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Bitcoin price rises 0.4% to $20,910, somewhat recovering from $1,000 plunge after crypto exchange co-founder was arrested on Wednesday, weak US data show hard landing for economy .
Yesterday there was some good news on US wholesale inflation, but a shocking retail sales figure reminded market participants that a recession was coming, if not yet.
Combined with weak factory output data, it closed the week looking at US manufacturing
Slowing growth is bad for equities, and that’s what cryptocurrencies are doing today. The S&P 500 is down 1% at 3,889 and the Nasdaq is trading down 1.08% at 10,836.
Bitcoin Price Can Break Out Of Current Resistance Zone By Breaking Above $22,500
Bitcoin and all other crypto assets have been highly correlated with other risky assets such as stocks over the past 12 months, so what happens in stocks spills over into crypto.
The trailblazing crypto is currently battling in an area of resistance where it can break out at around $22,500 (see chart below).
The $30,000 region is next, with even stronger resistance between $34,700 and $48,800.
However, it is not yet clear if Bitcoin’s rise is genuine, so it may be ahead of its time.
But for now, Bitcoin’s price is firmly above the 200-day moving average for the first time since December 2021, after briefly touching the MA200 last March.
Genesis Bankruptcy Fears, Debt Ceiling Drama, Tough Talks on ECB Interest Rates – Crypto Uncertainty Increases
As if the market’s worries weren’t enough, yesterday it was reported that crypto lender Genesis was preparing for bankruptcy and that its owner, Digital Currency Group, was suspending its dividend. The news has arrived.
And today, the US debt ceiling has been reached, forcing the Treasury Department to take so-called special measures to avoid default.
Elsewhere, the European Central Bank (ECB) further pushed crypto prices lower, suggesting it would maintain its policy of raising interest rates no matter what the Fed does.
ECB President Christine Lagardethe euro zone’s central bank indicated it would continue its hike if it softened across the bloc, despite signs of inflation.
This comes after concerns about persistent underlying inflationary pressures surfaced at the ECB Governing Council meeting in December.
So even if the Fed starts cutting rates, it won’t happen in Europe.
Rising interest rates will hit growth sectors such as technology, squeezing future earnings and thereby undermining valuations. Cryptos behave like risky tech stocks for some reason.
DOJ raids are good for fighting crime, but the announcement was all a play
On top of that, it is easy to understand why the anti-money laundering enforcement action taken yesterday by the US Department of Justice hurt crypto market sentiment yesterday.
The DOJ has arrested Anatoly Legkodymov, co-founder of the Bitzlato exchange, on suspicion of illegal gambling and money laundering of drug funds.
It’s good to see DOJ in action, but after a nap at the wheel of FTX, we speak to US officials who feel the need to put on a show
Despite all these headwinds, the near-term outlook for cryptocurrencies is perhaps that the stalled rally could take off again soon.
Despite the threat of a hard landing for the US and other advanced economies, a looming recession has the corollary to give the Fed more room in interest rates.
Indeed, fears that the Fed is raising rates too far indicate that the FOMC’s rate-setting bodies are beginning to split.
Significant shifts in market sentiment may be occurring across asset classes
Marcus Sotiriou, market analyst at listed digital asset broker GlobalBlock (TSXV:BLOK), believes a significant shift in market sentiment may be underway. It brought bad news to the market.”
“If this sentiment persists, it will be a significant regime change as the main driver of asset prices in 2022 was sustained inflation,” he added.
However, the DOJ’s major role in the Bitcoin price decline provides a strong argument for a further rise in the future.
Bitcoin dropped $1,000 from $21,400 to $20,500 when the DOJ’s first announcement was made, but it wasn’t as bad as the market feared when the real news landed.
In fact, there seems to be a gap between the US and Europe in terms of cryptocurrency regulation and interest rates.
US is catching up with crypto regulation. Other regions, such as Europe, have taken a more cautious and sober approach.
Europe is somewhat ahead with the establishment of a regulatory framework for the MiCA (Crypto Asset Market), which is expected to come into full effect next year or sooner.
South Korea, Thailand, Germany Are Ensuring Crypto Regulation Is Wise…If Not The United States
Timo Lehes, co-founder of Swarm Markets, commented on the DOJ’s action, saying:
“Other regulators, such as Germany’s BaFin, have taken a more forward-looking approach to regulating the sector and seem less enthusiastic about boasting ‘gotchas’ press conferences.
He continued:
“Cracking down on illegal activity should be applauded, but this is not how crypto can become a normal part of the financial ecosystem.
“It involves a prudent regulatory framework and positive collaboration between regulators and crypto market innovators.”
South Korean regulators are showing signs of approaching cryptocurrency regulation in a more thoughtful and sensible way than seen in a hodgepodge of competing regulators in the United States.
GlobalBlock’s Sotiriou said: “Thailand’s SEC, for example, issued new regulations on protected cryptocurrencies this week, and South Korea’s financial regulator is now developing tools that can monitor cryptocurrency risks.”
It’s Time to Start Accumulating a Diverse Portfolio of Crypto Assets
While you may be considering buying bitcoin as part of your dollar cost averaging strategy, remember that the upper limit is small. As with equities, these understudied areas of the market, especially pre-sales, have the best risk and reward profiles.
Meta Masters Guild, a sustainable play-and-earn gaming platform, is one such coin, raising nearly $700,000 in a presale just a week ago.
Another is Fight Out, which uses Web3 technology to transform fitness apps and gym workouts. The company has raised his $3 million, the app will be live by the second quarter of this year, and he plans to build a network of 20 gyms backed by elite combat sports athletes.
