Bitcoin Falls to $26,166 as Memecoins Flood the Blockchain

Bitcoin fell 9.42% from May 5 to May 12 to trade at $26,365 as of 7:30 p.m. Friday in Hong Kong. The world’s largest cryptocurrency by market capitalization has traded below $30,000 since April 19. Ether fell 7.3% on the week to $1,765, missing the key support level at $1,800.

The US consumer price index (CPI) released this week showed lower headline inflation in April, raising hopes for the Federal Reserve to halt interest rate hikes next month. Annual US inflation eased to 4.9% last month, from 5% in March, but rose 0.4% on the month.

Bitcoin briefly topped $28,300 after the release of US inflation data, but has since traded lower.

“Bitcoin fell to USD 26,900 after rejecting from ~US$28,200 area. Reaction from ~US$26,900 area was quite strong,” tweeted pseudonymous cryptoanalyst Rekt Capital. “The resistance at USD 28,200 is the resistance to hit if the price is to enjoy bullish momentum,” he added.

The global crypto market capitalization was at $1.1 trillion on Friday at 19:30 in Hong Kong, down 8.33% from $1.2 trillion a week ago, according to CoinMarketCap data. Bitcoin’s market cap of US$510 billion made up 46.3% of the market, while Ether’s US$214 billion made up 19.4%.

Bitcoin is stuck in traffic

In another milestone for the world’s first blockchain, the number of non-zero Bitcoin addresses hit a record high of 46.6 million on Thursday, buoyed by growing interest in Ordinals, a protocol that allows data to be written into the minimum amount of money. unit of Bitcoin, according to on-chain data analysis firm Glass node.

As a result, Bitcoin congestion problems worsened. The network faced a growing backlog of transactions that was exacerbated by the network surpassing 5 million Ordinals inscriptions, fueled by the arrival of memecoins in the form of BRC-20 tokens, a fungible token standard built on the Ordinals protocol. BRC-20 tokens passed $1 billion in market capitalization on Tuesday.

Adding to the negative market sentiment, Binance temporarily halted Bitcoin withdrawals twice in 12 hours on Monday, due to a “large volume of pending transactions.” The world’s largest crypto exchange resumed Bitcoin withdrawals on the same day, with Bitcoin falling as low as US$27,419 on Monday.

“[The correction] was strong because of that as Binance witnessed historically high BTC outflows,” said Leena ElDeeb, a research associate at 21.co, the parent company of 21Shares, an issuer of crypto exchange-traded products.

Bitcoin supply on exchanges fell to a five-year low of 5.84% on Tuesday, according to crypto analysis firm Sentimentwhich indicates that long-term owners are increasingly choosing self-custody solutions.

“The downtrend was also influenced by misinformation on Twitter, calling the congestion a denial of service attack, when in fact it was increased demand that caused congestion and skyrocketing transactions just meant people were willing to pay more money for faster settlement,” ElDeeb added.

Nilesh Verma, crypto market analyst and founder of Crypto Granth consultancy in India, pointed to a separate thread of inaccurate information dissemination surrounding the US government and its Bitcoin holdings as a significant factor in the falling value of Bitcoin this week.

Misinformation emerged on Wednesday, stating that the US government began selling its Bitcoin holdings. According to a March 31 lawsuit, the US government seized 51,351.89 Bitcoin (worth $1.4 billion) from Ross Ulbricht, the creator of the darknet marketplace Silk Road. The government sold 9,861 Bitcoin ($279 million) on March 14 and plans to sell the remaining 41,490 Bitcoin ($1.1 billion) in four batches this year.

“Someone shared fake news that the US government will sell Bitcoin by showing wrong marking on the Arkham platform…same as we saw on April 27, when Bitcoin fell from USD 29,000 to USD 27,000 on an error in the Arkhram platform ,” Verma said.

Market analysis

Crypto Granth’s Verma said Bitcoin has strong support around USD 26,111. “Bitcoin needs to hold this support for continued bullish momentum. As of now, we can see a retest of this area. We believe we will see strong buying near USD 25,000-26 000. Weekly close below US$26,000 will make Bitcoin bearish,” Verma wrote.

But Dr. Jeff Ross, founder and CEO of investment firm Vailshire Capital Management, said Bitcoin needs to dive before starting another rally.

“Short-term momentum indicators need another flush lower, ideally to $24,000, to complete the healthy reset and begin the next leg higher, from mid to late May,” Ross wrote on his confirmed Twitter accounting.

Biggest winners:

Kava, the governing token of a layer-1 blockchain of the same name, was this week’s biggest winner among the top 100 coins by market capitalization listed on CoinMarketCap. Kava rose 17% to USD 0.9204, after the protocol announced that the main web launch is a week away.

Bitcoin SV (BSV) – a fork of Bitcoin Cash focused on scalability – was this week’s second biggest gainer, rising 8.47% to $35.88. The token saw a surge of interest after congestion on the Bitcoin network caused transaction fees to rise.

See related article: Central Banks’ Actions Move Crypto; Standard Chartered eyes $100K Bitcoin

Next week: All eyes on the US debt ceiling

Negotiations to raise the $31.4 trillion U.S. debt ceiling to keep the government solvent continued Wednesday, with congressional Republicans demanding more budget cuts. President Biden’s meeting with top congressional leaders scheduled for Friday was postponed until next week, three sources familiar with the matter told NBC News.

Investors are also awaiting Europe’s harmonized index of consumer prices, scheduled for next Wednesday. Eurozone annual inflation for April is expected to come in at 7% for April, up from 6.9% in March, according to flash estimates from Eurostat, the European Union’s statistical office.

In the crypto space, the floating Ether staking protocol Lido Finance is preparing for its V2 upgrade, which enables the withdrawal of Ether and staked Ether (stETH) directly on the protocol. Lido DAO will vote for the V2 upgrade starting today, from 10pm Hong Kong time. With community approval, the upgrade is expected to go live next Monday.

Web 3.0 gaming protocol Gala Games is also preparing for a contract upgrade on Monday. The protocol will issue its new Gala V2 token in a 1:1 ratio to all Gala token holders, while support and utilities for the first token will cease at the same time. While most major exchanges signaled their support for the new token, Coinbase tired that it will not support Gala V2.

See related article: Crypto and NFT Market Update – May 11