Last week in the news
It was a week full of economic news and old topics: inflation and monetary policies. FED increased interest rates by additional 50 basis points, Bank of England by additional 25bps. Markets continue to perceive economic outlook in a negative manner. Friday’s trading brought additional sell-off of mostly tech companies, Bitcoin was pushed to $35K due to margin calls, while ETH is trying to hold above $2.5K.
During the previous week FOMC meeting was held, where the US FED Fund rate was increased by additional 50 basis points, to the spread of 0.75% - 1.0%. This is the second biggest rate increase since the year 2000. Although there has been market news that the next rate increase could be 75 basis points, FED officials commented that it is not on the table, however, additional 50bps increases are likely in the following meetings. What is also mentioned in a Meeting statement is FED`s plan to decrease its asset holdings, starting from June. At the same time economic output of developed economies significantly slowed down in the first quarter of this year, which means that stagflation is on the stage.
Elon Musk is engaging his business connections in order to back him for the $44 billion purchase of Twitter shares. During the previous week it has been announced that Binance, a crypto currency exchange, will participate with $500 million in this deal, while Sequoia Capital will commit $800 million and Fidelity $316 million to this deal. As it has been reported, up to now $7.1 billion has been committed by various companies and investors. Changpeng Zhao, a Binance founder, commented his commitment on Twitter as “a small contribution to the cause”.
Although the latest sell-off in markets was led by the tech industry, Block Inc, formerly Square, managed to increase its share price by 10% after posting results for the first quarter of this year. As noted by the company, they have still not seen a drop in consumer spending, although there has been a slowdown in demand for crypto currencies, after decrease in prices during the Q1.
The Central Bank of Argentina issued an announcement in which it forbids banks to offer crypto currencies to customers through their platforms. This announcement occurred a month after Argentina`s CB signed an arrangement of $45 billion with the International Monetary Fund in which it has been requested from CB to ban the use of crypto currencies.
Crypto market cap
For some time now many economists have been warning about unsustainable monetary policies of western economies and that too much monetary easing and money in the system would inevitably lead toward very high inflation. Now it’s too late for an adequate reaction from the central bankers, so they will need to react in an aggressive way to stop widening inflation, but with one huge problem, which is related to decreased economic output. Increase of interest rates will slow down inflation but it will also hurt economic recovery, which is already quite weak. Markets don’t like uncertainties, which is the main reason for the latest massive moves to the downside on the equity market and huge rise in yields of US Treasury bonds. Crypto market was also hit on the news that the FED will continue to pull money out of the system. During the previous week total crypto market capitalization decreased by additional 4% where $71B was wiped out from the market. This adds to total outflow from the beginning of this year of 25% or $540 billion. Also, all gains from the beginning of this year were now erased. Trading volumes on a daily basis have been modestly increased, moving between $150B and $200B.
Push of crypto prices to the downside during the previous week was also supported with activation of margins on crypto futures. As per some estimates, around $400 million worth of positions were liquidated as Bitcoin made a move toward $35K. Vast majority of coins ended a week with decreased market cap. Bitcoin was down by 6%, losing $43B in market cap. Ether lost $11B or more than 3% in cap on a weekly basis. On the opposite side, Tron gained 32% in value, adding $2B to its total market cap. This occurred as TRON DAO Reserve, backing new stablecoin USDD, purchased 504 million coins in order to safeguard blockchain. At the same time Tron decreased coins in circulation by 2.7% compared to the week before.
The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies.
Crypto futures market
In line with general negative market sentiment and execution of margin calls for crypto futures, the crypto futures market ended the week in red. Short term BTC futures fell by 6% on average, while ETH futures were down by 3%. As for long term maturities, BTC fell below $40K for the end of this year, while ETH futures were traded below $3K. It is still positive that market price BTC futures for the end of the next year at level of $40K, and ETH futures at $3K.
Table below provides the most recent information on BTC and ETH future prices.
Bitcoin: where is the bottom line?
It is well known that markets don’t like uncertainties, nor use of words like squeeze of liquidity. Sell-off which occured on the market during the previous week was a result of late actions of monetary authorities, which are starting with a more aggressive rise in interest rates as a major monetary instrument to fight surging inflation. As the crypto market became part of the mainstream, it is acting in the same manner as other financial markets – with run-off of the capital. Additional burden for BTC during the previous week was liquidation of crypto traded futures, which exceeded $400 million in value as the price of BTC went below $38K short support line. Bear market is activated, so the main question at this moment is where it ends?
Previous week BTC started testing a $40K resistance line, which increased confidence that this line could be finally broken. However, FED` statements revealed their plans on further tightening of monetary policy, and markets reacted with a push of BTC price to the down side, breaching $38K short support and finishing week modestly above $35K support line. On a positive side is that this support line is still not clearly tested to the downside, but during the last three trading days selling orders are the one that dominate orders for BTC. RSI was moving between 50 and down to 36, but a clear oversold market has not been reached which opens a way for a price to move further to the downside. Moving averages of 50 and 200 days are still moving as two parallel lines, but MA200 started to converge faster toward its MA50 counterpart. There is still no indication that we will see a cross in the near future.
