Good Morning. Here's what happened:
Prices: Bitcoin and Ether plunged over the weekend as investors continue to worry about rising interest rates and the possibility of a recession.
Insights: The BitMEX case leaves regulatory issues unresolved.
Technician's take: A weekly close below $36,247 for BTC could lead to further downside targets.
PricesBitcoin
(BTC): $34,444 -2.1%
.Ether (ETH): $2,553 -2.9
Biggest Winners
There are no winners today in CoinDesk 20.Biggest Losers
| Asset | Ticker | Income | DACS Sector |
|---|---|---|---|
| Solana | SOL | -5.2% | Smart contracts platform |
| Cosmos | ATOM | -4.7% | Platform for smart contracts |
| Polygon | MATIC | -4.4% | Platform for smart contracts |
MarketsS&P500
: 4,123 -0.5%
DJIA: 32,899 -0.2%
Nasdaq: 12,144 -1.4%
Gold: $1,881 +0.3%
A tough weekend for cryptocurrencies
The new reality of higher interest rates and heightened recession fears continued to hit crypto markets over the weekend.
Bitcoin last traded at around $34,200, a drop of more than 2% and the lowest level since July last year. Even then, it fared better than most major altcoins in the CoinDesk Top 20 by market cap. Ether changed hands at about $2,550, down about 3% over the same period and the lowest level since early March. Terra's Luna token plunged 8.5% at one point, and SOL and CRO each fell about 5%. AXS and TRX shined amid the sea of red, rising 1.5% and 5.5%, respectively.
"BTC continued to be weighed down by macroeconomic pressures and overall market sentiment," Joe DiPasquale, CEO of crypto fund manager BitBull Capital, wrote to CoinDesk. "The FOMC led to volatility, but the upside was short-lived."
The declines in cryptocurrencies coincided with those in equity markets, which closed down 1.4% last Friday after the tech-heavy Nasdaq fell 5% a day earlier - its worst performance since 2020. The S&P 500 and Dow Jones Industrial Average fell in smaller increments, but continued their downward trend following the widely expected half-point interest rate hike by the Federal Reserve last Wednesday. A day later, the Bank of England (BoE) continued its own tighter monetary policy stance, raising rates by a quarter point to the highest level in 13 years.
It was the BoE's fourth consecutive rate hike since December. Central banks elsewhere in the world have pursued similar strategies to curb inflation, which has reached a 40-year high and threatens to rise further amid the fallout from Russia's invasion of Ukraine.
The U.S. Labor Department's latest jobs report, which showed an unexpectedly large gain of 428,000 jobs in April, underscored concerns Friday that a historically tight labor market could drive up wages and accelerate inflation. According to the report, U.S. employers paid workers an average of 1.4% more in the first quarter of this year than in the previous three-month period. This was the largest increase in two decades.
DiPasquale expects Bitcoin to continue to fall, especially if "monetary policy continues to contract," but doesn't see the largest cryptocurrency by market cap falling below the $25,000 to $30,000 range, even if a downturn were to reach extreme proportions. However, he also noted that "a short-term rise cannot be ruled out," as about $1.3 billion worth of options expire on bitcoin futures exchange Deribit in May.
InsightsShould
BitMEX co-founders have taken action against them?
Arthur Hayes and BitMEX have both separately decided to plead guilty to the charges against them and pay fines to settle their respective cases with the FBI, with Hayes and the other BitMEX co-founders each being fined $10 million late last week.
That's a shame, as we've discussed before, because the case against them was based on a novel interpretation of the Bank Secrecy Act and a confirmation that the Commodity Futures Trading Commission (CFTC) does indeed have extraterritorial powers. This type of litigation is expensive and exhausting, so it's understandable if someone would rather give up than see the process through.
But now that Hayes is awaiting his verdict, we are no further along in providing regulatory clarity than we were before. Terraform Labs' lawsuit against the U.S. Securities and Exchange Commission is working its way through the legal system, but it will be months, if not longer, before it goes before a judge. In the meantime, the "power struggle" between the CFTC and SEC has caused the regulatory environment to stall, as Sam Bankman-Fried, founder of crypto exchange FTX, explained in a recent interview.
"We're not really in a place with more federal oversight than we were a year ago," he told Blockworks, arguing that if the SEC and CFTC could agree on who is responsible for licensing cryptocurrency exchanges, it would solve "60% of the problem."
The CFTC claims that the Commodity Exchange Act of 1934 gives it authority over cryptocurrencies, which it calls currency, thus allowing it to regulate the derivatives market for cryptocurrencies (which is what BitMEX specializes in). At the same time, the SEC's regulatory mandate is to determine whether a particular cryptocurrency or product that includes the coin is a security.
"The fact remains that digital assets like cryptocurrencies do not fit neatly into the SEC's regulatory framework," Bo Howell, an Ohio-based securities lawyer, wrote in a post explaining the controversial authority over cryptocurrencies.
