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Fed ‘will determine the fate of the market’ — 5 things to know in Bitcoin this week

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Fed ‘will determine the fate of the market’ — 5 things to know in Bitcoin this week

Bitcoin (BTC) starts a new week with much to make up for after its worst April performance ever.

The monthly close placed BTC/USD firmly within its established 2022 trading range, and fears are already that $30,000 or even lower is next.

That said, sentiment has improved as May begins, and while crypto broadly remains tied to macro factors, on-chain data is pleasing rather than panicking analysts.

With a decision on United States economic policy due on May 4, however, the coming days may be a matter of knee-jerk reactions as markets attempt to align themselves with central bank policy.

Cointelegraph takes a look at the these and other factors set to shape Bitcoin price activity this week.

Fed back in the spotlight

Macro markets are — as is now the standard — on edge this week as another U.S. Federal Reserve meeting looms.

As inflation runs rampant worldwide, it is expected that Chair Jerome Powell will make good on his previous pledges and announce key interest rate hikes.

Wednesday will be pivotal.

The Fed is expected to confirm a $95B per month sell program which has not yet been unleashed on the market. https://t.co/gRRwd059Lw

— Charles Edwards (@caprioleio) May 2, 2022

How severe and how quickly they are applied is a matter for debate, and a separate debate concerns whether markets have already “priced in” various options.

Any shocks are likely to spark at least temporary volatility across markets, and over the past six months or so, crypto has been no exception.

Attention is thus on the Federal Open Markets Committee (FOMC) meeting to be held on May 3 and May 4.

“First came the Fed. Then the Netflixpocalypse. Then the Russian invasion. Then the sanctions. Then the Fed and the largest treasury dump ever. This week it was earnings. Next week the Fed again,” macro analyst Alex Krueger summarized over the weekend:

“The Fed’s QT announcement on Wed will determine the fate of the market.”

Krueger was referring to a policy known as quantitative tightening (QT) — the counterpart to quantitative easing, or QE, which describes the Fed’s pace of economic support withdrawal in a bid to reduce its $9 trillion balance sheet.

Risk assets, already sensitive to a conservative environment, are already tipped by Bitcoiners to lose big in the coming months, taking crypto down with them.

“It’s easy to overlook this, given the broad retreat of the market last week, but: Along with meme stocks, the Bitcoin-sensitive equity basked is already making new lows,” Jurrien Timmer, director of global macro at asset management giant Fidelity Investments, added.

An accompanying chart of the Goldman Sachs Bitcoin-sensitive equity index — 19 major cap stocks with exposure to crypto — spelled out the relative pain already being experienced.

Goldman Sachs Bitcoin-sensitive equity index chart. Source: Jurrien Timmer/ Twitter

Next week will see the focus shift back toward inflation itself with the publication of U.S. consumer price index (CPI) data for April.

Time for $28,000 Bitcoin?

At around $37,600, April’s monthly close was decidedly uninspiring for Bitcoin hodlers, data from Cointelegraph Markets Pro and TradingView shows.

BTC/USD 1-month candle chart (Bitstamp). Source: TradingView

Despite subsequently regaining some ground, BTC/USD has reaffirmed at least a short-term desire to trade in a narrow range well below the top of its 2022 trading corridor of $46,000.

Expectations were previously high that April would deliver better performance, but in the end, 2022 ended up being Bitcoin’s worst April on record, with overall losses of 17.3%, data from on-chain monitoring resource Coinglass confirms.

BTC/USD monthly returns chart. Source: Coinglass

On the back of that, it is thus little wonder that the mood among analysts is equally cautious.

“The BTC chart is heavy right now, & a break below $35k could cause a rush for the exit… But I don’t trust breakdown patterns in this range. We’ve seen short squeezes and ATH breakout traps over the past year,” popular trader Chris Dunn tweeted on May 1:

“Risky to anticipate, better to react… I’d love a $26k washout.”

Dunn is far from alone in calling for a capitulation event to take the market to $30,000 or under.

“In regards to talk of capitulation, I believe that it would require Bitcoin to go below $30k,” analyst Matthew Hyland argued in one of several tweets about Bitcoin’s volume profile:

“Low volume since May of last year which brought BTC to $30k. Low volume = low turnover of buyers and sellers. Below 30k would unlock the buyers who bought pre-65k in early 2021.”

Hyland explained that low-volume markets are apt to see larger price swings, and a significant BTC price dip may be necessary to reignite engagement amid an overall lack of participation at current levels.

