Good morning! Here's what happened:
Prices: Bitcoin and some altcoins had a good day; Ether was down.
Insights: Tether is sticking to the 1:1 retracement of the peg - so far.
Technician's take: Buyers are responding to oversold conditions, though upside potential in BTC appears limited.
Prices
Bitcoin (BTC): $31,837 +0.3%
Ether (ETH): $1,947 -2.4%
Bitcoin is rising, but not Ether
Bitcoin continued its recent mini-recovery on Tuesday, at least temporarily.
The largest cryptocurrency by market cap was still chugging along near $32,000, the threshold it crossed during midday trading, following a surge over the U.S. holiday weekend. Bitcoin is up nearly 8% over the past four days. Still, analysts remained cautious about predicting a long-term recovery amid lingering inflation concerns and the prospect of recession.
"The emerging rebound from the bottom may be self-sustaining for now, as many market participants believe the crypto market has corrected enough to become attractive for long-term buying," FxPro Senior Market Analyst Alex Kuptsikevich wrote. "However, fundamentals such as a halving, loose monetary policy or accelerated adoption are needed for growth to continue."
Bitcoin fared better than ether, which spent much of Tuesday in the red and last changed hands at around $1,950, down 2%. Other altcoins were mixed: SOL and AVAX were recently down more than 3%, while ADA was up more than 25% at times, driven by rising native asset issuance on the network and the upcoming Vasil hardfork, a network upgrade expected in June that would increase scalability. AXS was up more than 15% at one point.
Shares fell, snapping a brief winning streak, as investors weighed the central banks' approach to taming rising prices and a drop in the Conference Board's consumer confidence index. The technology-heavy Nasdaq, Dow Jones Industrial Average and S&P 500 all fell less than a percentage point.
Annual inflation in eurozone countries climbed to 8.1% in May, the highest level since the euro currency was introduced. Meanwhile, the fallout from Russia's unprovoked invasion of Ukraine continues to mount, and eurozone countries are discussing how they might help Ukraine circumvent a Russian naval blockade to help the country export grain, as well as the possible seizure of assets from Russia's central bank. Brent crude oil, a widely recognized benchmark for energy markets, traded above $116 a barrel.
There was more positive news from China, where the number of COVID-19 cases fell below 100 nationwide for the first time since March, and the country's largest city, Shanghai, announced plans to reopen its economy. And U.S. President Joe Biden met with Fed Chairman Jerome Powell and U.S. Treasury Secretary Janet Yellen to discuss ways to fight inflation.
In an appearance on CoinDesk TV's First Mover program on Tuesday, Opimas CEO and founder Octavio Marenzi noted that the Fed's potential flexibility on a rate hike much later in the year, after it has raised rates at its next two meetings, "has given crypto markets room to breathe, to say, 'Maybe they'll go back to printing more money faster.' ' That helps cryptocurrency very, very much in the short term. But I think we're going to be disappointed in it in the long run."
Markets
S&P 500: 4,132 -0.6%
DJIA: 32,990 -0.6%
Nasdaq: 12,081 -0.4%
Gold: $1,838 -0.7%
Insights
Tether's various banking relationships don't matter until we know the whole picture
The Financial Times reports this week that "some" of Tether's $73 billion in reserves are being stored at a relatively obscure bank in the Bahamas called Capital Union.
The bank has assets of about $1 billion, so only a small portion of the Tether reserves could be stored there. In the past, Tether has been something of a vagabond among banks; it first opened accounts in Taiwan (which is likely the subject of a U.S. Department of Justice investigation), and when that banking access was cut off, Tether moved on to Montreal and Puerto Rico.
According to Tether - which has refused to fully disclose its banking relationships - none of this matters, as Tether can process redemptions (exchanging its USDT stablecoins for fiat US dollars) on demand. Tether has "strong banking relationships with more than seven, eight banks around the world." That's about it as far as disclosure goes. In fact, Tether handled $10 billion in stablecoin redemptions after the collapse of Terra's UST stablecoin.
But the market disagrees. In the weeks since Terra's UST began showing signs of trouble, Tether has had to struggle to maintain its 1:1 peg to the dollar. Circle's USDC did not have the same problem; rather, the stablecoin was lifted above the peg due to capital inflows.
Tether's desire to keep the nature of its banking relationships and reserves secret has already cost the company $18.5 million, which it paid in a settlement with the New York attorney general's office.
