First Mover Asia: Bitcoin Set to Close Week Underperforming Major Japan, China Stocks

Investors in the region were more risk-averse this week amid fresh evidence of the U.S. central bank's commitment to hawkish monetary policy and an unsettled macroeconomic environment; cryptos were mixed.

AccessTimeIconApr 7, 2022 at 10:42 p.m. UTC
Updated Apr 8, 2022 at 1:58 p.m. UTC

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

Good morning. Here’s what’s happening:

Prices: Bitcoin and ether were roughly flat over the past 24 hours.

Insights: Bitcoin has been underperforming major Asian stock indices amid investors' concerns about interest rate hikes and uncertain macroeconomic conditions.

Technician's take: Range-bound price action could persist for a few days.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.

Prices

Bitcoin (BTC): $43,544 -0.3%

Ether (ETH): $3,227 +0.7%

Top Gainers

Asset Ticker Returns Sector
Ethereum Classic ETC +10.0% Smart Contract Platform
Stellar XLM +2.4% Smart Contract Platform
Polygon MATIC +1.9% Smart Contract Platform

Top Losers

Asset Ticker Returns Sector
Bitcoin BTC −0.5% Currency
Litecoin LTC −0.4% Currency
Bitcoin Cash BCH −0.4% Currency

Bitcoin did a little better on Thursday after tumbling the previous day but still fell slightly, following a downward trend for much of the week. Ether fared slightly better, but other major altcoins were mixed.

Bitcoin, the largest crypto by market cap, was recently trading at about $43,500, about where it stood 24 hours earlier and well off the $47,000 threshold it crossed a week ago as investors continued to digest the U.S. central bank's new hawkish intensity and the ongoing swirl of economic events stemming increasingly from Russia's invasion of Ukraine.

"Bitcoin is struggling for direction as Wall Street grows cautious over how aggressive the [Federal Reserve] will be with tightening of monetary policy," Oanda Senior Market Analyst Americas Edward Moya wrote in an email.

SOL and AVAX were recently up about 2% and 3%, respectively after spending parts of Thursday in the red. Terra's luna (LUNA) was recently down over 4%. The meme coins DOGE and SHIB were both roughly flat. Outside the CoinDesk top 20, CAKE rose over 6% at one point.

Crypto prices veered slightly from the performance of major equity markets, which were in the green, albeit barely. The tech-focused Nasdaq was up less than a tenth of a percentage point.

The U.S. central bank has signaled powerfully as a body, and by individual governors, over the past week that it would ratchet up its efforts to tame inflation, which has reached nearly 8%, a four-decade high.

On Thursday, Federal Reserve Bank of St. Louis President James Bullard told reporters after a speech that the Fed would have "to move forthrightly in order to get the policy rate up to the right level to deal with inflation that we’ve got in front of us." His remarks followed two days after Fed Governor Lael Brainard, who had been reluctant to abandon the Fed's dovish posture of recent years, suggested the Fed might increase interest rates at a faster pace.

Other winds during the day blew more favorably for digital assets. Addressing crypto In a speech for the first time, U.S. Treasury Secretary Janet Yellen said that a digital dollar could become a "trusted money comparable to physical cash."

Speaking to attendees at an American University event, Yellen highlighted the differing perceptions about crypto, saying that’s often the case with “transformative” technology. “Some proponents speak as if the technology is so radically and beneficially transformative that the government should step back completely and let innovation take its course,” she said. “On the other hand, skeptics see limited, if any, value in this technology and associated products and advocate that the government take a much more restrictive approach.”

Meanwhile, European and U.S. lawmakers who have criticized Russia's unprovoked attack on Ukraine were considering and pushing forward on new economic sanctions. They included a European Union ban on Russian coal and a U.S. House vote to remove Russia's favored trade status and a halt to imports of energy products.

Still, Oanda's Moya was cautiously optimistic about bitcoin's near-term performance.

"Bitcoin has held up nicely given the recent bond market sell-off, but it could struggle if that move continues," he said. "Bitcoin's long-term outlook remains bullish but if risk aversion runs wild it could be vulnerable to a drop towards the $38,000 level."

Markets

S&P 500: 4,500 +0.4%

DJIA: 34,583 +0.2%

Nasdaq: 13,897 +.06%

Gold: $1,931 +0.3%

Insights

Bitcoin set to close week underperforming major asian stock indices

Concerns over how a hawkish Fed will react to inflation, the continuing war in Ukraine and China’s COVID-19 crisis sent Asian markets tumbling this week, and bitcoin with them.

CoinDesk - Unknown

Hang Seng and other indices (TradingView)

The world’s largest digital asset is set to end the week down 8%, underperforming major indices in Asia including the Nikkei 225, Hong Kong’s Hang Seng Index, the Hang Seng index of Hong Kong-listed China Stocks, as well as the S&P 500.

Analysts have pegged uncertainty, anchored by anticipation of the latest Fed minutes, as a reason for the week-long sink. The Fed now has a mandate to tame inflation, but the question is how tolerant will it be of the economy dipping into a recession.

In February, a number of analysts who previously spoke with CoinDesk said the Fed would back off tighter monetary policy if the economy cools too much, too quickly and stocks tank. These observers believed the Fed could tolerate about a 20%-30% drop in equity prices.

