Bitcoin (BTC) continued to move sideways on Wednesday, indicating a pause in bearish sentiment among traders.
However, most alternative cryptocurrencies traded higher on Wednesday, recouping last week's losses. For example, Decentraland's MANA token rose 3% over the past 24 hours and remained roughly flat over the past week. Meanwhile, The Sandbox's SAND token rose 7% on Wednesday. MANA and SAND are metaverse tokens used to exchange value in a virtual game environment.
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Also, on Wednesday, the Federal Reserve released the minutes from its meeting earlier this month, which showed that there could be several 50 basis point rate hikes in the next few meetings.
Stocks traded slightly higher, while gold and the 10-year Treasury bond yield traded slightly lower over the past 24 hours.
Latest prices
●Bitcoin (BTC): $29.578, +0.68%.
●Ether (ETH): $1,950, -0.59%
●S&P 500 daily close: 3.979, +0.95%
●Gold: $1,853 per troy ounce, -0.64%
●Ten-year Treasury yield daily close: 2.75%.
Bitcoin, ether, and gold prices are determined at approximately 4 p.m. New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information on the CoinDesk indices can be found at coindesk.com/indices.
More volatility on the horizon
Price movements that move in a range usually lead to a volatile breakout or breakdown.
The chart below shows the recent rise in open interest, or the number of outstanding contracts, in the bitcoin futures market. "A rapid increase in open interest usually indicates large market moves," Arcane Research wrote in a report this week.
For example, a similar spike in open interest occurred just before a short squeeze last July, when BTC was trading around $30,000. However, the spike in open interest also coincided with BTC's price peak of around $48,000 in March and remained elevated during subsequent price declines, according to Arcane.
Reducing speculation
With so much uncertainty, traders were unwilling to show a strong bullish or bearish bias. For example, funding rates, the cost of funding long and short positions in the perpetual futures market, have ranged between neutral and negative in recent months. This means that traders holding short positions dominate the market and are willing to pay long traders for a bearish stance.
That said, refinancing rates have not been this strongly negative for some time, which is typically the case at price lows. Similarly, extreme increases in refinancing rates are typically seen at price peaks. This suggests that the excessive speculative activity that defined the 2020-2021 bull market has declined.
Altcoin Review
- Terra 2.0 and LUNA Airdrop Coming: Revival plans for the Terra blockchain are taking shape, two weeks after the network's stablecoin (UST) and its native token (LUNA) fell to near zero. There has been heated debate over how to move forward with Terra, with the community divided. The result is the launch of a parallel "Terra 2.0" later this week, with a plan to gradually compensate LUNA holders to alleviate selling pressure. The validators that run the blockchain and deploy LUNA by managing staking pools agreed to the revival plans, much to the displeasure of the majority of the Terra community, including one of the largest decentralized financial platforms, Lido, which voted against supporting the new Terra blockchain. Read more here.
- ETH merges in a bear market: the long-awaited (and delayed) transition of the second largest blockchain to proof-of-stake may finally be ready in August. For a while, the impending merger was hyped to send the price of ether to the moon - there was even speculation that it could surpass bitcoin in an event dubbed "flipping." But market conditions have changed drastically since then (Fed tightening, risk asset sell-off, war, decade-long inflation, etc.), and the hoped-for impact of the merger on the price may prove lukewarm. Read more here.
- Whales ditched Tether to USDC: The failure of Terra's UST has led to an upheaval in the stablecoin market, and big investors have a new favorite. Data from CoinMetrics shows that crypto whales - addresses holding more than $1 million - on the Ethereum blockchain have abandoned Tether's USDT for the perceived safety of its biggest competitor, USDC. Since Terra's collapse, USDT has seen $10 billion in redemptions. It is still the most popular stablecoin - cryptocurrencies whose price is pegged to another asset, usually the U.S. dollar - but USDC has gained about $5 billion, eating into USDT's market share. Read more here.
Relevant Insights
- JPMorgan Strategists Advise Digital Assets Over Still-Costly Real Estate: Nikolaos Panigirtzoglou and his team shed light on the prospects for cryptocurrencies after Terra's collapse.
- Andreessen Horowitz launches its fourth $4.5 billion crypto fund: Silicon Valley venture capital firm doubles down on crypto investments despite market decline.
- OCC Chief Hsu: Crypto industry has unhealthy 'addiction to hype': The acting head of the U.S. Office of the Comptroller of the Currency has advocated limiting banks' involvement in cryptocurrencies.
- As Bitcoin Price Falls, Older Mining Assets Become Less Profitable: Even though the difficulty of bitcoin mining is moving downward, the price trend could mean a crisis for retail miners. On the other hand, it could be an opportunity for those looking to buy rigs.
- Wormhole Bridge expands to Cosmos ecosystem: the Jump-supported cross-chain connector will integrate with Injective, an EVM-compatible chain in the Cosmos ecosystem. It becomes Wormhole's 11th chain.
- Binance consults on crypto strategy as Kazakhstan looks to boost industry: the country, known as the center of bitcoin mining, is trying to attract more crypto companies and expand the industry.
- FTX's Bankman-Fried is lobbying the CFTC for direct clearing of customers' crypto swaps: The crypto exchange's founder and CEO argued at a roundtable in Washington, D.C., while mainstream derivatives firms portrayed his ideas as dangerous.
- Celestia Launches Test Network for First Modular Blockchain Network: The "Mamaki" test network could end what the project calls the "monolithic era" of Layer 1 blockchains.
- Definition of cryptocurrency regulation important for industry growth: Morgan Stanley: Disagreement on new legislation would be negative and lead to a prolonged period of uncertainty, the bank said.
- Avalanche Submits Subnet Proposal for ApeCoin DAO Metaverse Migration: The proposal comes weeks after Otherside faced issues on Ethereum.
- NFL Taps Mythical Games for First Play-to-Earn Venture: The football league is continuing its crypto push with an NFT game slated for release in early 2023.
Other markets
Most digital assets in the CoinDesk 20 ended the day higher.
Biggest gains
| Asset | Ticker | Returns | DACS Sector |
|---|---|---|---|
| Ethereum Classic | ETC | +2.0% | Smart contracts platform |
| Stellar | XLM | +0.8% | Platform for smart contracts |
| Polygon | MATIC | +0.8% | Platform for smart contracts |
Biggest losers
| Asset | Ticker | Earnings | DACS sector |
|---|---|---|---|
| Litecoin | LTC | -2.5% | Currency |
| Bitcoin Cash | BCH | -1.9% | Currency |
| Solana | SOL | -1.6% | Smart contracts platform |
Sector classifications are provided through 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.