Key Points
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Bitcoin has formed a pennant structure that could see it push into the mid-$20Ks or to fresh annual lows.
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NEXO has shown no signs of picking up amid news that Nexo is looking to buy Vauld.
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Litecoin is underperforming on Tuesday and eyeing a drop back to annual lows just above $40.
Amid a more risk-averse macro mood as US market participants return to the fray following a public holiday extended weekend, cryptocurrency prices have been pulling back from earlier weekly highs. Market commentators were on Tuesday citing another big intra-day jump in European gas prices as raising risks of a stagflationary recession there, which has resulted in a bid for safe-haven assets like the US dollar and US bonds.
Stocks have been under pressure ahead of the US open and it, thus, isn’t too surprising to see that Bitcoin has pulled back about $1,000 to new session lows under $19,500. That means the cryptocurrency is back to close to flat on the week, having been as much as 6.0% higher when it came close to hitting $20,500 during Asia Pacific trade.
BTC/USD was thus last trading down by just shy of 4.0% on the day, while the world’s second-largest cryptocurrency by market capitalization Ethereum was trading closer to 4.5% lower on an intra-day basis. ETH/USD was last changing hands almost bang on the $1,100 level, having dropped back under its 21-Day Moving Average at $1,120 per token.
Like Bitcoin, Ethereum is still trading well within this week’s and recent ranges. Crypto trading conditions are likely to remain rangebound for the remainder of Tuesday’s session amid a lack of any notable US economic/central bank events to drive any macro volatility.
Focus has already shifted to the release of US ISM Service PMI survey results on Wednesday ahead of the publishing of the minutes from the Fed’s ultra-hawkish meeting last month. Traders will recall that, in June, the Fed implemented its largest rate hike in 28 years of 75 bps in a bid to demonstrate that it is serious about getting inflation under control.
Just a few days before the June Fed meeting, data showed that US inflationary pressures according to the Consumer Price Index had unexpectedly accelerated in May. The tone of the minutes tomorrow are likely to be very hawkish, with the Fed signaling for the first time back in June that it is willing to sacrifice growth and the health of the labor market (to an extent) if that is required to bring down inflation.
With US 10-year yields currently down nearly 70 bps from their mid-June highs near 3.5%, markets seem to have become much more pessimistic on the US growth outlook. Wednesday’s ISM data will be viewed in this context. A combination of poor data but a still very hawkish sounding Fed could weigh on risk assets like stocks and crypto.
Below is a list of Tuesday’s trending cryptocurrencies.
Bitcoin (BTC)
There has been lots of chatter in recent days about whether or not Bitcoin might have already or be close to printing its bottom for this bearish cryptocurrency market cycle. Various on-chain indicators of wallet activity cited by crypto analysts have been put forth as supporting the argument that Bitcoin is at/near a bottom. Usually, they argue in some way or another that 1) capitulation of weak-hand investors is advanced/nearly complete and 2) Bitcoin is oversold/under-valued.
Macro strategists have warned, however, that unless global inflationary pressures begin to tame, thus allowing central banks like the Fed to ease off on the tightening, Bitcoin’s bear market may still have some way to run. The situation could be made even worse if fears about a recession continue to rise, but this isn’t also coupled with expectations for easier central bank policy.
Bitcoin appears to have formed a pennant structure in the last few weeks since prices stabilized following their early/mid-June collapse. If Bitcoin can manage a sustained break above its 21DMA, that opens the door to a push towards the $23,000/$24,000 area.
But at the same time, a break below last week’s lows in the upper-$18,000s could trigger selling pressure that has the potential to push Bitcoin to fresh annual lows under $17,600. In the absence of a broad macro rebound in risk assets (like stocks) on bets that inflation will ease (perhaps due to a recession), the downside break looks the more likely outcome.
Nexo (NEXO)
Cryptocurrency lending/yield generating service Nexo continues to project strength at a time when many of its competitors are imploding. Coinbase-backed digital assets platform Vauld has become the latest to halt withdrawals, but Nexo has immediately pounced. The two firms signed a so-called term sheet outlining plans for Nexo to acquire Vauld’s troubled assets within the next 60 days.
Nexo also offered to buy troubled Celsius Network assets immediately after the rival lending platform halted withdrawals amid “extreme market conditions” more than three weeks ago. Nexo has said that it is planning a mass consolidation of the crypto industry during the current bear market, indicating to crypto investors that its balance sheet must be looking much stronger than many of its competitors.
However, recent price action in Nexo’s utility token (holders get cheaper loans, and higher yields on deposits) tells a different story. NEXO/USD is down a little over 5.0% on Tuesday despite the news that Nexo is looking to buy Vauld, losses that are in line with the rest of the crypto market.
Since the start of May, NEXO/USD has dropped over 75% from above $2.30 per token to current levels just under $0.58. It only currently trades around 5.5% above the sub-$0.55 record lows printed last week.
The bulk of these losses came when Terra’s algorithmic stablecoin UST collapsed from its 1:1 peg to the US dollar back in early May, sending a chill across the Decentralised/Centralised Finance (DeFi and CeFi) space. Nexo is categorized as a CeFi platform.
NEXO/USD’s continued failure to get above its 21DMA, which was most recently evident in the last few days, suggest a downside break of the all-time lows looks very much on the cards. Crypto investors are obviously still very worried about the health of Nexo’s balance sheet given the fate being suffered by many of its competitors.
Litecoin (LTC)
Litecoin was last down 7.5% on Tuesday, taking its losses in the last 24 hours to nearly 5.0% as per CoinMarketCap. That makes Litecoin the worst-performing cryptocurrency in the top 50 by market cap in the last day.
LTC/USD failed an attempt earlier in the day to break back above its 21DMA (just above $52.0) and has since slumped to fresh lows since 19 June in the low-$48.0s. Its technicals are looking bearish, with the pair very much still capped by a negative trend line that has been in play since mid-May.
The implication is that a near-term test of the 2021 lows just above $40 looks to be on the cards for the coming sessions/weeks.
This article was originally posted on FX Empire