recovered gracefully and we discovered a few other issues that could be improved to make Ethereum more resilient,” tweeted Marius van der Wijden, a developer at the Ethereum Foundation.
The cost of insuring against a potential U.S. government default in the next 12 months soared to record highs last week.
Bitcoin (BTC) faced selling pressure in the week ended April 23 as bond yields rose and the U.S. dollar liquidity declined.
The leading cryptocurrency by market value fell by 9% to $27,600, registering its largest single-week percentage loss since early November, according to veri from TradingView and CoinDesk. The yield on the 10-year U.S. Treasury note rose by six basis points (bps) to 3.58%, its second straight weekly gain, denting the appeal of risk assets, including cryptocurrencies.
The USD Liquidity Conditions Index, an indicator tracking the greenback’s supply in the monetary system, slipped to $6.13 trillion, reaching the lowest in over a month, according to veri source TradingView. Besides, traders priced in a higher probability of the Federal Reserve (Fed) continuing its tightening cycle with a 25 basis point rate hike in May.
Since 2021, bitcoin and the wider crypto market have closely tracked local peaks and troughs in the dollar liquidity index. Bitcoin rose to its the-then high of $28,000 in the first half of March as the Federal Reserve (Fed) opened liquidity taps to contain the banking crisis, pushing the dollar liquidity index higher from $5.82 trillion to $6.35 trillion.
“In the absence of encouraging signs on the monetary liquidity front, BTC continued to drift down over the week after its sharp drop on Monday, dragging other large-cap crypto assets with it,” Noelle Acheson, the author of popular Crypto Is Macro Now newsletter wrote in the weekend edition of the newsletter.
“BTC – while being an ‘insurance’ asset that should outperform when other asset groups are suffering – is still heavily impacted by the overall macro mood, which will largely be driven by monetary liquidity expectations,” Acheson added.
According to Dessislava Laneva, macro analyst at Paris-based crypto veri provider Kaiko, bitcoin and financial markets, in general, may see increased price turbulence in the near term, thanks to the U.S. debt ceiling issue.
The U.S. government reached its statutory debt limit – the self-imposed cap on borrowing – of $31.4 trillion in January, forcing the Treasury to implement extraordinary measures to help the government meet its obligations for at least five months. These measures also boosted the dollar liquidity and kept risk assets bid.
Since then, the debt ceiling negotiations have been in a deadlock. Last week, one-year credit default swaps, which measure the cost of insuring against government default in the next 12 months, rose to a record high, according to Wall Street Journal.
The current pricing in the CDS market shows a 2% probability of a default. That’s uncomfortably high for something that could be a financial calamity, Andy Sparks, the head of portfolio-management research at New York-based MSCI told WSJ.
Observers are worried the Treasury may run out of money in June.
“The debt ceiling drama is a source of short-term volatility and adds uncertainty to the market,” Laneva told CoinDesk.
Bitcoin is still seen as a risk asset and may face selling pressure if equities throw a fit at some point. Risk assets took a beating during the 2011 debt ceiling drama when a deadlock in Washington led to the country losing its top-notch triple-A sovereign credit rating.
“Once a deal is reached, expected in the second half of the year, the Treasury will need to refill its reserves, thereby reducing liquidity and exacerbating the impact of quantitative tightening [sister of rate hikes]….this situation may prompt the Fed to cut rates, which would ultimately benefit risk assets,” Laneva said.
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According to Tom Dunleavy, macro analyst at Messari, a potential default might see bitcoin pick up a haven bid like it did during the recent banking crisis in March.
“I find it unlikely that the U.S. goes into default. I think the debt ceiling issue will be resolved before it comes to that,” Dunleavy said. “If the U.S. does default or we get close to the deadline without a deal it should be immensely positive for BTC. We’ve seen the store of value story for BTC become more solidified with the recent bank failures. BTC’s correlation to gold is also near all-time highs,” Dunleavy added.
The latest price moves in crypto markets in context for April 24, 2023.
This article originally appeared in First Mover, CoinDesk’s daily newsletter putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.
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Bitcoin fell 0.5% to $27,416 in the past 24 hours after facing selling pressure last week as bond yields rose and the U.S. dollar liquidity declined. The cryptocurrency registered a 9% weekly loss, its largest seven-day decline since early November, according to data from TradingView and CoinDesk. Bitcoin had reached $30,000 last week for the first time in almost a year. The yield on the 10-year U.S. Treasury note rose by six basis points to 3.58%, its second straight weekly gain, denting the appeal of risky assets, including cryptocurrencies. Ether also erased most of its monthly gains, trading recently at $1,851, down 1% in the past 24 hours. Simon Peters, an analyst at investment firm eToro, wrote in a morning note Monday that the market is yet to see bitcoin retest more precipitous levels that would suggest the recent rally is finished.
Existing crypto companies could get a “fast-track regime” to new European crypto rules, France’s Financial Markets Authority said in a Friday statement. France recently toughened its crypto registration procedures in the wake of crypto exchange FTX’s collapse and in preparation for the European Union’s Markets in Crypto Assets law. The European Parliament voted in favor of MiCA last week, and the rules are set to take effect starting around July 2023. There will now be “consideration of a possible fast-track modular licensing” between France’s existing regime, known as PSAN, and MiCA, which includes much tougher governance, consumer-protection and financial-stability rules, the AMF said.
U.S.-based crypto exchange Gemini revealed Friday plans to open an offshore derivatives platform – a decision announced as the regulatory environment gets tougher in its home country. The first product at Gemini Foundation, as the new division is called, will be a perpetual bitcoin contract denominated in Gemini dollars (GUSD), the company said, followed by a perpetual ether contract also linked to GUSD. Unlike conventional derivatives, perpetuals don’t have an expiration date. The decision coincides with U.S. regulators getting stricter about cryptocurrencies. In January, the company and Genesis (which, like CoinDesk, is owned by Digital Currency Group) were accused by the Securities and Exchange Commission of selling unregistered securities.
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