Crypto markets faced a tumultuous day as concerns over UK inflation and the US debt ceiling impasse triggered a sharp decline in prices. Bitcoin, along with other major cryptocurrencies, reached its lowest level since May 12, trading at around $26,315.
The uncertainty surrounding the US debt default and ongoing regulatory issues weighed heavily on market participants, and the correlation between crypto and stock markets briefly resurfaced as major stock indexes also struggled. The release of divergent views among US central bankers on interest rate hikes failed to restore market confidence. Additionally, the UK’s higher-than-expected Consumer Price Index further dampened crypto markets. Analysts believe that Bitcoin needs a new catalyst to break free from its current stagnation, as it lacks a consistent narrative to drive investor decisions.
Meanwhile, the stablecoin market has been contracting for 14 consecutive months, indicating a decline in capital within the cryptocurrency space and posing challenges for price recovery. The total market capitalization of stablecoins dropped to $130 billion in May, the lowest level since September 2021. This contraction hampers liquidity in the crypto ecosystem and inhibits investment and speculation. Both JPMorgan and Goldman Sachs have emphasized the importance of stablecoin market growth for sustained cryptocurrency price recovery.
Furthermore, trading volume with stablecoins has significantly decreased this month, reaching the lowest levels since December 2022. However, TrueUSD has bucked the overall trend by experiencing increased trading volume, primarily driven by its promotion on Binance, making it the second most traded stablecoin on centralized exchanges.
In the realm of decentralized finance (DeFi), tensions have escalated between Sushiswap and Lido as they await the outcome of a vote concerning the return of stolen funds. Sushiswap seeks to recover $72,000 worth of ETH that ended up in Lido’s treasury following a hack. However, a governance proposal to return the funds failed to reach the required quorum, and a second vote is currently underway with low participation and growing opposition. The situation has sparked accusations of theft and misuse of decentralized autonomous organization (DAO) procedures. Both projects have encountered regulatory challenges, with Sushiswap being subpoenaed by the SEC and rumors circulating that LidoDAO received a Wells Notice.
Meanwhile, Hong Kong is addressing concerns raised by the crypto industry regarding a shortage of responsible officers (ROs) as the city prepares to implement a new regulatory regime for digital assets. The scarcity of ROs has become a hurdle for crypto companies seeking permits under the new regime, potentially impeding Hong Kong’s aspirations to become a crypto hub.
ROs are responsible for ensuring compliance with regulations and are required for each type of license held by a firm. To alleviate some pressure on crypto firms, the Securities and Futures Commission (SFC) has indicated that it may allow one individual to serve as an RO under both securities and anti-money laundering ordinances, reducing the number of required officers during the transition period. The SFC acknowledges the lack of talent with experience in both virtual assets and traditional securities and remains open to a pragmatic approach.
Hong Kong is currently processing applications from crypto exchanges and has received indications of interest from additional companies. However, the shortage of ROs with crypto experience has led to salary premiums and recruitment challenges. While the city aims to attract individuals with technical expertise in crypto and blockchain to become ROs, local securities law mandates that at least one RO must be present in Hong Kong at all times.
According to yesterday’s analysis, the current state of BTC has reached a critical point where the 4-hour and 1-hour time frames are aligned in their respective mSOW phases in the accumulation structure. While there may be some volatility at current price levels that could lead to further shocks and allow investors to increase their Bitcoin holdings, we can infer from the increase in trading volume and the rapid decline that triggered extreme fear in the market that senior investors have taken control of the path of least resistance. This suggests that the next expected move is an upward trajectory toward the 4-hour Spring zone (26,790-26,990). By looking at the speed and depth of the rise into this area, we can make a prediction for the subsequent move. Given this, following the Wyckoff logic, Bitcoin is likely to see the next downside move above current levels, which could also be the last accumulation phase before Bitcoin’s rise to above $31,015 begins.
- Closest hourly support zone: 26310 – 26120
- Closest hourly resistance zone: 26380 – 26485
- Key Level: 26285 (Weekly Close between Dec. 21-28, 2020)
Hourly Resistance zones
- 26380 – 26485
- 26570 – 26690
- 26790 – 26990
Hourly Support zones
- 26310 – 26120
- 25900 – 25818
- 25500 – 25240
Concerns about a potential US recession weighed on US stocks and bonds, driven by fears of a debt default or higher interest rates. The ongoing negotiations over the debt ceiling and conflicting views on interest rates further contributed to the market’s decline. However, Nvidia’s strong sales forecast provided a boost to market sentiment during after-hours trading. Meanwhile, European and Asian markets also experienced retreats amid worries about inflation and debt issues.
The rise in yields on short-dated Treasuries reflected concerns surrounding the possibility of defaults. Bond traders, despite the recession risk, remained optimistic about a rate hike in July. These factors set the stage for a mixed outlook for the financial markets.
During Asian trading on Thursday, US stock futures opened on a positive note, driven by an improved risk sentiment following Nvidia’s encouraging sales forecast. However, the US dollar weakened against the yen, and the price of gold edged higher after Fitch Ratings issued a warning about a potential downgrade to the US credit rating due to the ongoing partisan dispute over the debt ceiling. Despite the Fitch news, Nasdaq 100 futures managed to hold on to most of their early gains, surging by 1.4%. Similarly, S&P 500 contracts also rose by 0.4% during Asian trading.
Nvidia’s impressive after-hours performance saw its shares surge by approximately 25%, leading to a significant increase in the company’s market value. While major Asian equity indexes initially indicated declines, there is Optimism about potential gains in tech-related stocks in South Korea, Japan, and Taiwan.
Amidst these developments, the yen strengthened against the dollar, while most other major currencies remained relatively stable. However, the yield on 10-year Treasury bonds rose, reflecting concerns surrounding the ongoing debt ceiling discussions and diverging opinions on US interest rates. Analysts hold different views on the outcome of the debt talks, with some anticipating a positive resolution before the June 1 deadline, while others suggest that the discussions may extend beyond that date.
Looking ahead, the Bank of Korea and Bank Indonesia are expected to maintain their current interest rates in their upcoming policy decisions, underscoring the cautious stance taken by central banks amidst persistent economic uncertainties.
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