In theory, you should regulate the markets and you should regulate the commodity itself, but first you have to establish a path. SEC Chairman Gary Gensler said last month that they were working on it, but he did not give a timetable for when something like a notice of intent to regulate the "intertwined" market would be released.
Ideally, this would happen through legislation - in previous interviews, former CFTC enforcement attorney Braden Perry has warned of the dangers of regulation through enforcement, as opposed to a defined regulatory framework - but another alternative would be through legal precedent.
Had Hayes or BitMEX decided to fight the FBI, they might have actually forced a resolution to the question of which agency takes the lead in regulating the crypto market.
Tech's opinionBitcoin coll
apses, support at $30K
Bitcoin (BTC) broke below a short-term uptrend as momentum signals turned negative. The cryptocurrency could see further declines towards $30,000, which is near the bottom of a one-year trading range.
BTC has failed to hold the $40,000 level in recent months and has fallen 47% since its all-time high of nearly $69,000 in November last year. The long-term uptrend has weakened, suggesting that upside potential remains limited this year.
On the weekly chart, BTC is at risk of falling below its 100-week moving average of $36,247. A second weekly close below this level could lead to downside targets towards $30,000 and then $17,823 (a decline of about 80% from peak to trough, comparable to the 2018 crypto bear market).
That said, May is typically a seasonally strong period for stocks and cryptocurrencies. This could lead short-term buyers to remain active at lower support levels, even if they lack conviction to change the recent downtrend in price.
Key Events8
:30am HKT/SGT(12:30pm UTC): Jibun (Japan) Banking Services PMI (April)
.10:00am HKT/SGT(2:00am UTC): China's Imports/Exports (YoY/April)
10.00am HKT/SGT(2.00am UTC): China's Trade Balance (April)
CoinDeskTVIn
case you missed it, here is the latest episode of "First Mover" on CoinDesk TV
:Crypto market selloff continues, US adds 428K jobs in April, Gary Vaynerchuk, rapper Ice Cube on Crypto & Web 3
Gary Vaynerchuk, CEO of VaynerMedia, and Ice Cube, rapper, actor and co-founder of BIG3, were guests on "First Mover" and talked about their collaboration in democratizing ownership of sports teams via NFTs (non-fungible tokens) in this exclusive interview. Also, GlobalBlock's Marcus Sotiriou gave an analysis of crypto markets, and ClayStack's Mohak Agarwal talked about the state of crypto deployment.
HeadlinesBitcoin selloff continues as Asian markets fall on weak China indicators: Bitcoin continues losses as major markets in Asia end the week.
U.S. officials put North Korea-related bitcoin mixers and more BTC and ETH addresses on sanctions list: The U.S. Treasury Department is ramping up efforts to stop the flow of stolen cryptocurrencies from a historic $620 million hack.
9 in 10 central banks are exploring digital currencies, BIS says: A 2021 survey by the Bank for International Settlements found that more than half of central banks are developing CBDCs or conducting concrete experiments.
U.S. Labor Market Report Shows Gain of 428,000, Adding to Price Pressure: The U.S. Labor Department report released Friday showed job growth remained robust last month, at a level that should keep the Federal Reserve concerned about an overly tight labor market.
Tamagotchi on Crack." Irreverent Labs raises $40 million for NFT cockfighting game: Investors are backing a game studio whose "MechaFightClub" title is based on 6,969 NFT robot chickens, according to government documents.
Longer ReadingInflationwill
create a political vacuum. Can Bitcoin Fill It? "Prices are rising at a time when distrust in government to fix the problem is pervasive. That leaves the door open for Bitcoin, the ultimate hedge against inflation.
Today's crypto explainer: what is Dune Analytics and how does it work?
Other Voices: An Appalachian town was told a Bitcoin mine would bring an economic boost. It got noise pollution and an eyesore. (Washington Post)
Said and Heard
"Of course, metaverses face the problem of the proliferation of copycats. There are dozens of metaverse projects in the making, and as Tushar Jain of Multicoin Capital recently noted, they can all sell "land." However, the issues raised by Nir and others in recent days are much more fundamental and may point to weaknesses in the model regardless of the competitive landscape. In particular, the notion that geographic space in a virtual world appreciates in value in the same way that land does in the real world seems to overlook some truly fundamental differences. (CoinDesk columnist David Z. Morris) ... "All 27 EU countries must agree to this dramatic move. Hungary and Slovakia - two of the countries most dependent on Russian energy - are holding out on the deal. It is likely that these countries will be given a much longer period to implement a full ban. More importantly, the EU's latest move says nothing about a ban on Russian natural gas imports, which means there will still be plenty of money flowing from the EU to Putin for now. But the EU should act quickly and decisively this week to put the oil ban into effect and send a message to Putin that the atrocities Russia is committing in Ukraine are unacceptable." (Washington Post) ... "If you're looking for patterns in the markets' wild swings, the answer is simple: financial markets are coming to grips with a startling change in Federal Reserve policy. Over the past two decades, financial markets may have become so accustomed to Fed encouragement that they simply don't know how to react now that the central bank is doing its best to slow the economy." (The New York Times)