Perhaps, Tether believed, the resulting market chaos would cost the company more than $18.5 million if it were completely honest and disclosed its relationships and the nature of its holdings that support its dollar commitment. The articles of faith around Tether include the ability to process redemptions, and so far that has held up in times of crisis and been successful - so no need to list its banking partners and cause unnecessary trouble.
The question is whether this logic will hold and whether Tether will be able to maintain its bond in the coming bear market.
Tech opinion
Bitcoin rebound meets resistance at $33K-$35K
Bitcoin (BTC) broke out above a short-term downtrend over the weekend and reclaimed the $30,000 level. The cryptocurrency is experiencing a relief bounce after several weeks of oversold levels on the charts. Nevertheless, resistance at $33,000 and $35,000 could slow down the price upswing.
The Relative Strength Index (RSI) on the daily chart has risen from oversold levels over the past two weeks, supporting the buildup of price momentum. The RSI on the 14-day chart is currently neutral and needs to stay above 50 to support the upswing.
On the weekly chart, the RSI is more oversold than it has been since March 2020, when a crypto rally began. This time, however, the significant loss of long-term momentum suggests that the upside may be limited.
For now, the price could stabilize above the support zone between $27,000 and $30,000, which could delay further breakthroughs on the chart.
Important events
8:30 AM HKT/SGT(0:30 UTC): Japanese Jibun Bank manufacturing PMI.
9:45 AM HKT/SGT(1:45 UTC): China Caixin PMI for manufacturing.
HKT/SGT(8:30 a.m. UTC): U.K. S&P Global/CIPS Manufacturing PMI
CoinDesk TV
In case you missed it, here is the latest episode of "First Mover" on CoinDesk TV:
Amid rising inflation, Cyprus' deputy minister talks about the country's plans for crypto regulation
President Joe Biden was scheduled to meet with Federal Reserve Chairman Jerome Powell as inflation remains at its highest level in decades. Octavio Marenzi, CEO and founder of Opimas, shared his thoughts on crypto markets and the potential impact of this highly anticipated White House meeting. And Cyprus Deputy Research Minister Kyriacos Kokkinos discussed his country's outlook on digital asset regulation.
Headlines
Singapore examines crypto use cases with DBS, JPMorgan and Marketnode: In the first phase of "Project Guardian," led by DBS, JPMorgan and Marketnode, MAS will examine DeFi applications in wholesale funding markets.
Morgan Stanley says record investment in crypto venture capital will slow: Deal activity peaked in December and could decline by as much as 50% by year-end, the bank says.
Cardano's ADA is up 25%, leading the gains of major cryptocurrencies: Bitcoin showed signs of bottoming out earlier this week, with the broader market up about 4.4% in the last 24 hours.
Terra's new Luna token is up 40% after listing on Binance: Terra's new Luna token has attracted more than $850 million in trading volume in the last 24 hours as it begins to build momentum.
NFT art museums are a good idea: the Metaverse is making galleries global and helping to fund the arts. This article is part of "Metaverse Week."
Longer Reading
Letters to Layer 2: We still don't know about the metaverse: Will it be expensive to use? Will there be more than one? Who is ultimately responsible for building the metaverse?
Today's crypto explainer: what is a stablecoin?
Other Voices: First it documented the alt-right. Now it's going after crypto. (Washington Post)
Said and heard
Senior [EU] officials are expected to sign off on the oil embargo in the coming days, increasing the intensity of the bloc's economic retaliation against Russia for the war in Ukraine. EU member state leaders said late Monday they had agreed in principle to ban Russian crude oil and refined fuels arriving on ships, which account for at least two-thirds of imports from Russia. The EU will also agree to ban insurance on ships carrying Russian oil, officials and diplomats familiar with the measure said, a move aimed at making it harder for Russia to access international oil markets. (The Wall Street Journal) ... "With the right policies, the U.S. can transition from recovery to stable, steady growth and lower inflation without giving up all those historic gains. During this transition, growth will look different. We will likely see fewer record job creation numbers, but that is not a cause for concern. If the average monthly number of new jobs created shifts from the current 500,000 to about 150,000 over the next year, it will be a sign that we are successfully entering the next phase of the recovery - because that kind of job growth is consistent with a low unemployment rate and a healthy economy. Things should also look different than they did in the decades before the [coronavirus] pandemic, when we too often had low growth, low wage growth, and an economy that worked best for the wealthiest Americans." (U.S. President Joe Biden in a commentary in the Wall Street Journal)