Cryptocurrencies were mostly higher on Wednesday as traders brushed off concerns about regulatory crackdowns. Bitcoin was up about 1.9% over the past 24-hours, giving up about half of Tuesday’s relief rally, suggesting that buyers are starting to take profit.
“It’s too early to tell if this is “the” bottom or just a temporary floor before more downside. The lack of any upside catalyst (beside some contrarian oversold metrics) remains the biggest hurdle for cryptos to bounce back,” wrote Elie Le Rest, partner and co-founder of crypto hedge fund ExoAlpha.
Latest prices
Cryptocurrencies:
- Bitcoin (BTC) $33083.9, +1.52%
- Ether (ETH) $1923.6, +0.97%
Traditional markets:
- S&P 500: 4241, -0.11%
- Gold: $1773.9, -0.27%
- 10-year Treasury yielded 1.489% versus 1.475% on Tuesday
“Overall we might witness a range market in July with lower tranches $25,000-$35,000,” wrote Le Rest.
Delta Exchange CEO Pankaj Balani does not expect bitcoin to break $30,000 support. “Naked shorts have started to enter the market and the risk of sharp rises due to short squeezes is higher,” wrote Balani.
However, the risk of further regulatory pressure still looms.
“Private unbacked cryptocurrencies like Bitcoin may be hogging the spotlight, but the role of regulators and policymakers as key gatekeepers likely limits their potential to catalyze truly transformational change,” wrote JPMorgan in a research note published on Monday.
And from a macro perspective, bitcoin’s sell-off coincided with a broader risk-off move over the past two months, evidenced by the decline in the copper/gold ratio. $30,000 support is critical for bitcoin, although resistance is strong around the $40,000 level.
Reach for yield
Aside from the slight risk-off tone over the past few months, the recent decline in negative yielding debt could be a headwind for cryptocurrencies.
The downtrend in global interest rates has encouraged a search for yield as central banks remain committed to accomodative monetary policy. This environment has benefitted risk assets such as corporate bonds, emerging market debt, and more recently cryptocurrencies.
“Any evidence that easy money is ending with a more hawkish stance by central banks will likely be a drag for speculative assets,” wrote Santiago Espinosa, strategist at MRB Partners.
Bitcoin dominance stabilizes
Bitcoin’s dominance rate, or the top cryptocurrency’s share in the total market, dropped to under 40% in May, which preceded a near 30% price crash. Since then, the dominance rate has stabilized, suggesting that bitcoin is regaining its luster.
“The surge of new altcoins diverted some capital away from BTC and spread it out across small-cap assets, many of which later died out,” wrote Coin Metrics in a newsletter published on Tuesday.
The chart below shows a proxy of BTC dominance against roughly 100 of the largest altcoins, using the free float version of market capitalization, according to Coin Metrics.
Ether options trade gone bad
An ether put options seller lost $3 million by taking a large bet against a sharp drop in the cryptocurrency and ended up booking a massive loss on Tuesday.
The trader likely sold the $2,560 puts during the bull run, expecting a continued rally to last at least until the year-end and thus a steady drop in the option’s price. However, ether peaked above $4,000 on May 12 and fell to $1,700 on Tuesday.
“The market moved just enough to force the trader to take a loss by buying back 5,000 contracts of the December expiry $2,560 put option sold earlier this quarter,” Gregoire Magadini, CEO of options analytics platform Genesis Volatility, told CoinDesk in a Telegram chat.
The loss underscores that selling options, be it put or call, is a strategy better suited to institutions with ample capital supply and high-risk tolerance.
Altcoin roundup
- Privacy coin Monero has increasingly become a tool for criminals such as ransomware gangs to demand money from victims, according to a Financial Times article. The cryptocurrency, which was designed to veil senders, receivers and the amount for each transaction, saw its price going up 15% on Wednesday. The cryptocurrency has a market cap of $3.8 billion.
- “The features Monero offers probably land itself for criminals to protect their activities, but ten years ago you read the same thing about bitcoin,” Vik Sharma, CEO of Cake Wallet told First Mover. “It is a double-edged sword. But again, so is cash. So is bitcoin.”
- On Tuesday, Polkadot, the token for the smart contract blockchain of the same name, rose by more than 70% in just four hours on U.S.-based crypto exchange Coinbase. However, the price on other exchanges followed the larger market sell-off. A Coinbase spokesperson told CoinDesk the team was investigating what happened, and said the price discrepancy of DOT (-1.56%) between Coinbase and other major exchanges was likely due to the “send and receive” function being disabled as part of “the incident.”
Relevant news
- Goldman Sachs Taps JPMorgan’s Private Blockchain for Repo Trade: Report
- Bipartisan Crypto Bills Pass US House of Representatives – Again
- 3iQ’s Bitcoin ETF Rises on First Day of Trading on Nasdaq Dubai
Other Markets
All but one digital assets on the CoinDesk 20 ended up in green on Wednesday.
Notable winners as of 21:00 UTC (4:00 p.m. ET):
filecoin (FIL) +10.39%
tezos (xtz) +7.66%
the graph (GRT) +6.13%
Notable losers:
aave (AAVE) -2.62%
Source: Coindesk