BTC is currently on the cross road. On one side there are indications that the move to the downside is still not finished, as RSI is holding above but close to the oversold side. On the other hand, $35K support has not been clearly tested, which leaves a space for the market to do it in the coming days. In this sense, $35K is a level to watch in the coming trading days. If it is clearly broken, then BTC will most certainly start a road toward a $30K support line. On the other hand, there is still a high probability of short term reversal to the upside, where BTC might make a move toward $38K for one more time.
Ether: is $2.5K end of ongoing move?
General market sentiment also affected the price of Ether during the previous week, as a second most dominant coin on the crypto market. Although Ether was weakening for some time before the latest sell-off, it was managing to hold above psychological $3K line. However, during the previous week, the market pushed the price of Ether from levels modestly below $3K down to $2.620, where the coin is finishing the week.
Support line at $2.850 has been easily broken and the price of ETH managed to stop at next support at $2.650, which is the level currently tested. RSI was moving below 50 and was pushed down to 36, but it has not reached a clear oversold market. This increases the probability that the price of ETH could go lower from this level in the coming days. MA50 and MA200 continue to slowly move toward each other, without indications that cross might occur in a shorter period of time.
Current charts are opening a question if the end of bear market is at current levels, or it could be expected to further move to the down side. In this case $2.5K will be the final end of the current price reversal. However, there is still a high probability that price will shortly revert to the upside in case that current support line at $2.650 is not clearly broken. In this case the price of ETH could move to test the resistance line at $2.850, with a low probability that it can get back to $3K level.
Ripple: decreased volatility is coming again?
Two weeks ago XRP reached clear oversold market and started its short reversal at the start of the previous week. Price of XRP reached $0.65 when general bullish sentiments overwhelm the market. Lowest level reached during the week was at $0.58, where the coin is ending this week. It was positive for XRP that the coin was weakening for two weeks before the bull market, so the price could not go lower from these levels.
RSI went from oversold market up to the level of 40, but reverted back down as of the weekend. It indicates that the market will need some time to start a recovery path toward the overbought zone. MA50 and MA200 are still moving as two parallel lines with down trend, not providing indication that cross might occur in the near future.
XRP has reached its general oversold territory. Of course, if negative fundamentals on crypto market continue also during the week ahead, there is some probability that the price might go at least till next support line at $0.55. In case markets calm down, there is a higher probability that XRP will move to the upside and resistance lines at $0.60, eventually $0.65.
Binance Coin: oversold market is still to come?
General market sentiment was on the downside, so the price of BNB just followed the market trend. But, what is positive about BNB is that these moves were not as fast as with some other coins on the market. For some time now, the price of BNB is moving to the downside, but with higher reversals, which indicates that the market has some increased confidence in this coin. However, charts are still pointing to $350 as a bottom line of the latest reversal move started at the beginning of April this year.
For the last three weeks RSI is moving below level of 50, which provides indication that market is watching currently at oversold zone. This adds to the probability that the price of BNB might go lower from current levels, which further emerges $350 support line. MA50 and MA200 continue to move as two parallel lines, not adding to the probability of potential reversal in the coming days.
Current charts are pointing to the $350 support line as the end of the latest reversal move. In this sense, BNB might make a move toward this level in order to test it. In case that current support at $380 holds during the week, then it might be expected that the coin will revert back to next resistance at $400, before its final move to the down side.
Cardano (ADA): low volatility will continue
There are again some interesting elements on charts for ADA, which indicates that there are few large players on the market for this coin. Namely, as of the start of the week ADA continued to trade around $0.77, but on Wednesday there was a huge buy order , when the price was moved to $0.89, and right on the next day there was a huge sell order which returned the price back to $0.77 level. These kinds of moves are sort of “noise” in technical analysis, indicating that the market for ADA is either too concentrated or too shallow in order to fit into technical analysis.
In this way it could be expected that the price of ADA will continue to have low volatility around current levels with potential to test $0.8 resistance line, but there is no indication that the price might return to next resistance at $0.9.
LINK: oversold market is quite close
LINK has slowed down during the previous week, regardless of general market sentiment. To some extent this was positive for LINK as the price was moving in a relatively lower range from $12.2 down to $10.3. For the last three days selling orders were dominant for this coin, while RSI was moving very close to the oversold market for one more time within the last two weeks.
Next long term historical support line for LINK stands at $8, however, based on the current chart, there is a decreased probability that the coin might head to test this level. On the other hand, a push to the downside from current levels will certainly lead to an oversold market where the price reversal might be expected. In this case price could be pushed to the levels below $13 resistance.
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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