Last week in the news
Inflation in the U.S. hit new records in the last 40 years, reaching 8.6% in May, as published on Friday. The US equity markets closed lower after the results, as well as the crypto market. Bitcoin is finishing the week below $30K support, while Ether is testing a $1.520 support line.
Inflation figures and monetary policies were in the spotlight of the market during the previous week. Markets were waiting to see if the latest FED's monetary moves would manage to put a halt on inflation, expecting it to stay at least on April`s level of 8.3%. However, CPI exceeded expectations, reaching 8.6%, which is its highest level in the last 40 years. Output figures put investors into a negative mood, considering their increased expectations that FED will continue with its aggressive monetary policy in order to put inflation under control.
ECB meeting was held on Thursdays, where it has been concluded that the rate hike of 25 bps is coming in July, for the first time after almost 11 years. Further rate hikes are also possible till the end of this year, with the next one probably already in September. At this meeting, ECB officials increased their expectations on future development of inflation while, at the same time, they decreased expectations on EU zone growth. EU equity markets were traded lower both on Thursday and Friday.
In order to sustain competitiveness on the market, a company Checkout.com, conducting business within a field of online payments, announced that it will start accepting stablecoins for payment of goods. In partnership with Fireblocks, a crypto security firm, they are currently implementing a feature which would allow payments in USD coin, pegged to $1 USD and currently world`s second stablecoin in terms of its market cap.
New rules for stablecoins have been issued and adopted by the New York State Department of Financial Services. Licensed companies which deal with cryptocurrencies from now on would have to comply with the rules requiring reserve requirements for stablecoins which would make stablecoins redeemable, as well as, regular monthly auditing.
Another large company is joining the crypto club. The American Express, card issuing company, announced the issuance of its first card linked to crypto currencies. In cooperation with Abra platform, the Abra Crypto Card will be offered to American Express card holders where they will be rewarded in crypto currencies for their purchases.
Professionals from the investment companies Grayscale and Bitwise shared their optimism that first spot-BTC exchange traded funds might be approved soon by the SEC. They shared their insights at CoinDesk`s Consensus 2022 gathering held during the previous week. Applications for ETF`s from both firms have been submitted and waiting for final SEC`s decision until the end of June and beginning of July this year.
Crypto market cap
Inflation figures continue to drive market sentiment, including also the crypto market. Investors are looking at the moment when CPI figures will reach their peak level, since it will mean that FED will ease their current aggressive monetary policy and halt further increase in interest rates. The US CPI figures from Friday are a certain signal to markets that FED will continue with monetary tightening and further increase interest rates. Such indications are already confirmed by Fed Chair Powell, commenting on the latest inflation figures. Recession is now a word with increased use among market participants.
The crypto market reacted to CPI results in a negative manner, since this means further pull of liquidity from the markets, including the crypto market. Total market capitalization is finishing the week at a level of $1.13 trillion, which is a decrease of additional $74B or 6% on a weekly basis. Daily trading volumes remained relatively flat during the week, moving between $165B down to $125B on a daily basis. Total outflow from the beginning of this year went modestly above $1B, which is a decrease of 48%.
Major coins were the ones leading crypto market cap decrease during the previous week, with ETH leading the list. Ether lost additional $28B in market cap within a single week, which is a decrease of 13%. Bitcoin took the second place with a drop of $21B in market cap or almost 4%. Surprisingly, Binance Coin lost almost $5B within the week, which is a drop in market cap of more than 9% for this coin. List of other coins who finished the week with loss in market cap of more than $1B include XRP, losing some 6% in value, Dogecoin with a drop of more than 13% and Solana, with a drop of 9%. Despite the general market trend, there had been few coins which managed to modestly increase their market cap like LINK with an increase by 4% and Theta with additional 3% increase in value. As for coins in circulation Tron had a decrease by modest 0.5% while Filecoin increased its circulating coins by 1.7%.
The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies.
Crypto futures market
Crypto futures were traded lower during the week, following spot market developments. However, as the official market closes on Friday, developments during the weekend still have not been priced, in which sense; Monday will be day to watch for current futures levels. BTC futures ended the week around 1% lower from the week before, where maturity in December this year still holds modestly above $30K. On the other hand, ETH futures were traded around 5% lower from the previous week. Maturities as of the end of this year finished the week some 3% lower from the week before, but still modestly above $1.800 level.
Table below provides the most recent information on BTC and ETH future prices.
Bitcoin: waiting for inflation to peak
Within an environment of peaking oil and food prices with disturbed supply chains, keeping inflation under control is quite a challenging task for FED. Tightening monetary policy during this year still has not provided expected results, as per May CPI results, so further measures are to be expected in terms of additional rate hike by 50 bps on the next FOMC meeting. Markets are becoming nervous as insecurity is not an environment where they like to operate; hence, we are facing a bear market both in equities and the crypto market, with increasing Treasury yields. As BTC became part of the mainstream, its sensitivity to monetary measures became part of the market game, so it has to wait for inflation to peak in order to face some significant push to the upside.
Although the start of the previous week was relatively good for BTC, reaching $31K, the rest of the week was traded in red. Support line at $30K has been broken to the downside, so BTC is ending the week around short term support line at $28K. Since this is not a significant line for BTC, it opens a path toward next support line at $25K. During the last two weeks, RSI reached level of 50 on two occasions, but was not able to cross this line in order to head toward the overbought market. Instead, the indicator reverted a bit to the downside, finishing the week around level of 40. Moving average of 50 days continues to modestly diverge from its MA200 counterpart. Both lines are still moving with downtrend.
