BTC Continues Fall, on Moderate Volume
Bitcoin (BTC) fell 2% on Tuesday, its fourth consecutive daily decline. The largest cryptocurrency by market capitalization has dropped 6% since crossing $25,000 briefly on Aug. 14.
Ether’s (ETH) price also tumbled for a fourth consecutive day, dropping 1.2% over the past 24 hours. The second-largest cryptocurrency by market capitalization behind bitcoin is now down 8% from the psychologically important $2,000 level it last cracked on Aug. 15. Ether has flirted with $2,000 for much of the past week after dropping below $1,000 earlier this summer.
Price declines in both assets occurred on normal daily volume compared to their 20-day moving averages.
Traditional markets were mixed. The Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq composite and S&P 500 were down 0.5%, 1.3% and 0.7%, respectively.
Month-over-month U.S. retail sales were flat for July, while the consensus of analyst estimates was for a 0.1% gain. The unexpectedly sluggish spending in July occurred despite a better-than-expected inflation report on Aug. 10.
Commodities were mixed. The price of crude oil rose by 0.9%, natural gas prices contracted 1.44%, while gold, the traditional safe-haven asset, declined 0.63% in price.
Among altcoins, EOS increased 13%. while AVAX and MATIC dropped 4% and 4.3%, respectively.
●Bitcoin (BTC): $23,378 −2.5%
●Ether (ETH): $1,848 −1.9%
●S&P 500 daily close: 4,274.04 −0.7%
●Gold: $1,777 per troy ounce +0.2%
●Ten-year Treasury yield daily close: 2.89% +0.07
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 COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
BTC continues to sell off on overbought RSI readings (hourly chart)
Following a 1% increase at 10:00 UTC, BTC declined 2.6% on higher-than-average volume an hour later. The decline followed a 67.1 RSI reading, just shy of 70.
The RSI is a widely used crypto market indicator that measures price momentum. A reading of 70 implies that an asset is overbought (i.e., overvalued), while a reading of 30 implies that an asset is oversold.
Over the last 10 trading days, there have been approximately eight instances where BTC’s hourly RSI has surpassed the current level of 67. The price of BTC, 12 hours following those oversold readings, declined seven out of eight times by an average of close to 1.3%.
Conversely, when RSI readings surpassed the oversold benchmark, prices were 5.4% higher, 12 hours later. Since declining to an RSI reading of 31.34 at 18:00 (UTC), BTC prices have increased 0.36%.
Although widely regarded, the RSI should not be viewed in isolation as a way to enter and exit the crypto market. It can, however, provide insight into price behavior, momentum and perceived price extremes.
Binance CEO weighs in on current state of crypto markets
Changpeng Zhao, CEO of Binance, the world’s largest crypto exchange by volume, discussed crypto’s outlook during CNN’s weekly ”Markets Now” show.
“We’re seeing stabilization. I wouldn’t say [the crypto winter] is completely over or not, that’s very hard for me to define,” Zhao said. “Bitcoin’s peak was around $68,000. Today it’s still at $23K so it’s bounced off from the bottom a little bit, but I’m not sure it’s the bottom bottom.”
Zhao said the main thing the crypto market needs now is time.
“When markets drop sharply, it does take a while to recover,” Zhao said. “Now we’re seeing some really positive news – the BlackRocks [referring to asset managers such as BlackRock] are getting into the industry so institutions are still coming in. We have seen a comeback from the retail side as well … And there’s a lot of new innovation.”
Zhao believes the cryptocurrency industry is fine and that price fluctuations are to be expected, but he doesn’t “see bitcoin going back to $68K in a hurry.”
“Going back up will always take some time, but the industry historically does go through four-year cycles so in a few years, most likely, there’ll be another cycle up.” Zhao said.
Despite the decline, derivatives markets are showing positive sentiment
Derivatives markets have turned slightly bullish of late, as funding rates for BTC have moved into positive territory again.
Funding rates represent payments to traders who are long or short a particular asset. When rates are positive, traders who wish to establish long positions are willing to pay traders who hold short positions.
The reverse is the case when funding rates are negative. The extent to which rates are positive or negative are used as an indicator of market sentiment.
In the current case, funding rates turned positive on Aug. 16, after being negative in the two days prior, implying a potential shift to bullish sentiment.
Fed Minutes Show Further Rate Hikes Ahead, Slower Hikes Eventually
By Helene Braun
U.S. central bank governors anticipate further interest rate increases in the upcoming months, but the pace of rate hikes will likely slow once they see a significant impact of the Federal Reserve’s policy making on inflation, minutes released Wednesday from last month’s Federal Open Market Committee (FOMC) meeting show.
“As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” the minutes said.
The FOMC boosted the interest rate by a robust 75 basis points in July, part of an ongoing hawkish, monetary campaign to tame inflation, which has hit four-decade highs in recent months. The committee, which meets regularly to set U.S. monetary policy, is widely expected to increase the rate similarly at its September meeting.
Bitcoin (BTC) and other cryptocurrency prices changed little following the release of the minutes. The largest crypto by market cap was trading 0.4% higher in the 30 minutes post release but was down about 1% over the past 24 hours. Bitcoin has declined for four consecutive days to lose ground it gained after rallying last week.
According to the minutes, the Fed will continue to hike rates until inflation lowers to 2%. “...It likely would be appropriate to maintain that level for some time to ensure that inflation was firmly on a path back to 2%,” the minutes said.
The U.S. central bank has raised interest rates four times this year, including 75 basis points – a historically large increase – at its last two meetings.
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