To unlock higher volume, it would require Bitcoin to flush below 30k

Based on the volume levels between 20k-30k (which BTC spent less than 3 weeks in), I wouldn’t expect it to match the volume profile we saw last May however it would still standout compared to current volume: pic.twitter.com/msQRmz9UVi

— Matthew Hyland (@MatthewHyland_) May 1, 2022

Over the weekend, meanwhile, calls emerged for a near-term trip to $35,000.

U.S. dollar strength keeps up the pressure

April may have come and gone, but the ogre of the U.S. dollar index (DXY) remains firmly in the room.

A single day of consolidation on April 29 is already history, and on May 2, DXY was already attempting to continue a breakout that has seen dollar strength hit its highest since 2002.

At 103.4 as of press time, DXY shows no signs of a more significant pullback, much to the disappointment of Bitcoiners at the mercy of inverse correlation.

U.S. dollar index (DXY) 1-month candle chart. Source: TradingView

“At the moment, the inverse relationship between bitcoin and the DXY […] depicts that if the index holds above the 102 DXY resistance level, this could weaken bitcoin, and the price action could retrace to the $35k and below area, particularly if the rising DXY can be attributed to the tightening of monetary policy,” on-chain analytics firm Glassnode’s latest Uncharted newsletter explained.

In the event, 102 was little problem for DXY, which may stand to gain even more should the Fed rate hike decision be on the upper end of the spectrum.

“The development of the USD is highly dependent on the Fed’s course of action. The rising inflation and potential 50bps rate hike in early May could strengthen the DXY,” Glassnode added.

As Cointelegraph recently reported, other major world currencies have suffered along with crypto in USD terms in recent weeks, with a particular focus on the fate of the Japanese yen. Japan, unlike the U.S., continues to print vast amounts of liquidity, devaluing its currency even further.

Trader: Illiquid supply outweighs price dip significance

Last week saw a new record for the proportion of the Bitcoin supply dormant for at least a year — 64%.

As seasoned hodlers — or at least those who bought before the July 2021 bottom near $28,000 — there is thus a determination not to capitulate yet.

Now, more data has been added to the mix, and it comes in the form of illiquid supply.

According to Glassnode’s Illiquid Supply Change indicator, recent weeks have produced large increases in the overall segment of the BTC supply, which is now no longer available for purchase.

The result is Illiquid Supply Change reaching levels not seen since late 2020 when BTC/USD began to exhibit signs of a “supply shock” as market participants piled into what was already a solidly “hodled” asset class.

“This number is reaching peak high numbers, which we’ve also seen in 2020 (the build-up). Ultimately, a large number of coins are ‘illiquid,’ which adds to the potential of a possible supply shock,” Cointelegraph contributor Michaël van de Poppe said as part of comments on the numbers.

Continuing, Van de Poppe argued that the indicator “tells a lot” and could even take some of the fear out of a dip to $30,000.

“Yes, the market can still make a new lower low in which the bear market continues (relatively; the altcoin bear market is currently already active for a year, which means that retail is gone) and a hit of $30K can be reached. But, fundamentally, the data tells a lot,” he added.

Bitcoin Illiquid Supply Change chart. Source: Glassnode

Crypto sentiment “crosses over” macro

In what could be a silver lining under current circumstances, crypto sentiment is already pointing higher this week, even as traditional market sentiment remains nervous.

Related: Top 5 cryptocurrencies to watch this week: BTC, LUNA, NEAR, VET, GMT

The Crypto Fear & Greed Index, having hit two-week lows of 20/100 last week, has now exited its “extreme fear” zone.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

At 28/100, Crypto’s index is now even above its traditional finance (TradFi) counterpart, the Fear & Greed Index, which on May 2 measured 27/100.

Fear & Greed Index (screenshot). Source: CNN

Should crypto continue to fulfill its function as a bellwether of market moves to come, there may be modest cause for relief at the data.

28/100 marks Crypto’s best reading since April 17.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Miami’s Mayor Remains Unfazed by Crypto Crash, Still Receives His Paycheck in Bitcoin

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Miami’s Mayor Remains Unfazed by Crypto Crash, Still Receives His Paycheck in Bitcoin

Despite the tragedy of TerraUSD (UST) de-pegging and the subsequent chaos that plagued the cryptocurrency markets, Miami’s mayor remains resolute in receiving his salary in Bitcoin, but it seems he has other streams of income.

At the World Economic Forum (WEF), Miami Mayor Francis Suarez told attendees of a panel that he was still receiving his paycheck in Bitcoin and has no plans to stop. Suarez’s comments are coming on the heels of plummeting cryptocurrency prices over the last few months with Bitcoin down by over 30% in the last 2 months.

