Last week in the news
The FED has once again moved the markets to the negative territory. Another rate increase of 75bps and potential for another one in July, encouraged another sell off on the markets during the previous week. Bitcoin slipped below $20K support and Ether is modestly below $1K.
At the FOMC meeting held during the previous week, the US reference interest rate has been additionally increased by 75bps. In a Statement, FED` Chair Powell noted that there is possibility for rates to be additionally increased during July`s FOMC meeting for additional 50bps or 75bps, which will depend on macro data. The ultimate goal is to bring US inflation down to the strategic level of 2%, and this fight will be “unconditional” as Powell stressed.
During the Conference after the FOMC meeting, Fed Chair Powell also commented that US financial stability is necessary to support USD as a global currency. He specifically mentioned the introduction of digital currencies and instant payment systems which are expected to be launched by the year 2023, similar to the FedNow. Analysts are noting that such systems will support USD as a world's reserve currency.
Coinbase sent a letter to its employees noting that some 18% of jobs in the company will be cut. Company's CEO, Brian Armstrong, stressed the possibility of a recession, in which sense, the company needs to prepare for such a business environment.
Analysts are concerned that one of the highest bets on Bitcoin in the history of this market, a company MicroStrategy could suffer huge losses considering the latest high drop in BTC value. They are most concerned about margin calls if BTC falls below $21.000, which would force MicroStrategy to liquidate some of their BTC holdings. The CEO of the company, Michael Saylor, commented on Twitter that the company “has 115.109BTC that it can pledge”, in which sense, they have prepared for high volatility in the value of BTC.
Binance issued a statement on Friday, noting that the company has stopped transfers through Brazilian payment system Pix, since they terminated cooperation with Capital, a Brazilian payment operator. This comes as a response to changes in policy of the Brazilian Central Bank.
Crypto market cap
As the FED made a promise a few months ago that they will use aggressive monetary policy in order to fight surging inflation, this promise came to reality within two previous FOMC meetings. Strong reference rate increase will continue probably in July, as Fed Chair Powell noted. In the Statement after the meeting he briefly mentioned that the Fed is currently targeting level of interest rates at 3,5%-4% probably during the course of this and next year, however, it will all depend on the macro figures in the coming period. At the same time, FED started decreasing the size of its balance sheet, pulling the liquidity out of the system. Such rhetoric and moves from the FED turned financial markets further to the sell-off. Total crypto market capitalization decreased by 30% during the previous week, erasing additional $350 billion from the market. Market cap dropped below $1 trillion, reaching almost $800 billion, a level from December 2020. Daily trading volumes were flat, moving around $125B on a daily basis. Total outflow from the beginning of this year went modestly above $1.4B, which is a decrease of 64%.
During the previous week all coins were traded in red with significant outflow of funds from the crypto market. The highest outflow in nominal amounts was led by the leading coins. Bitcoin was down by $195B which is a decrease of 36%. BTC is followed by Ether, with a loss in market cap of $72B or 38%. Binance Coin was also negatively affected as the coin decreased its market cap by $13B or 28%. Tether continues to decrease its coins in circulation, losing additional 6% during the previous week and reaching a level of $68 billion coins.
The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies.
Crypto futures market
FED`s aggressive policy is making its hard impact also on the futures market. BTC futures were traded lower by some 30% for all maturities. Market expectations for BTC`s price as of the end of this year are strongly downgraded from a week before, and were traded modestly above $21K. Maturities for the end of the next year were lower by $10K, reaching $23K.
ETH futures suffered a higher drop in price, where shorter maturities were down by 35%, while longer maturities were down by almost 40%. Prices of futures for the end of this year reached level of $1.1K, while for maturities as of the end of next year were modestly higher, moving around $1.2K.
Table below provides the most recent information on BTC and ETH future prices.
Bitcoin: heavily oversold
By the theory of effective markets, all known facts about an asset are discounted to the present price as a reflection of the real current value of that asset. Something like this happened during the previous week on financial markets, including the crypto market. Expectations of the future prospectus of the business conditions were fuelled by both FEDs increase of interest rates by 75bps, and Powell`s announcement that another rate hike of 50-70bps is coming in July. In this sense, market discounted not only current 75bps but also the July`s one. Negative sentiment was also supported by the strong pull of FED's balance sheet, meaning less money in circulation and for investments. All markets were heavily in oversold area during the previous week. Margin calls were the ones that had additional effect on strong push of the markets to the downside.
In anticipation of the FED's meeting BTC started the previous week with an immediate drop down to the level of $22K and managed to finish the week clearly breaking the support line at $20K. Coin is currently traded modestly below $18K. Daily trading volumes were significantly increased during the whole week, with dominating selling orders. RSI went down to the level of 17, which is strongly in the oversold territory, moving there for the last six days. Moving average of 50 days is moving away from its MA200 counterpart, but both indicators are still moving with strong downtrend, indicating that the bear market is still on stage.
During the following days, it can be expected that markets will seek for new levels after the latest strong push to the down side. RSI is showing that reversal should occur, but before that, all selling orders need to be fulfilled. Technical analysis should be continued to be taken with some level of precaution, because of the known unknowns related to fundamentals. If it is assumed that $18K is the bottom line of the latest move, then BTC might try to shortly revert to the level of resistance line at $20K. At this moment, financial markets could not count on stronger demand, in which sense, stronger moves to the upside could not be expected. On the opposite side, if the market continues to push the price further to the down side, expected level where the move finishes might be $15K support.
