Bitcoin BTC Price Rally Stops Above $30K

Good morning. Here’s what happens:

Prices: Bitcoin regained its perch above $30K, but the rally stalled; ether is hovering near $2,100.

Insight: Longer-term narratives, such as bitcoin’s recent store of value history, matter, but price depends on traders’ shorter-range, often fickle sentiments.

Bitcoin rises above $30,000 and then stops

Crypto markets got off to a promising start on Tuesday with bitcoin re-establishing its foothold above the psychologically important $30,000 threshold.

But BTC’s rally stalled around $30,300 at midday, with the biggest cryptocurrency up just 3.3% over the past 24 hours. Bitcoin had dipped as low as around $29,100 on Monday before recovering as investors appeared to regain some of their earlier interest in the asset that holds value, even as worries about the banking industry have eased.

In an interview with CoinDesk TV’s “First Mover” program, Kaiko senior research analyst Dessislava Aubert called the current rally “macro-driven” and said its ongoing strength will depend on liquidity.

The rally “started with the Fed (US Federal Reserve) providing emergency liquidity to banks in the United States,” Aubert said. “So definitely, liquidity plays a big role.”

She added: “We’ve seen markets expect big cuts in the second half of the year. So there’s still a lot of uncertainty around whether this will be the case or not. Ultimately it will depend on how US monetary policy turns out. “

Ether climbed above $2,100 for the second time in three days before dipping below the threshold and rising again. The second largest cryptocurrency by market capitalization recently changed hands at around $2,100, up around 1.5%. A post-Ethereum Shanghai upgrade sale has yet to materialize.

Other major cryptos were solidly green with ICP, the token of the Internet Computer blockchain-based smart contract platform, recently surging 15% to around $6.80. XRP, the parent crypto of the blockchain-based, payments-focused platform XRP Ledger, was up more than 3%. The CoinDesk Market Index, which measures the performance of the overall crypto market, was recently up 2.7% and in significant uptrend territory on a one to five scale.

Stock indexes spent the day largely flat as the Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq Composite and S&P 500 were all within a few fractions of a percentage point of where they stood at Monday’s close. Gold ticked up to $2017, but was still down from its near-record highs last week when holdings of value were in vogue. The yield on 2- and 10-year government bonds rose slightly, but last week’s rise has stalled.

In an email to CoinDesk, Anthony Georgiades, co-founder of Pastel Network, a decentralized blockchain for non-fungible tokens (NFT), crypto and Web3 technology, attributed bitcoin’s plunge below $30,000 to “converging elements,” particularly the looming the prospect of an inflation-focused Fed continuing its diet of hawkish rate hikes. But he also noted a loss of public confidence in the dollar and the banking system.

“People … are looking for a decentralized safe haven that is an inflation hedge,” he said.

He added: “There are also macroeconomic conditions to consider. With a slowing CPI and signs of recession, the market seems to be pricing in potentially dovish Fed policies, which could lead to a risk-on mania. Bitcoin has found itself in something of a paradoxical environment, and there may be price fluctuations until the Fed’s monetary policy in the short and medium term becomes clearer.”

Bitcoin’s ‘Store-of-Value’ Narrative Is Real, But Not a Price Movement

Markets are noisy, chaotic things that we humans instinctively try to imbue with order and reason. This generally involves searching for explanations for why prices are trending up or down or what triggered a sharp move.

Often there is an obvious explanation – an earnings surprise or an unexpected corporate action. Sometimes the reason is not so easy to see – cash flows, an evolving user base, steady product development and so on.

Noelle Acheson is the former head of research at CoinDesk and Genesis Trading. This article is an excerpt from her Crypto is macro now newsletter, which focuses on the overlap between the changing crypto and macro landscape. These opinions are hers and nothing she writes should be taken as investment advice.

With bitcoin (BTC), it is even more difficult to discern what is driving sentiment shifts at any given time because it has no earnings, there are no corporate actions, regulation is not the threat it is for some other crypto assets and the narratives are many and varied. There isn’t even universal agreement on what bitcoin is, let alone what drives its price.

But our search for sanity in the midst of chaos encourages us to latch on to something that makes sense, and if it’s a narrative that justifies our interest while highlighting a timely concept, so much the better.

A phrase we hear a lot these days is “value store”. It tends to mean different things to different people, but generally it refers to an asset that holds its value relative to a broad basket of other assets over a long period of time.

Despite short-term price volatility and sharp bear markets, bitcoin is a store of value because it is the only asset traded on liquid exchanges today with a programmatic and verifiable hard cap. With other “hard assets” (those with limited supply) such as gold, diamonds or real estate, we do not know the supply limit, nor do we know how much currently exists.

In addition, with other “hard assets”, price affects the potential supply. For example, if gold were to rise from $2,000 to $20,000 per ounce, new extraction methods would become viable, increasing the theoretical limit. Bitcoin is the only asset traded on liquid exchanges where the price has no influence whatsoever on the supply. It is the most difficult of hard assets.

Moreover, the supply of its most common denominator – the US dollar – has increased over the decades, and lately at an astonishing pace. We are likely to embark on a new wave of monetary policy easing, involving lower interest rates and encouraging credit to overcome falling economic growth and consumption.

An increase in the supply of USD beyond what economic growth can absorb will – all things being equal – reduce its value relative to other assets, and by basic math, if the value of the denominator falls, the ratio increases. Bitcoin is a store of value and a hedge against currency depreciation.

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Coinbase CEO Brian Armstrong indicated that the crypto exchange would consider moving away from the US if the regulatory environment for the industry does not become clearer. Jason Gottlieb, Morrison Cohen LLP partner and head of the firm’s digital assets practice, weighed in. In addition, Kaiko senior research analyst Dessislava Aubert broke down XRP’s rally over the past month. And, Arkham Intelligence is one of CoinDesk’s projects to watch in 2023. Arkham founder and CEO Miguel Morel joined the conversation.

Ethereum’s unstaking requests now face a 17-day waiting period: The queue stood at 14 days late last week, but it has lengthened as more exit requests pile in from validators on the blockchain. Ether deposits with stake also outpace withdrawals for the first time since last week’s Shanghai upgrade.