Good morning! Here's what happened:
Prices: Bitcoin and other major cryptocurrencies are falling.
Insights: South Korea's government is taking a closer look at cryptocurrencies.
Technician's take: long-term momentum remains negative, limiting price upside.
Bitcoin (BTC): $29,784 -6.2%.
Ether (ETH): $1,818 -6.2%
Bitcoin and other cryptocurrencies decline
Investors decided Wednesday that bitcoin isn't such a good deal after all - and neither are almost all other major cryptocurrencies.
The largest cryptocurrency by market capitalization recently traded just below $30,000, a drop of more than 6% in the last 24 hours that gave up much of the gains recorded during a surge over the U.S. holiday weekend. As recently as Tuesday morning, Bitcoin was changing hands at over $32,000 as markets reacted to the easing of COVID-19 restrictions in China and the faint possibility that the U.S. Federal Reserve could ease its monetary restraint later this year.
All that good faith had evaporated by early Wednesday, and investors returned to the risk-averse stance that has characterized their moves over the past eight months. Ether also lost over 7% in the same period, trading at around $1,800. Other major cryptocurrencies fell even lower, with Luna Classic (LUNC), the new name for the original Terra Protocol's LUNA, dropping 61% at one point. SOL and ADA both fell about 12%, while DOT dropped about 9%.
"Bitcoin's price performance today is not entirely surprising," Joe DiPasquale, CEO of crypto fund manager BitBull, wrote to CoinDesk. "Not only is it under pressure from traditional markets, but it also had trouble breaking through the resistance zone between $31 and $32, leading to a breakout from the range it set over the weekend."
Major stock indexes fell, with the tech-heavy Nasdaq and S&P 500 each closing down 0.7%, as investors renewed concerns about high inflation and the prospect of recession. Gold and the 10-year Treasury bond yield both rose.
At an economic conference on Wednesday, Jamie Dimon, CEO of JPMorgan Chase and a crypto skeptic, told investors and analysts that the bank would be conservative with its balance sheet and prepare for rough economic times. Dimon said he is concerned about the central bank's quantitative tightening and the lingering effects of the Russian invasion of Ukraine. "Right now it's sunny, things are going well, everybody thinks the [U.S. Federal Reserve] can handle it," Dimon said. "The hurricane is out there, down the road, it's coming at us.
Bitcoin finished May, a historically strong month, well in the red, although it outperformed the altcoins. This reflects investors' preference for the digital asset, which is considered the least risky. Still, BitBull's DiPasquale was skeptical that Bitcoin could quickly turn upward. "Going forward, Bitcoin will need to see significant buying activity and a major shift in sentiment for there to be any hope of a quick turnaround," he wrote.
S&P 500: 4,101 -0.7%
DJIA: 32.813 -0.5%
Nasdaq: 11,994 -0.7%
Gold: $1,846 +0.5%
South Korea is a hotbed of interest in cryptocurrencies.
That was evident less than three months ago, when South Korea's two main presidential candidates competed to see who could appeal to younger voters as the most crypto-friendly.
But the country's lawmakers have taken a harder look at digital assets in recent weeks, especially after the collapse of the TerraUSD stablecoin (UST) and the Luna token that backed it. The UST implosion swept away an estimated 280,000 Korean investors.
According to a report by Korean news agency NewsPim on Tuesday, the South Korean government may establish a digital assets committee this month to specifically oversee the digital assets market in light of the Terra debacle. The committee will establish criteria for listing coins, introduce measures to protect investors and monitor unfair trading.
The initiative follows widespread calls for the creation of a body that could function similarly to stock market regulators to protect investors. Responsibility for cryptocurrencies currently rests with a number of ministries and regulators, including the Ministry of Strategy and Finance, the Financial Services Commission, and the Ministry of Science and ICT (Information and Communications Technology).
Calls for stronger oversight of the crypto industry were made at an emergency seminar held by the National Assembly last week. "We need to ensure that exchanges play their role properly, and to that end, it is important that regulators oversee them thoroughly," said Rep. Sung Il-jong of the ruling People Power Party.
How the establishment of a crypto committee is related to the proposal by Yoon Suk-yeol, the conservative candidate who won the March presidential election, to "confiscate crypto profits obtained through illegal means and return them to victims" is not clear.
One technician's assessment
Bitcoin slips as relief bounce loses steam, support at $27K
Bitcoin (BTC) gave up earlier gains after buyers took some profits below the $33,000 resistance level. The cryptocurrency may find support, first at $27,500 and then at $25,000.
The relative strength index (RSI) on the four-hour chart reached oversold levels on Monday, which preceded the current pullback in the price. On the daily chart, the RSI returned below the neutral level of 50, indicating a temporary loss of upward momentum.
On the weekly chart, bitcoin seems to be oversold, albeit with negative momentum signals. This suggests that the uptrend may be limited beyond $35,000.
Right now, BTC is about a week away from registering a signal of exhaustion to the downside, as it did on June 7 last year and January 10 this year. Still, a weekly close above $30,000 is needed to confirm a short-term upside signal.
Should further dips occur, secondary support is seen at $17,673.
Blockchain Fest Singapore 2022
9.00am HKT/SGT (1.00am UTC): Opec and non-OPEC ministerial meeting.
10.00 HKT/SGT(2.00 UTC): Eurostat Producer Price Index (MoM/YoY/April).
In case you missed it, here is the latest episode of "First Mover" on CoinDesk TV:
Nansen analyst on whales' role in UST de-pegging; will BTC hold above $31K?
Nansen Principal Research Analyst Aurelie Barthere joined "First Mover" to discuss the company's research, suggesting multiple parties were involved in the collapse of stablecoin terraUSD (UST). In addition, Waves founder and lead developer Sasha Ivanov shared his plan to revamp Waves' USDN after this stablecoin collapsed twice in the last three months. In addition, Rob Frasca of Cosimo Ventures shared insights on crypto markets.
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Said and heard
"Shanghai officially ended its two-month citywide lockdown today, carefully giving 2.67 million businesses, from corner stores to multinational manufacturers, free rein to resume operations after the city brought the [COVID-19] outbreak under control." (South China Morning Post) ... "Despite still staggering profit margins, mining companies are in a tough spot. Most listed mining companies - including industry leaders Riot, Marathon and Core Scientific - saw their market capitalizations plunge by well over 50 [percent]. Both Riot and Core Scientific missed their optimistic revenue estimates and conservatively revised their expansion plans." (Wired) ... "The Decoupling. The latest iteration of the 'hope bill' for Bitcoiners and crypto-natives. When it finally and inevitably happens, it will only be up for Big Crypto and down for Big Fiat. But what it actually means is a bit weird. Decoupling is the moment when the bitcoin price decouples from stocks and starts to rise when stocks fall (and vice versa). Decoupling is the moment when Bitcoin (BTC) and stocks become negatively correlated. Bitcoin will rise to $1 million per coin and stocks will fall to zero." (CoinDesk Research analyst George Kaloudis)