Ether: the bottom has (not) been reached?
It was another round of selling orders for ETH, so the coin continued its moves to the downside. Psychological line at $2K is now too far away, while the coin is struggling to maintain $1K in value. Whether the bottom-line has been reached is to be seen in the coming days when markets calm down after the latest strong downtrend.
During the Monday trading the coin has been pushed from the level of support line at $1.4K down to $1.1K. This level was maintained for a few days while a final push to the down side has been made as of the weekend and FED's rate decision. ETH is ending the week modestly above the level of $900. At this level buying orders are emerging, but still they are mixed with selling ones. This indicates that the bottom line might still come. RSI is moving around level of 14, which is strongly in the oversold area, moving there during the whole week. Moving average of 50 days continues to diverge from MA200, where both lines have downtrend.
At current moment, it is essential to allow markets to calm down at new level. For ETH, a level of $900 might be the one, but technical indicators are still unclear so it might take one or two additional days, until they pick up the latest strong moves to the downside and point to a clearer picture. RSI is showing high potential for short term reversal, but it should not be expected that the price of ETH could go too much higher from current levels. Resistance at $1K might be tested in the coming period. In case that price is pushed further to the downside, there is some probability that $800 might be a level to watch.
Ripple: on a brink of short reversal
During the previous week XRP was following general market sentiment and finished the week 17% lower from the end of a week before. On a positive side, XRP managed to lose lower compared with major coins. This probably comes from the fact that XRP previously was following a continued down trend, where the price was already adjusted to the future market expectations. This statement is also supported by the RSI who reached level of 30 as of the end of the week, but still did not reach a clear oversold market.
XRP started the week around level of $0.36 and below support line of $0.4. In line with market sentiment, the price went down to the lowest weekly level of $0.28, where the coin is finishing this week. During the week there has been mixed both selling and buying orders, which supported the price not to fall deeper into the red zone. Moving averages of 50 and 200 days are continuing their divergence from each other, with a continuing down trend for the last three months.
RSI is indicating that a short price reversal might be in store for XRP in the coming days. Certainly, it is too early to confirm that the price bottom line has been reached after the latest downturn on the markets. Monday will be the day to watch for confirmation. If the selling orders continue, then the price might seek a level of $0.20 support. On the opposite side, if the bottom line is reached, then the coin might modestly revert back to the level of resistance at $0.3. Current charts are pointing probability for $0.40 level, but it should be taken with reserve until market calms down.
Binance Coin: moving in oversold area
Within a single week BNB lost some 29% in value. This came as a result of the negative market sentiment and general push of asset prices to the downside. BNB started the week testing $250 support line but soon managed to break it and finish the week around $190 next support.
During the whole week RSI was moving in the oversold territory, around level of 23. Moving averages of 50 and 200 days continue to move with modest divergence from each other and with a clear down trend. Main question at this moment is if the market has reached its bottom in price correction, after which short price reversal might be expected? To answer this question, Monday will be a day to watch. In case that correction is over, it could be expected for the price of BNB to return to the previous significant level at $250. However, if correction continues, there is some probability for a support line at $150.
Cardano (ADA): trading in a mixed mode
If we take into account general market sentiment and developments during the previous week, it could be noted that ADA outperformed the market by dropping less than many other coins. The price went down from $0.56 to $0.44, where on Tuesday and Wednesday buying orders dominated the market. Regardless of the drop in the price, ADA was traded in a mixed mode, which is generally positive for this coin, regardless of circumstances on the market.
Although the majority of other altcoins were traded heavily in the oversold territory, ADA managed not to reach this level. During the whole week RSI was moving within 40-45 range. It shows that the market is still not ready to push the price to the oversold zone, but there is still no strength for a move toward the overbought area. Moving averages of 50 and 200 days continue to move as two parallel lines with clear downtrend.
Emerging buying orders are increasing confidence that the price of ADA could not go much more to the down side. In case that current correction is still not over, there is some chance that the price might go down to $0.4 support line. On the opposite side, there is probability that the price might revert to the upside in order to test once again $0.5 resistance.
LINK: mixed selling and buying orders
During the previous week LINK lost some 20% in value from the week before. If we take into account general market circumstances and strong downtrend on the crypto market, this was not such a bad performance. This comes especially as LINK was traded in a sort of mixed mode, with equal share of both selling and buying orders. Of course, there is some probability that so-called “whales” are trying to sustain price at some levels, still, there is no available public data over their impact on the price of LINK.
RSI started the week modestly below level of 50 and moved down to 38. It seems that the market is still unsure whether to head the price toward the overbought or oversold market. Moving averages of 50 and 200 days continue to move as two parallel lines with clear downtrend, not indicating that potential cross is in store anytime soon.
LINK is ending the week testing support line at $6. There are no clear indications that this level might be breached to the downside, but still, it should be confirmed within the next two days. In case that market is still not finished with correction, there is some probability for the price to be pushed further down to the level of $5 support line. However, if the current bottom line is reached, there is a probability that the price might turn again to the level of $7.
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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