Aug 29, 2022

The latest moves in crypto markets, in context

Was this newsletter forwarded to you? Sign up here.

Supported by

Good morning, and welcome to First Mover. I'm Omkar Godbole here to take you through the latest in crypto markets, news and insights.

In today's newsletter:

Price Point: Bitcoin recovers to $20,000 as the U.S. Dollar Index (DXY) retreats from 20-year highs. The bounce looks fleeting as bond yields continue to rise and stock futures signal risk aversion.
Market Moves: Bitcoin may not be an inflation hedge, but there might be something to be said for it acting as a way to bet on the separation of money and state, writes CoinDesk's George Kaloudis.
Chart of the Day: Bitcoin looks south after back-to-back weekly losses.

No doubt, this year's selloff in crypto is largely tied to interest rates and the Fed's decisions to raise them to rein in inflation. Sign up for Market Wrap here to get our next take on how Powell's comments today are affecting bitcoin.

Price Point

Bitcoin (BTC) looked to regain some poise as the Dollar Index (DXY), one of its biggest nemeses, reversed its early jump to a fresh 20-year high.

The leading cryptocurrency by market value bounced to $20,000, having slipped to a six-week low of $19,526 late Sunday, CoinDesk data shows. Ether, the native token of Ethereum's blockchain, and other major coins also witnessed a minor bounce after the weekend's drubbing.

The DXY, which tracks the greenback's value against major fiat currencies like the euro and the Japanese yen, set a new two-decade high of 109.48 during Asian hours, extending Friday's rally triggered by Federal Reserve Chair Jerome Powell's unambiguously hawkish comments.

Bitcoin tends to move largely in the opposite direction to the DXY.

Temporary bounce?

The sustainability of the bounce was under question as the DXY pulled back mainly due to expectations of retaliatory monetary tightening by the European Central Bank (ECB) and resulting recovery in the euro.

"Hawks at the ECB are advocating a 75 basis point hike [0.75 percentage point] at next month's meeting, and this risk seems to be lending the euro support ahead of last week's low near $0.9900," Marc Chandler, chief market strategist at Bannockburn Global Forex and the author of the Marc to Market blog wrote in the daily newsletter.

The global tightening theme is bearish for liquidity-addicted risk assets, including cryptocurrencies.

Further, U.S. rates extended Friday's rise, with the two-year Treasury yield setting a 15-year high of 3.48% and the futures tied to the S&P 500 dipped 0.8%. Both offered negative cues to the crypto market.

The Fed fund futures showed a 75% chance of the central bank delivering its third 75 basis point rate hike at the September meeting. The probability stood around 50% before Friday's Powell speech.

Both bitcoin and ether's derivative market activity reflected a bearish sentiment, with futures trading at a discount to the spot price and puts or bearish bets drawing a higher price relative to calls.

Mott Capital Management's Michael Kramer said in a blog post that bitcoin could drop to $18,000, having dived out of a bear flag pattern, a bearish technical setup, last week. Kramer took note of similar bearish patterns on technology stocks and the tech-heavy Nasdaq index.

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

With nearly a decade-long track record of being the world's largest digital currency asset manager, Grayscale is an industry leader for secure and regulated exposure to crypto.

Grayscale Digital Large Cap Fund (Symbol: GDLC) is designed to capture the market capitalization weighted performance of some of the largest and most liquid digital assets. As with all of Grayscale's publicly-traded funds, investors can access the fund directly through brokerage or retirement accounts they already have - the same way they would for other asset classes like stocks and bonds.

Simply type GDLC into an investment account, such as in Fidelity or Robinhood, to get started today.

Learn more about Grayscale's publicly-traded products here. Investing involves risks and the possible loss of principal.

Market Moves

Inflation Hedge or Not, Bitcoin's True Value Is Separation of Money and State

By George Kaloudis

Inflationary forces are still out there and investors are thinking about how best to protect themselves. Is bitcoin a way to do that?

I'm not sure. From a market perspective, no, not at all. In recent memory, bitcoin has been correlated with stocks. Stocks aren't supposed to be inflation hedges; less-risky things like gold and commodities are. So bitcoin's price following (or leading) stocks makes bitcoin not really appear like an inflation hedge.

However, bitcoin is probably investable simply because it is separate from the "heads of state." I'm not saying bitcoin's price is immune to the acts of heads of state, but I am saying that bitcoin isn't issued by any country and that the broader network a) doesn't need any particular country and b) is resilient enough to buck China banning it.

So, in the event that bitcoin doesn't behave as an inflation hedge, there might be something to be said for it acting as a way to bet on the separation of money and state.

According to Zoltan Pozsar, global head short-term interest rate strategy at Credit Suisse, we are in a war economy where heads of state matter more than heads of central banks.

Read the Full Story Here

Chart of The Day

Bitcoin Dropped for Second Week

By Omkar Godbole

Bitcoin has taken out the ascending trendline support with back-to-back weekly losses.
The focus has shifted to June lows under $18,000.

Join us for Converge22, Circle's first annual crypto ecosystem conference, taking place September 27th-30th in San Francisco! Featuring wide-ranging demos and developer workshops, plus high-powered guest speakers including Ethereum's Vitalik Buterin, Aave's Stani Kulechov, Mary-Catherine Lader of Uniswap Labs, Anatoly Yakovenko of Solana, and dozens more.

Register with code Coindesk to receive $100 off your ticket!

Crypto Prices

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset	Ticker	Returns	DACS Sector
Avalanche	AVAX	−10.4%	Smart Contract Platform
Cosmos	ATOM	−4.6%	Smart Contract Platform
XRP	XRP	−3.5%	Currency

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

Latest Headlines

Fintech Firm Lightnet Group Gets $50M From LDA Capital to Boost Velo Protocol's Tech
The firm has the option to raise the total commitment to up to $100 over the next three years.
Crypto Coin AVAX Drops 11% After Self-Described Whistleblower Says Avalanche Weaponised Litigation Against Rivals
Ava Labs CEO rejected the accusation as "conspiracy theory nonsense."
Singapore's Central Bank Wants to Foster Digital Assets, Restrict Crypto Speculation
The head of the Monetary Authority of Singapore, Ravi Menon, insists this stance is "synergistic" and says price speculation is the source of the crypto world's problems.

What to Watch

Check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time.

RJ Phillips, founder, OnlyFans
Robert Kopitsch, Blockchain for Europe secretary general
Luke Farrell, crypto trader, GSR Markets

The Investing in Digital Enterprises and Assets Summit facilitates capital flow and market growth by connecting the digital economy with traditional finance through the Presenter's Mainstage, capital allocation meeting rooms and sponsor expo floor. Use code FM_20 for 20% off the General Pass. Register now.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.