The Mayor told the audience that he remains unperturbed by the mayhem in crypto streets and will continue accepting his salary in Bitcoin. A reason for his cool, calm, and collected nerves is because of his multiple income streams that might serve as a buffer during volatile moments.

“I will note, for the record, that it’s not my only salary,” said Suarez. “It’s a different decision than if a person was deciding to take their salary in Bitcoin if it was the only source of income for them.”

Mayor Suarez drew the attention of cryptocurrency enthusiasts last year when he announced that he will begin taking his entire paycheck as Mayor in Bitcoin. Before the announcement, Suarez publicly announced his desire to pay government employees in Bitcoin as part of efforts to improve crypto adoption in the city. 

Making Miami the crypto capital of the U.S. 

Mayor Suarez has been making moves to make Miami a leading crypto hub since his assumption of office. The city has been receptive to cryptocurrency miners, and there have been conversations about allowing citizens to pay bills and taxes with crypto.

“I want us to differentiate ourselves as a crypto capital of the United States or the world,” he said in an interview with Bloomberg.

Suarez has been backing his claim with actions, with the city famously launching MiamiCoin which netted the city over $5.2 million. In November 2021, there were plans for the city to distribute $21 million to Miami’s citizens through the ambitious plans to create a digital wallet for each citizen.

Miami was the center of attention after successfully hosting the Bitcoin 2022 conference. Major players in Bitcoin’s ecosystem like MicroStrategy’s CEO Michael Saylor, ARK Invest CEO Cathie Wood, billionaire Peter Thiel, CEO of Strike Jack Mallers, and others. Nayib Bukele, El Salvador’s pro-Bitcoin president, was scheduled to make an appearance but pulled out due to unforeseen circumstances.

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Billionaire Investor Ray Dalio Says ‘Cash Is Still Trash’, Prefers ‘Digital Gold Bitcoin’

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Billionaire Investor Ray Dalio Says ‘Cash Is Still Trash’, Prefers ‘Digital Gold Bitcoin’

Billionaire investor and hedge fund manager, Ray Dalio, has reiterated his previous call that “cash is trash”. Dismissing equities as “trashier”, the Bridgewater Associates founder said he preferred “a digital gold like bitcoin” instead.

“Of course, cash is still trash,” Dalio said. “Do you know how fast you’re losing buying power in cash?” He was speaking on CNBC’s Squawk Box during the ongoing World Economic Forum (WEF) meeting in Davos, Switzerland.

“When I say cash is trash, what I mean is all currencies in [relation] to the euro, in relationship to the yen,” he explained. “All of those currencies like in the 1930s will be currencies that will go down in relationship to goods and services.”

Dalio is the founder of the world’s biggest hedge fund firm, Bridgewater Associates, which manages around $223 billion. In January 2020, the 72-year-old American investor advised people to diversify their portfolios by “getting out of cash”, which he called “trash”.

Bitcoin as ‘digital gold’

At Davos, Dalio spoke about a range of issues including stocks, the global economic outlook, and the U.S. central bank’s efforts to combat inflation. He said stock markets had become too crowded, and that compared to cash, “equities are trashier”.

“Everybody is long equities, and everybody wants everything to go up,” said Dalio. “The more they hype it the more it becomes somebody else’s financial asset they’re holding. You can’t have that, so you’re going to have an environment of negative real returns.”

For the billionaire, bitcoin (BTC) is a preferred form of investment at a time of worldwide economic uncertainty. His list of safe-haven assets also includes real estate and precious metals such as gold.

“I think blockchain’s great,” Dalio stated. He touted cryptocurrency’s potential as a fix to what he expects to be a tough year for the U.S. economy, marked by high inflation and a lack of real returns on investments. Continuing, he said:

“But let’s call it a digital gold. I think a digital gold, which would be a bitcoin kind of thing, is something that – probably in the interest of diversification of finding an alternative to gold – has a little spot relative to gold and then relative to other assets.”

Bitcoin’s inflation-hedge credentials under spotlight

Dalio’s comments come against the backdrop of rising disillusionment in the credentials of bitcoin as an inflation-hedge asset. Proponents have argued that bitcoin is a gold-like store of value.

In 2020, many people believed BTC was now poised to transition from a risk-on speculative asset to the crypto market’s version of the metal after its correlation to gold jumped to an all-time high.

But that argument may have started to fall apart with the massive decline in crypto markets this year. Bloomberg data shows that BTC’s correlation to gold dropped to almost zero earlier in January, and as bitcoin prices fell in later months, gold continued to rise.

