Market Wrap: Bitcoin Declines Into the Weekend, as Volatile Month Continues
The technical charts suggest further downside is likely as sellers react to extreme overbought conditions since March.
Bitcoin traded lower on Friday as the price struggled near the $35,000 resistance level. The cryptocurrency was trading around $32,000 at press time and is down about 8% over the past 24 hours. Some analysts expect continued weakness into the weekend as a volatile month nears its end.
- S&P 500: 4280.7, +0.33%
- Gold: $1779.2, +0.22%
- 10-year Treasury yield closed at 1.531%, compared with 1.492% on Thursday
Ongoing concerns about regulatory crackdowns and environmental issues have weighed on bitcoin’s price over the past few months. The technical charts suggest further downside is likely as sellers react to extreme overbought conditions since March.
Over the short term, bitcoin remains in a consolidation phase between $30,000 support and $40,000 resistance. Oftentimes, trading ranges can be difficult to navigate for some traders.
“Chinese market participants have been massively selling during the past month alongside the Grayscale unlocking schedule leading to more selling pressure,” wrote Elie Le Rest, partner and co-founder of ExoAlpha, a crypto hedge fund, in an email to CoinDesk. Greyscale, like CoinDesk, is a unit of Digital Currency Group.
“With newcomers in the crypto market seeing their profit and capital getting wiped out by selling waves, newcomers are taking their losses as they can’t stomach this much negative volatility anymore,” wrote Le Rest.
Traders are also grappling with the potential for tighter monetary policy in the U.S. this year, which could weigh on risk assets including cryptocurrencies.
“Wall Street will have to see a couple more inflation and labor reports before having a better understanding on when the [Federal Reserve] will taper and be poised to raise interest rates,” wrote Edward Moya, senior market analyst at Oanda, in an email to CoinDesk.
“It seems it will take intensifying inflation pressures to get the dollar rally going and that might pose one of the key risks for cryptocurrencies this summer,” wrote Moya.
Institutions embrace crypto
Despite short-term price swings, institutions are gradually warming to cryptocurrencies.
Bitcoin trading volumes on the LMAX Digital spot exchange have surged over the past year. Because LMAX Digital "facilitates trades for institutions only and already is among the leading bitcoin spot exchanges, this depicts the current institutionalization of the bitcoin market,” according to a report by Arcane Research and LMAX Digital published on Friday.
The report also mentioned that roughly 70% of the 77 institutional investors surveyed by LMAX Digital expect asset managers, funds and banks to be the most significant contributors to trading volume in the next three years.
However, several gaps remain, which could slow the pace of widespread institutional adoption. “Access to banking has been particularly highlighted by brokers, while proprietary trading firms and HFT [high frequency trading] firms see access to credit as a big gap. Notably, corporates see a lack of global regulation as a major concern,” according to LMAX Digital.
Bitcoin hashrate declines
It appears that China’s regulatory crackdown has accelerated the decline in bitcoin’s hashrate over the past month. The hashrate refers to the total combined computational power that is being used to mine and process transactions on the blockchain.
Bitcoin's mean hashrate has dropped to 104 EH/s, the lowest level since June 2020, according to data from Glassnode. BitOoda, a digital asset financial services platform, predicted the target hashrate would be around 105 EH/s at the next difficulty reset, which will likely happen on July 3, while the target hashrate will drop further to 85 EH/s at the subsequent difficulty reset on July 19 or July 20.
Chinese miners have been looking for hosting sites for potential migration. “We're seeing a ton of inbound requests from China-based mining companies that are looking to relocate to North America and are looking to do it urgently,” Dave Perrill, CEO of crypto mining colocation company Compute North, told CoinDesk.
- High gas fees have plagued Ethereum off and on for months, so much so, that there has been a boom in funding and uptake around layer 2 solutions such as Polygon, Arbitrum and Optimism. A new project is taking a different tack and hoping to foster better communication between two groups of Ethereum stakeholders whose incentives are often misaligned: miners and users. The Ethereum Eagle project (EGL), launching Friday, is trying to provide a signaling mechanism for the miners and community to strike the “right” balance between gas limits and block size.
- Opera, a privacy-oriented web browser that has a history of incorporating crypto features, is incorporating its first stablecoins, including celo dollar (cUSD), celo euro (cEUR) stablecoins and Celo’s native CELO token. Celo is an open-source blockchain network focused on making decentralized finance (DeFi) systems and tools more accessible.
Most digital assets on the CoinDesk 20 were lower on Friday.
Notable losers as of 21:00 UTC (4:00 p.m. ET):
uniswap (UNI) -11.48%
the graph (GRT) -11.33%
aave (AAVE) - 10.03%
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