Crypto Market Update

Crypto Market: $BTC Fails at First Attempt to Rally

On Monday, Bitcoin unexpectedly made significant gains to burst beyond $20,000 on September 27. The largest cryptocurrency by market capitalization reached its highest point in more than a week, but it was still unable to break out of its constrained trading range.

The shaky comeback came to an abrupt halt on Wednesday as Bitcoin lost value when U.S. trading hours were in effect and plunged below $19,000 before bouncing back above the mark.

However, due to Bitcoin’s good performance, Ether was able to partially recoup some of its losses after the shocking post-Merge sell-off. This helped boost the whole cryptocurrency market until today’s sell-off eliminated the previous week’s gains.

The entire market cap for cryptocurrencies remained below $1 trillion despite a decline in the cryptocurrency sector. The Crypto Fear and Greed index, currently at 21 points, will probably end the month in the “extreme fear” zone.

The New Hike Game

Image Source: Coin360

Financial markets are spiraling downward in one of the most unsettling macro environments in decades. Even though the Fed’s decision to raise interest rates by another 75 basis points last week wasn’t unexpected and was thought to have been priced in, it nevertheless led to a sell-off in the traditional asset markets.

The real signal for traders—rather than the rate hike itself—comes from the Fed’s remarks on its upcoming actions. Fed Chair Powell said the Fed would maintain raising rates until it reaches a “terminal rate,” or endpoint, of 4.6% in 2023, as it promised to reduce inflation to 2%.

Projections from the meeting also suggested that the Fed will continue to be more hawkish for the rest of 2022, most certainly increasing rates by at least 1.25 percentage points overall in each of its final two meetings this year. That indicates a quarter-point rate increase for the coming year, with no rate reductions or declines anticipated until 2024.

The price performance of risk-on assets over the past week shows how important the FOMC decision was in influencing the direction of the markets. While the S&P 500 made a new 2022 year bottom today, breaking below the previous bear market intraday low that was hit in mid-June, today’s sell-off may not be as severe as it could be.

Risk-on assets are unlikely to gain traction in the upcoming weeks, at least until the next CPI on October 13, given the deteriorating geopolitical environment amid the conflict in Russia and Ukraine and the energy crisis in Europe.

Top 7-day Gainers

$XRP (+16%)

With $XRP remaining one of the rare large-cap cryptocurrencies that closed the week in the green, Ripple’s native coin outperformed other top cryptocurrencies by market capitalization.

The market is pricing in a likely Ripple victory in the SEC litigation, which is about to come to a close after almost two years, even though the momentum slowed down in the last two days and provided its holders an upside of 15.7% in the last seven days.

$RSR (+53%)

In anticipation of the Reserve protocol’s mainnet launch on the Ethereum network, the value of Reserve Rights, an ERC-20 native token of the Reserve protocol, increased by 52.6% over the previous week. At the time of publication, $RSR is trading at $0.00807, according to information from CoinMarketCap.

The Reserve Protocol has been described as a collection of stablecoins with decentralized governance and diversity to lower risk. The Reserve network’s stablecoin, Reserve ($RSV), relies on $RSR to “perform an arbitrage loop,” which helps keep the price of $RSV at roughly $1, unlike fiat-backed stablecoins like $USDT.

Notably, it was reported earlier this month that the US Congress is drafting legislation that would temporarily outlaw some varieties of algorithmic stablecoins. A two-year period during which regulators examine the instruments would be prohibited from the issue or creation of additional “endogenously collateralized stablecoins” under the proposed legislation.

$COMP (19%), $MKR (18%), $UNI (+16%)

As they all rebound from the post-Merge stress that drove the key tokens of the Ethereum ecosystem into oversold territory earlier this month, Ethereum blue chips are among the top performing cryptocurrencies this week. However, protocol activity and overall value remain sluggish when the crypto winter sets in.

Top 7-day Losers

$ATOM (-14%)

Despite a flurry of developments announced during the ongoing ecosystem conference, Cosmosverse, the native token of the Cosmos ecosystem, $ATOM, concludes this week with a 13.6% loss. During the event, the Cosmos team unveiled a new whitepaper that suggested modifications to the Cosmos Hub that would improve interoperability and security while also modernizing $ATOM’s tokenomics.

$ADA (-2.5%)

Cardano’s “Vasil” hardfork, one of the biggest updates to the system to date, was released on September 22. The improvement is anticipated to make the network quicker, less expensive, and “more sophisticated” right out of the gate with more complex smart contracts.

Even with delays, the upgrade seems to have been worth the wait because consumers have already noticed a drop in transaction fees. However, the repercussions on the developer side have not yet been observed.

The hard fork didn’t assist $ADA in gaining considerable momentum in terms of price movement as it did Ether before the Merge. On September 11, the price of $ADA began to decline, and it didn’t stop until the day of the hardfork, when it rose from the local bottom of $0.435 to the local peak of $0.4611.

$DOT (-0.4%)

Even though Polkadot’s $DOT had a price spike on September 26 after the layer-1 blockchain revealed its progress to enhance the network’s parachain scalability, relay-chain governance, cross-chain communication, and parachain development, the token is now down this week.

$ETHW / IOU (-60%)

he price of proof-of-work tokens has fallen sharply since the Merge. The Ethereum hard fork $ETHW has fallen more than 60% in two weeks despite the most recent trend reversal, and Ravencoin’s $RVN and Ergo’s $ERGO have both fallen sharply after making gains for several weeks before the Merge.

In the Middle of Nowhere

As a few significant economic developments occurred, the price of bitcoin approached the high resistance level of $20,500. Last week, the 75 basis point increase in the Fed’s interest rate caused the S&P 500 to hit new local lows and drove bitcoin and ether to range lows of $18,500 and $1,250.

Markets quickly bounced back from that point, and $BTC broke $20,000 today in an attempt to pass $20,500. Huge spot buying power supported the recovery, but after a big number of limit sell orders on $20,300 were hit, $BTC was rejected from that level and fell towards $19,000.

The preceding week saw no change in the open interest (OI) of cryptocurrency futures due to the range trading of $BTC and $ETH and the lack of a discernible market trend. Without significant short-side liquidations yesterday, Total Market Open Interest increased close to $30 billion, indicating that bulls are too worn out to make another significant surge.

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