Like Bitcoin, Ethereum has been reasonably well supported in recent days but is still well within recent ranges. Monday’s subdued trading conditions are unsurprising given important upcoming risk events later this week. On Wednesday, US ISM Services PMI data for June is scheduled for release ahead of the publishing of the meeting minutes from June’s FOMC meeting.
The current narrative is that 1) the US economy is slowing (the Services PMI data is seen signaling this) and 2) the Fed will press ahead with tightening in the coming quarters regardless (given high inflation). Wednesday’s data is unlikely to shift this. Friday’s official US labor market data will be the week’s main event from a macro perspective.
The data will probably show that despite the slowing US economy, the labor market remains tight given the continued strong demand for workers/under-supply of them. That might weigh on sentiment (and crypto prices), if it boosts bets that the Fed will continue with aggressive rate hikes this year and into next.
But another narrative playing out at the moment, and one that could boost risk appetite (and crypto prices) is that, in the longer term, the Fed won’t need to keep interest rates too high. The market has come to terms with the fact that the Fed is going to take interest rates well above the so-called neutral rate (around 2.5%) before the end of this year.
But markets have in the last few weeks been paring back on bets as to how high the Fed will take interest rates in 2023 and increasingly pricing in rate cuts in late-2023/2024. This can be seen by looking at price action in long-term bond yields, with the US 10-year having pulled back sharply from as high as 3.5% in mid-June to back under 3.0% by the end of last week.
In a sense, what (bond and money) markets are telling us here is that inflation is going to come back under control without the Fed having to do anything too extreme regarding rate hikes. That could be because global supply chain issues ease. Or it could be because commodity prices crash in anticipation of a global recession (this is already being seen in industrial metals).
The more this idea gains traction, the room there is for a recovery in risky assets like stocks and crypto in the second half of this year. Anyway, for now, expect quiet trading conditions for the next few days ahead of upcoming risk events, with crypto prices likely to remain fairly rangebound.
Here is a list of Monday’s trending altcoins.
KuCoin (KSC)
Major global crypto exchange KuCoin’s utility token KSC has been underperforming the broader cryptocurrency market in the last few days as the crypto exchange faces a slew of rumors about its potential insolvency. The exchange had exposure to Terra’s ill-fated LUNA and UST cryptocurrencies and to insolvent crypto hedge fund Three Arrows Capital (3AC), some social media users claims.
KuCoin has vehemently denied these claims. But the associated FUD (fear, uncertainty and doubt) has nonetheless seemingly had an impact on KCS. KCS/USD was last changing hands at around $8.3 per token, a little above the new annual lows it printed on Sunday just above $8.0.
The cryptocurrency slid over 22% last week, with more than half of that loss coming on Saturday alone. Since the end of May, KCS has shed over 50% of its value and is down over 70% from the record highs it hit back in December 2021.
The next key area of support is in the $4.0-5.0 per token area (lows from H1 2021). To the upside, $9.0 has now become a key area of resistance. Until uncertainty about the health of KuCoin’s balance sheet it cleared up, KSC may not be able to mount a sustained recovery, even if broader cryptocurrency markets can.