Crypto Market

Crypto Market: Another Week in Red

Bitcoin (BTC) has had another losing week, and despite continued adoption in nations like Brazil, BTC miners are being forced to shut down due to escalating energy costs. Though there is still some uncertainty, Ethereum users and the crypto community are optimistic about the future of ETH.

Top Market Trends of the Week

  • For the Brazilian Central Bank, the largest bank in Brazil will take the lead in developing a DeFi liquidity pool platform. Additionally, a Brazilian exchange joined together with Nasdaq to launch an official Bitcoin exchange.
  • The founder of Synthetix (SNX) suggested capping SNX production at 300 million to get away from the inflationary tokenomics required to “launch the network.”
  • Due to a 50% rise in electricity prices, Compass Mining announced that it was closing down 2 Bitcoin mining operations in Georgia.
  • Rune Christensen, the founder of MakerDAO, recommended that the protocol gradually depeg its DAI stablecoin from USD to reach a “decentralized collateral threshold” in the long run.

Top 7-day Gainers

  • CEL +21.0%
  • XEC +13.9%
  • BIT +12.5%
  • MATIC +8.8%
  • NEXO +7.7%

Top 7-day Losers

  • HNT -29.6%
  • AR -18.6%
  • AVAX -17.5%
  • AMP -14.6%
  • ZEC -14.0%

Bitcoin’s Technical Summary

Bitcoin (BTC) plunged more than 5% on the day of the speech and even dropped below the $20,000 level in the following days for the first time since July. 13.

The negative turn came after some market participants pointed out the signs of crypto decoupling from the stock market. Yet, the recent sell-off in the stock and crypto markets highlighted once again that in the current environment, crypto’s idiosyncratic factors might only prevail for a limited period of time. 

As Bitcoin sees its correlation with the S&P 500 climbing to the highest levels since the start of the summer, traders have to keep their eyes on macroeconomic conditions and policy changes that may cause a drawdown in the traditional financial markets.

For Bitcoin, $20,000 is a key level, and if the price drops to take down the last low, we could see a sharp decline toward the next range, between $15,000 and $13,000.

Ethereum Remains Volatile

Ethereum (ETH) continues to witness growing volatility ahead of the merge as the transition dates from PoW to PoS are finalized. Rescheduled from the anticipated date of around September 15 to September 6, this key upgrade might catalyze crypto’s growth if implemented successfully.

However, a lot of narratives around the merge swirl around its potential setbacks. Investors are unsure whether the upgrade will be able to solve Ethereum’s scalability issues and bring the transaction fees down. At the same time, many in the crypto community consider the most negative scenario that involves transaction censorship.

Over the last week, Ether plummeted alongside the major assets, losing 4.25% of its value. Following an extended run-up in July and early August, ETHBTC also dropped from the local highs of 0.81 to 0.075 at the time of writing as merge-related fears took hold.

Volatility Ahead

Last week’s price action on digital assets was volatile as risky assets dropped after FOMC and the Fed’s comments on the state of the economy, inflation, and a 75 bps rate hike in September. Crypto futures’ open interest has increased by roughly $320 million since then, signaling that BTC and ETH could see turbulence in the coming weeks.

A potential futures squeeze might be on the long side as traders were piling in shorts at the $19,500 resistance level. Aggregate funding rates turned moderately negative for both assets in mid-August, so crowded shorts may be at most risk. However, if Bitcoin falls below the last lows, we could see it moving toward the $13,000 – $15,000 range.

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