Last week in the news
Inflation and stagflation are currently two major words on the financial markets. Investors continue to be concerned regarding increasing inflator figures and, at the same time, decrease in economic output. During Friday`s trading, Dow Jones dropped 625 points, Nasdaq was down by more than 2% amid general sell-off in the tech industry. Volatility on the crypto market has decreased during the week, with Bitcoin broken down $40K support, while Ether is finishing the week around $2.7K.
El Salvador was the first country in the world to introduce Bitcoin as a legal currency in the country, and since last week the Central African Republic decided to do the same. Country's Parliament voted last week for the bill which will make Bitcoin legal currency alongside with the Central African CFA franc. Analysts are skeptical regarding such a decision, considering that only 11% of the Central African Republic is covered with the internet.
Crypto exchanger Kraken announced that the company will expand its operations to Dubai and Abu Dhabi. The company already received a license from the United Arab Emirates for the trading platform operations. Analysts are noting that Middle East is one of the emerging markets for crypto businesses while Kraken will be the first crypto exchanger to offer trading crypto in UAE dirhams.
Fidelity Investment announced plans to allow inclusion of bitcoin in 401(k) pension accounts, however, such a move was not welcomed by the US Department of Labor. Their main concerns are related to security of such investments considering many speculations and volatility surrounding crypto currencies.
The Central bank of Hong Kong doesn’t see the need for introduction of its digital currency. As officially announced, there is a fear that an introduction of the CBDC would lead to decrease of deposits held with banks and that commercial banks will be excluded as intermediaries, which might end up with decrease in bank`s interest margin and profitability. As a final consequence would be bank`s increased lending spreads which will negatively impact consumption and investments.
During the previous week Goldman Sachs, an US based investment bank, gave its first loan backed by Bitcoin.
Crypto market cap
Latest macroeconomic figures for developed markets are pointing that these economies are entering into stagflation. This means a macro environment with high inflation with decreased economic output. Investors are currently seeking sectors which could provide higher returns with relatively lower levels of risk. Crypto market capitalization continues to be under pressure from negative investor sentiment. During the previous week total crypto market capitalization dropped by 6%, reaching March level at $1.7 trillion. For a few weeks now daily trading volumes continue to be flat, moving around $150B and $160B. Total outflow of the funds from the crypto market since the beginning of this year stands at 22% or $470B.
Previous week the crypto market was trading with clear downside pressure. All coins lost in the market cap, there were no gainers. Altcoins were down by 15% on average. Highest drop in nominal figures had Bitcoin with a decrease of $26B or 3.5%, followed by Ether, which lost $21B or 6%. Among other leading coins, Ripple had a significant drop of 15% and a decrease in market cap by $5B. Cardano was down by almost $4B on a weekly basis, or $13%. It was not a good week also for Solana, as the coin lost some 11% in its value or almost $4B. There has not been significant movements in circulating supply of coins. Major gainer during the week was Filecoin with an increase in coins by 1.6%.
The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies.
Crypto futures market
Decrease in future prices continues for the fourth week in a row. In line with spot market BTC futures were traded lower by some 3% for maturities until July this year, while ETH futures for the same period were down by some 5%. For previous week it was specific that long term maturities have also dropped by some 3% for both coins. BTC futures maturing in December this year were still holding modestly above $40K, while ETH futures were still traded modestly above $3K.
Table below provides the most recent information on BTC and ETH future prices.
Bitcoin: $35K support is emerging
Inflation and low economic output in combination is probably the worst macro situation for any investor. This means that there is a double headache for the right investment decision: on one side, there is a need to hedge inflation but it can currently be done only with limited assets, considering that the majority of equities will fall into stagflation trap. As the FED announced tighter monetary policy, the crypto market is placed aside by investors in expectation that some of excess liquidity will be withdrawn from this market. During the previous week BTC weakened by some 3%. Support line at $40K has been broken to the downside, reaching the next short term stop at $38K, where BTC is currently traded. With such developments, the $35K support line is currently emerging on the charts.
RSI continues its slow-motion moves in line with spot price. Two weeks ago this indicator was pushed down to 40 from 50 level, while during the previous week it has reached level of 36, but still manages to move around 40. Clear oversold market has still not been reached, but the latest moves provide some indication that it might occur in the near future. Second week in a row moving averages of 50 and 200 days are moving as two parallel lines, indicating that the golden cross continues to be on hold.
Support line at $40K has been broken during the previous week with prevailing selling orders. Short term stop at $38K opens a path for the next support line at $35K. However, whether this level will actually be reached during the week ahead will depend on market strength to break the current $38K level. On the other side, charts are showing potential for a $40K resistance line to be tested one more time. In this sense, the likely scenario for the following days would be one more test of $40K, before final reversal to the downside and $38K on a road to the $35K support.
