Crypto Sell-Off Due to Fed Hoarseness; Cryptos fall somewhat in Monday trading

Prices: Bitcoin and ether fall slightly as investors worry about monetary policy and macroeconomic uncertainty.

Insight: Crypto-asset trading firm QCP Capital blamed the recent crypto sell-off on Federal Reserve hawkishness and Jump Capital’s possible abandonment of ETH.

Prices

• Bitcoin (BTC): $21,216 −1.7%
• Ether (ETH): $1,588 −1.9%
• S&P 500 daily close: 4,137.99 −2.1%
• Gold: $1,749 per troy ounce +0.1%
• Ten-year Treasury yield daily close: 3.04% +0.05

Bitcoin, Ether and Gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the spot price for COMEX. Information on CoinDesk indices can be found at coindesk.com/indices.

Bitcoin falls; Ether Falls, although investor interest is resurfacing

By James Rubin

Bitcoin held steady above $21,000 on Monday afternoon as investors continued their anxious concerns over upcoming comments from US Federal Reserve Chairman Jerome Powell and the same macroeconomic uncertainty that has engulfed markets of all stripes for nearly a year.

The largest cryptocurrency by market cap was recently trading at around $21,100, down about a percentage point in the past 24 hours. BTC has fallen 10% over the past five days following the release of July’s Federal Open Market Committee (FOMC) meeting, suggesting the bank will maintain its current inflationary 75 basis point rate hikes. Powell is widely expected to signal the central bank’s intention in a speech at the Fed’s annual economic symposium in Jackson Hole, Wyoming later this week.

“Bitcoin momentum has dissipated as riskier assets soften ahead of Jackson Hole Symposium,” Oanda senior market analyst Edward Moya wrote in an email. “Too much of Wall Street expects inflation to take two years or longer before the Fed gets inflation under control.”

Still, Moya added hopefully that the Bitcoin weakness “didn’t match the selling pressure hitting stocks…a sign that investors aren’t ready to see prices retest the June lows.”

Ether offered a two-part narrative on Monday. The second-largest crypto by market capitalization changed hands below $1,600, a drop of more than 2% that left ETH at its lowest level in nearly three weeks, amid investor concerns that venture firm Jump Capital was dumping the token. But as CoinDesk’s Jimmy He wrote, a report from data provider Kaiko found money flowing back into the ETH futures market on Monday. “When the price fell below $1,600, we observed a significant increase in open interest,” Kaiko noted.

Despite ether’s recent drop, Arca Chief Investment Officer Jeff Dorman remained optimistic about future prices, saying in his weekly Two Satoshi newsletter that concerns about it were overblown. While ‘long ETH’ is certainly a crowded and telegraphed trade, it is probably still one of the best risk/reward investment opportunities in digital assets right now,” Dorman wrote.

Other altcoins were mostly in the red in average trading volume with SOL and SAND recently at more than 6% and 5% respectively.

Stock markets that have been highly correlated with crypto prices suffered during the day from the same concerns that plagued the crypto markets. The technology-focused Nasdaq and S&P 500 both fell over 2%, and the Dow Jones Industrial Average (DJIA) almost as much as markets reverted to the more risk-averse climate of earlier in the summer.

Moya noted that bitcoin could fall below $20,000 support if the dollar, which has been strengthening, continues at this rate. “Bitcoin may have something to defend the $20,000 level, but it may be difficult for that level to hold if the king dollar continues to strengthen ahead of Fed Chair Powell’s speech at the Jackson Hole Symposium,” he wrote.

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Insight

The roots of the current crypto sell-off

By Shaurya Malwa

Crypto markets took a beating over the weekend as the merger-induced ether rally picked up steam and general “risk-off” sentiment drove prices down – with futures seeing over $800 million in liquidations since Friday.

Ether fell 25% in the past week after a nearly month-long rally. DOGE and SHIB fell over 15% on Monday, while tokens powering layer 1 blockchains Avalanche, Polkadot and Solana saw declines of as much as 12%.

In a Telegram broadcast on Monday, Singapore-based QCP Capital blamed two factors, the US Federal Reserve’s continued monetary hawkishness, for the slide in the absence of a specific trigger, adding that it expected markets to continue to trade sideways during of the coming weeks.

“Fed officials have actively pushed back on the dovish narrative in the market,” QCP traders said. “This has led to stocks stalling and trading lower, yields drifting higher and [the U.S. dollar] gather across the board.”

“Chatter about Jump dumping a large amount of ETH ahead of the merger has contributed to the rush to profit on ETH loans,” the firm added, referring to prominent crypto trading firm Jump Crypto.

QCP traders added that they saw “significant profit-taking” that eventually led to liquidations of long positions built up over a strong month-long rally, the effects of which were seen “particularly in ether” which has risen 130% in the past month.

The firm said it would watch Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole economic symposium in Wyoming on Friday for its potential impact on markets.

Following the release last Wednesday of the Fed’s July minutes, the consensus among central bank watchers is that Powell will signal further steep rate hikes in his symposium remarks, with some traders saying bitcoin technical data has turned bearish and the biggest crypto by market cap could see declines forward, as CoinDesk reported, with some traders saying bitcoin technical conditions have turned bearish and that

Important events

08:30 HKT/SGT(12:30 UTC): Jibun Bank Manufacturing PMI (Provisional August)