Markets are currently extremely sensitive to fundamentals, in which sense, technical analysis should be taken with precaution. Level to watch in the days to come is $28K, short term support line. There are currently equal chances for this line to hold and to be broken. If it manages to hold, then BTC will revert to the upside to the level of resistance at $30K. Charts are currently not showing that this line might be breached to the upside. On the other hand, if there are further negative fundamentals on the market, BTC might be pushed to the level of the next support line at $25K.
Ether: on a brink of oversold market ... again
Ether had another bad week, outperforming BTC for one more time. It could be noted that it is an interesting development, considering that Ethereum network has a significant place in development of many applications for DeFi`s and NFT`s, but ETH`s price within the last month, is just not following that potential. Following the theory of efficient markets, we just need to accept the premise that the market is always right, even in the case of current ETH`s price.
Monday trading ETH started with a shy uptrend, however, it soon reverted to the downside, breaking the $1.750 support line and finishing the week at the next support line at $1.520. During the whole week selling orders were prevailing on the market. RSI was modestly moving around 40, but ended the week at level of 30, which is the brink of another oversold territory. Moving average of 50 days is now clearly diverging from MA200 counterpart, leaving a potential cross for some time in the future.
During the last month it became clear that ETH is reacting to fundamentals more than any other coin on the market, beating also BTC in this sense. In this way, further monetary tightening might have additional negative impact on the price of ETH, which raises a question if ETH has reached bottom at level of $1.520, or is it yet to come? In case that price breaks the current support line, it opens a path toward next support at $1.400. Still, if the coin enters into a short reversal, then it will head toward $1.750 resistance with some potential for $1.850.
Ripple: challenging time ahead
Selling orders were prevailing on the market for XRP during the previous week, so the price of the coin was pushed down to the level of the next support line at $0.35. For a few weeks, coin was struggling to sustain the $0.40 support line, however, negative fundamentals were the ones that made an impact for XRP to finish the week at the next support line. Considering general market sentiment, certainly challenging times are ahead for XRP.
Weekly highest level reached was $0.41 after which XRP reverted to the down side, breaking $0.4 support line at finishing week at next support at $0.5. RSI started the week around level of 40 but reverted back to level of 33. Clear oversold market has not been reached, which increases potential for one to be reached in the coming period. Moving average of 50 days started stronger divergence from MA200 counterpart.
XRP is currently testing a $0.35 support line. In case that market continues with selling orders, the price might break the support line in order to test another one at level of $0.30. However, if XRP manages to sustain its current level, then the price might revert a bit to the upside in order to test resistance at $0.40.
Binance Coin: potential for reversal, but only short one
BNB was under high pressure during the whole week. At the start of the week price was pushed shortly to the level of $313, but selling orders were prevailing with this coin during the whole week. Soon, price reverted to the downside and reached its lowest weekly level at $266 on Saturday trading. Support line at $250 has not been clearly tested, which opens a path toward this level in the coming days. BNB is ending the week around $270 level.
RSI does not show the potential that the market might soon head toward the overbought zone. The indicator was moving between levels of 40 down to 33. Oversold market has not been clearly reached, which increases probability for it in the coming days. MA50 continues to diverge from MA200, indicating that potential cross is still not in prospectus for this coin.
As the support line at $250 has not been clearly tested during the previous week increases the probability that BNB might shortly test this level in the coming days. Current charts show decreased probability for this level to be broken, except in case of negative market fundamentals. Short reversal of the coin might push the price back to the resistance line at $300.
Cardano (ADA): smooth recovery
Regardless of general market sentiment, it might be noted that this was the second good week in the row for ADA. Market showed that there is potential for this coin, as price moves were more oriented toward upside, rather than to the downside. During the first half of the week, the price of ADA was moving toward the $0.7 resistance line, however, US CPI spoiled the game, so the coin reverted a bit to the downside, finishing the week slightly below the $0.6 support line, around $0.55. Support line at $0.50 has not been reached during the previous week.
During the week RSI went from level of 55 down to level of 45. Indicator shows that there is potential for the coin to head toward an overbought market, but it just needs more time. Moving averages of 50 and 200 days are continuing to move as two parallel lines but with downtrend.
Charts are showing that there is potential for ADA`s recovery, but it might be a slow and smooth path in the coming period. The highest threat to this lies on fundamentals. Resistance line at $0.70 has not been clearly tested during the previous week, which increases the probability that the market will turn to this level one more time. On the other hand, if the coin continues to move as per current trend, then $0.50 support is to be tested.
LINK: overbought market is postponed ?
LINK had an excellent start of the previous week, when its price managed to break the $8 long term resistance line, reaching its highest level at $9.6. Resistance line at $10 has not been tested on this occasion. Unfortunately, negative macro fundamentals pushed the price down to level of $7.1 as of the end of the week.
Prevailing buying orders for LINK started to push the RSI up to the level of 61 on its road toward the overbought market. Still, this indicator is ending the week below line of 50. However, in this case it does not look like the market gave up from the overbought territory but it has just been postponed. Moving averages of 50 and 200 days are continuing to move as two parallel lines with downtrend, not indicating potential cross in the coming period.
LINK showed high potential for an uptrend during the previous week. In case that coin reverts this trend, the price might again move back to the $8 resistance line, with some potential that next short term resistance at $10 might be tested. On the opposite side, there is a decreased probability that the support line at $6 might be tested in the coming days.
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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