Ether: looking at lower grounds
During the previous week Ether`s psychological line at $3K was definitely broken after several weeks of struggle. Currently only positive developments for Ether are the ETH futures market which still has positive sentiment that as of the end of this year ETH might be traded again above the $3K line.
Although ETH started the previous week around $3.030 level, it soon reverted to the downside and within the first two trading days the price reached weekly lowest level at $2.770. After this, ETH modestly recovered but the $3K line was broken, and selling orders took the market stage. Support line at $2.850 is currently tested to the downside. RSI continues to move between lines 40 and 37, signaling that the market still has some space to move to the downside until a clear oversold market is reached. On the other side, MA50 is continuing to slowly converge toward its MA200 counterpart, although this move has significantly slowed down within the last two weeks.
Level to watch in the coming days is the $2.850 support line, which is currently under test. There is some probability that this level might be broken in the coming period, where ETH will continue its move down to next support at $2.650. On the opposite side, there is a probability for $3K to be tested once again, but without possibility to cross this line to the upside.
Ripple: oversold market is reached
Support line at $0.7 has been a major support for XRP`s price, however, during the previous week, this level has been clearly broken to the downside. For the last two weeks selling orders were dominant within daily trading, ending with the lowest level reached at $0.60 on Fridays trading. With this level, the cycle started in February has ended and at the same time the market is on an oversold side. Regardless of the price tumble, this actually might be good news for XRP.
Moving averages of 50 and 200 days are still moving as two parallel lines. However, both lines have a down trend, with MA50 moving faster to the downside from its 200-days counterpart. Whether two lines are starting to diverge from each other is to be confirmed in the coming days. RSI has reached a clear oversold market, which is an indication of the coming price reversal.
RSI is clearly pointing on potential short term price reversal in the coming days. In this sense, it might be expected that XRP will shortly revert back to the levels of resistance lines at $0.65, and potentially toward $0.70. At this moment charts are not pointing that $0.70 resistance might be broken to the upside. On the opposite side, there is significantly decreased probability that price might fall below current support at $0.60.
Binance Coin: looking at $350 support?
In line with general market sentiment, and prevailing selling orders on the crypto market, the price of BNB was pushed to the downside during the previous week. At the start of the week, the coin tried to head toward $420 resistance, but without reaching this level, BNB reverted to the down side and support level at $380. BNB is ending the week around this level.
During the week RSI has been pushed one more time to the level of 50, but soon reverted down to 40. This move shows that the market is still setting the stage for an oversold market. Since mid-March moving averages of 50 and 200 days are moving as two parallel lines, without indication of potential cross in the near future.
Week ahead BNB will start around a $380 support line. Charts are pointing on a decreased probability that the price might return to the resistance line at $420. Higher probability is for the price to move toward $400 as a short term stop, before it reverts back to $380 with increased potential for next support at $350 to be tested in the coming period.
Cardano (ADA): new historically lowest price is coming?
Cardano started the previous week at $0.9 resistance line, however, in line with general market trend, the coin swiftly reverted to the downside and reached level of $0.77, where it is currently traded. ADA also ended the week with prevailing selling orders.
During the latest strong push of price to the downside, RSI has reached level of 30, which is an indication of an oversold market. At this point it might be expected some short price correction to the upside. Moving averages of 50 and 200 days continue with slowdown of convergence, with MA200 moving faster toward MA50.
With move toward $0.8, ADA has ended the cycle started in mid-March this year, when historically lowest price has been reached. In case that ADA moves below this support level, it would mean a new territory for ADA without historical data. Based on historical moves, it might be expected that the market will eye for $0.6 as a next support line. However, as the market has reached the oversold side, some price reversal is to be expected in the coming days, probability up to $0.85.
LINK: short stop before $8 support?
Previous week LINK started slightly above the support line at $13. In line with general market selloff, price of LINK reverted back and breached current support, ending the week around $11.5. Selling orders were dominant during the last three trading days of the week.
As of the weekend RSI was pushed from levels around 40 to the clear oversold side. This is an indication that LINK might soon start short term price reversal. As for moving averages of 50 and 200 days they continue to move as two parallel lines, with convergence slowed down. This is an indication that potential cross is on market hold, until the cycle is clearly ended so that longer term price reversal might start.
Although LINK is ending the week above level of $11, charts are showing that there is some probability for $13 resistance to be tested one more time in the coming days. On the opposite side, if selling orders prevail on the market also during the week ahead, there is some probability that LINK might also head toward the $8 long term support line for this coin.
Disclaimer: This article provides exclusive views of the author. It does not in any sense represent a suggestion for trading.
This Market Analysis has been published by a staff writer at XBTFX.
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