Market Wrap: Bitcoin Struggles to Hold $20K for the Foreseeable Future
By Glenn Williams, Jocelyn Yang
The largest cryptocurrency in market value toggled above and below the psychologically important threshold.
Price Action
Bitcoin (BTC) and Ether (ETH) both declined on Thursday, settling into what seems likely to be a flat trading range for the foreseeable future.
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Bitcoin (BTC) fell 1% on Thursday, temporarily falling below the psychologically important $20,000 level. The largest cryptocurrency by market cap has above and below $20K for the last six trading days.
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Ether (ETH), the second-largest cryptocurrency by market cap after bitcoin, rose 1.5% on the day. ETH has been essentially flat over the last three trading days, with above-average volume occurring only during Monday’s decline. Since Monday’s close, ETH’s price has moved approximately 1%.
Global Macro: U.S. initial jobless claims of 232,000 in August were below consensus expectations of 248,000, and down from 237,000 in July.
Continuing jobless claims for August were 1.44 million, matching the consensus, but also exceeding July’s figure of 1.41 million.
For digital assets, the better-than-expected jobs data is not likely to serve as a bullish catalyst. Given the Federal Open Market Committee’s (FOMC) resolve to slow inflation, stronger employment data is likely to lead to increased consumer demand. The result of this increase (i.e., more dollars chasing a basket of goods) is likely to push prices higher.
According to the CME FedWatch tool, the odds of a 75 basis point increase in the Fed funds rate during the FOMC’s next meeting on Sept. 21 have increased to 72%, from 69% a day earlier.
U.S. Equities: The Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq composite and S&P 500 were mixed on Thursday. The Nasdaq fell .3%, while the DJIA and S&P 500 rose 0.46% and 0.30%, respectively.
Commodities: Crude oil prices fell for the third consecutive day, declining 3.7% to $86 per barrel. Natural gas finished 0.61% higher, while the price of safe-haven asset gold as well as copper fell 1% and 3%, respectively.
Altcoins were mixed. Polygon (MATIC) rose 4.5% while maker (MKR) and solana (SOL), decreased 2.8% and 2.7%, respectively.
Latest Prices
●Bitcoin (BTC): $20,017 −0.9%
●Ether (ETH): $1,577 +0.4%
●S&P 500 daily close: 3,966.85 +0.3%
●Gold: $1,707 per troy ounce −0.4%
●Ten-year Treasury yield daily close: 3.26% +0.1
Technical Take
Absent Near-Term Catalysts, Institutions May See Current Valuations as Attractive
Bitcoin was recently trading below $20,000 on Thursday, continuing a flat trading range that began on Aug. 27. While the price of BTC has traded above and below $20,000 in each of the last six days, in the aggregate the price has moved just 2%.
The average true range (ATR) for BTC has fallen from 2,065 in June, to a current level of 903. ATR is a technical indicator that measures the absolute value of price movement over a period of time. Increasing ATR levels signal increased volatility while a declining ATR (which we currently have) indicates the opposite.
The compression in volatility for BTC, combined with moderate to below-average volume and proximity to its $21,000 point of control (discussed in Wednesday’s Market Wrap), or price level with substantial activity, signals a continuation of sideways trading behavior in the near future.
Given the oft-mentioned macroeconomic overhang, BTC doesn’t seem to have a bullish catalyst at the moment.
BTC’s low valuation, however, may be enticing institutions to start buying, particularly as the crypto landscape continues to mature. Ben McMillan, chief investment officer of investment firm IDX, called the current crypto climate a potential buying opportunity:
“With more visible development happening in the crypto ecosystem, many institutional investors are starting to view the current crypto ‘winter’ as similar to the period after the ‘dot.com’ bust which ultimately ended up being a generational buying opportunity for technology stocks,” McMillan said.
McMillan added that investors are seeing more interest in cryptos than other assets partly because of their longer-term prospects.
“Investors are still certainly focused on the near-terms risks, but we’re definitely seeing a greater appreciation for the growth potential going forward which definitely isn’t shared with other asset classes,” he said.
A look at BTC’s “Commitment of Traders” data shows that larger speculators (i.e., institutional money) are indeed beginning to enter into long positions. The report, published by the Commodity Futures Trading Commission (CFTC) each Tuesday provides a weekly snapshot of positions held by traders in futures markets.
The positions of small speculators are denoted in blue, while positions of larger speculators (i.e., institutions) are denoted in green. A look at BTC’s weekly chart shows large speculators moving into a net long position following the 15% decline during the week ended Aug. 19.
BTC’s weekly chart (Optuma)
Altcoin Roundup
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Potential Ethereum Hard Fork Token ETHPOW May Trade at 1.5% of Ether’s Price, Futures Suggest: The proof-of-work (PoW) chain, representing a group of miners opposing the impending Ethereum’s Merge and its switch to proof-of-stake (PoS), would have a new token called ETHPOW. Paradigm expects the token will open at $18 at minimum.
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Helium Proposes Shifting its Entire Network to Solana Blockchain Months After $200M Raise: The developers propose shifting all Helium-based tokens, governance and economics around the network’s native HNT, DC, IOT and MOBILE tokens from its own network to Solana. They cited faster transactions and “higher uptimes” among several reasons behind the proposed move.
Other Markets
Biggest Gainers
| Asset | Ticker | Returns | DACS Sector |
|---|---|---|---|
| Terra | LUNA | +13.3% | Smart Contract Platform |
| Polygon | MATIC | +4.7% | Smart Contract Platform |
| Cosmos | ATOM | +1.6% | Smart Contract Platform |
Biggest Losers
| Asset | Ticker | Returns | DACS Sector |
|---|---|---|---|
| Solana | SOL | −2.4% | Smart Contract Platform |
| Avalanche | AVAX | −1.8% | Smart Contract Platform |
| Loopring | LRC | −1.5% | Smart Contract Platform |