In April, the 50-day correlation coefficient for BTC and gold was around minus 0.4, the lowest since 2018, Bloomberg said. A reading of 1 implies assets are moving in lockstep, and minus 1 is the reverse.

Crypto markets have become more tied to the stock market instead, particularly to blue-chip technology stocks such as Apple, Amazon, and Microsoft. More than $1.5 trillion has been wiped off the face of crypto markets so far this year.

Dalio forecasts ‘squeeze on demand’

Dalio, the Bridgewater Associates founder, painted a gloomy picture of the global economy in 2022. He expects inflation in the U.S and elsewhere around the world to erode the purchasing power of money, saying:

“We are in an environment that we are now going to ask ‘what is the new money?”

On bonds, he said: “The Federal Reserve is going to sell, individuals are selling, foreigners are selling, and the U.S. government is selling because it has to fund its deficit. So there’s going to be a supply/demand problem, that means that it produces a squeeze.”

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Polkadot parachains spike after the launch of a $250M aUSD stablecoin fund

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Polkadot parachains spike after the launch of a $250M aUSD stablecoin fund

Crypto prices have been exploring new lows for weeks and currently it’s unclear what it will take to reverse the trend. Despite the downtrend, cryptocurrencies within the Polkadot (DOT) ecosystem began to rally on May 24 and have managed to maintain gains ranging from 10% to 25%, a possible sign that certain sub-sectors of the market are on the verge of a breakout.

Here’s a look at three Polkadot ecosystem protocols that have seen their token prices trend higher in recent days.

Acala launches a $250 million aUSD ecosystem fund

Acala (ACA) is the leading decentralized finance (DeF) platform on the Polkadot network, primarily due to the launch of aUSD, the first native stablecoin in the Polkadot ecosystem.

Following the collapse of Terra’s LUNA and TerraUSD (UST), traders were searching for “safer” stablecoin options.

On March 23, ACA rallied after the project announced the launch of a $250 million “aUSD Ecosystem Fund” that aims to support early-stage startups planning to build strong stablecoin use cases on any Polkadot or Kusama parachain.

— Acala (@AcalaNetwork) March 23, 2022

Acala also announced the launch of a kickoff rewards program that has set aside 1 million ACA tokens as rewards for LCDOT/DOT, LCDOT/aUSD, ACA/aUSD and aUSD/LDOT liquidity providers.

Following the aUSD ecosystem fund announcement, the price of ACA spiked 31% from a low of $0.364 on May 23 to a daily high of $0.478 on May 24.

Astar rallies after revealing a partnership with Microsoft

The Astar (ASTR) network is a smart contract hub for the Polkadot community that supports Ethereum (ETH), WebAssembly and other layer-two solutions like zk-Rollups.

Since the Polkadot relay chain doesn’t offer Ethereum Virtual Machine (EVM) support, Astar was created to become a multi-chain smart contract platform capable of supporting multiple blockchains and virtual machines so that they can integrate with the Polkadot ecosystem.

On May 24, it was revealed that AstridDAO, an Astar-based protocol responsible for minting the collateralized BAI stablecoin, had signed a partnership with Microsoft to become part of Microsoft for Startups, an initiative “which removes traditional barriers to building a company with exclusive access to technology, coaching, marketing and support.”

— AstridDAO – No.1 native stablecoin on Astar (@AstridDAO) May 24, 2022

If successful, the partnership should accelerate AstridDAO’s go-to-market speed and maximize its market influence. It also includes up to $350,000 worth of benefits through Github Enterprise, Microsoft Teams and Azure credits.

Following the partnership announcement, the price of ASTR spiked 61% from $0.055 to a daily high of $0.0888.

Related: Polkadot vs. Ethereum: Two equal chances to dominate the Web3 world

Uniswap v3 to deploy on Moonbeam

Moonbeam (GLMR) is an Ethereum-compatible smart contract parachain on Polkadot that streamlines the use of Ethereum developer tools to build or redeploy Solidity projects in a substrate-based environment.

Interoperability with the Ethereum network is a highly sought-after capability since a majority of decentralized applications currently operate on Ethereum along with a majority of the value in decentralized finance.

The benefit of EVM interoperability was demonstrated with the May 24 announcement that a proposal to deploy Uniswap (UNI) v3 on the Moonbeam network passed, meaning that the top decentralized exchange in the crypto ecosystem will soon be accessible to Moonbeam users.

— Uniswap Labs (@Uniswap) May 23, 2022

Following the announcement, the price of GLMR climbed 29% from a low of $1.15 on May 23 to a daily high at $1.48 on May 24 as its 24-hour trading volume increased 106% to $75.3 million.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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