At the time, the central bank seemed inclined to raise interest rates in small 0.25 increments and by just a percentage point over the rest of 2022, a “trivial” amount one analyst said, with inflation running at 7% at the time.

Now, with inflation surging closer to 8% and the macroeconomic environment increasingly uncertain because of the Russian invasion of Ukraine, the Fed has indicated it may be more aggressive in its anti-inflation measures.

How its approach affects crypto is uncertain for the long term. For now, investors seem more risk-averse, which is bad news for bitcoin.

Bitcoin’s slump on Fed hawkishness after a brief rally was felt throughout the broader crypto ecosystem as traders who bought into tokens including DOGE and SOL, which tend to rise and fall in sync with bitcoin, got rekt in a massive liquidation wave with over $400 million lost.

With bitcoin’s continued correlation to the S&P 500, the big question on traders’ mind in Asia is what will break this trend? When will bitcoin rise again?

Galaxy’s Mike Novogratz thinks it’s all on the shoulders of the Fed. Novogratz still believes bitcoin will eventually hit $500,000 and then $1 million, but it's going to be in retreat until the Fed takes its hands off the economy when it eventually slows down.

Then, “Bitcoin goes to the moon,” Novogratz said.

Technician's take

CoinDesk - Unknown

Bitcoin daily chart shows support/resistance, with RSI on bottom. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) is stabilizing after a near-10% drop from the $48,000 resistance level earlier this week. The cryptocurrency is holding support above $43,000 and is roughly flat over the past 24 hours.

The relative strength index (RSI) on intraday charts are rising from oversold levels, which could keep short-term buyers active into the Asia trading day. On the daily chart, however, the RSI is neutral with negative momentum, suggesting range-bound price action could persist for a few more days.

BTC will need to make a decisive move above above $45,000 in order to yield upside price targets, initially toward $50,966. For now, the price recovery from the January low at $32,933 remains intact, especially given the positive momentum reading on the weekly chart.

Still, indicators on the monthly chart suggest upside is limited for BTC over the intermediate term. That means BTC will need to maintain stronger support above $37,560 to keep the three-month uptrend of higher price lows stable. A decisive break below that level could invalidate the recovery phase.

The chart below shows key levels to manage short-term risk, per the DeMARK indicators, available on Symbolik.

CoinDesk - Unknown

Bitcoin daily chart shows DeMARK set-ups with MACD on bottom (Damanick Dantes/CoinDesk, DeMARK Symbolik)

Important events

9:30 a.m. HKT/SGT(1:30 a.m. UTC): Australia financial stability review

1 p.m. HKT/SGT(5 a.m. UTC): Japan consumer confidence index (March)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Miami is charging ahead with its bitcoin capital ambitions as it unveils a laser-eyed charging bull during the Bitcoin 2022 conference this week. Mayor Francis Suarez joined "First Mover" to explain his crypto projects for the city, and what's going on with MiamiCoin. Plus, insights on the potential impact of Janet Yellen's speech on digital assets from Martin Leinweber of MV Index Solutions and more Miami bitcoin conference news from John Bartleman of TradeStation.

Headlines

Blockchain-Exposed Stocks Could Show Massive Sales Growth Despite Recent Underperformance, Goldman Says: Bitcoin has become more correlated with equity index returns in recent months, the bank’s analysts said.

HBAR Foundation Commits $250M to Drawing Metaverse Apps to Hedera: The announcement follows a $155 million DeFi fund launched at the end of March.

Dogecoin, Solana Traders Nurse Big Losses as Cryptos See $400M in Liquidations: Wednesday's figures were the third-highest liquidation losses of this year.

Cosmos-Based Juno Blockchain Pushed Offline in Apparent Attack: A malicious smart contract has put the network out of commission for over 24 hours and comes less than a month after a controversial governance vote.

Tom Brady’s Autograph, ESPN Launch Network’s First NFT Collection: The collection will feature images of the likely Hall of Fame quarterback and coincide with the release of a docuseries on Brady’s career.

Longer reads

Waves Founder Blames Short Sellers for Its Woes. Here's Why That's a Red Flag: To longtime finance observers, blaming shorts often looks like the last desperate deflection of a project in denial about its failures.

Today's crypto explainer: What Is a Rebase/Elastic Token?

Other voices: Miami’s crypto craze on full display at bitcoin conference (ABC News)

Said and heard

"It isn’t often you’d hear tech companies described as dinosaurs, but they are indeed now just that and need to evolve or risk being relegated to an era past. The largest tech giants, including Amazon, Google and Meta Platforms, have become too accustomed to the outdated business models of ad monetization, an industry that is growing 15.7% annually. Ad tech is still an appealing opportunity, but blockchain has a much higher growth potential." (Rockaway Blockchain Fund Chief Investment Officer Dusan Kovacic) ... “With this new business structure, Tennessee will be a beacon for blockchain investment, new jobs and investment,” [Powell] says. “Just as Delaware became a hub for traditional LLCs or South Dakota for credit card companies.” (Tennessee state representative Jason Powell, quoted in the Nashville Scene) ... "Credit rating agencies have indicated that payments in a currency different from the one the debt was sold in would count as a default once the grace period expired. Russia’s debt payments that were due on Monday have a 30-day grace period and had no provision for repayment in any currency other than dollars. It would be Russia’s first default on foreign currency debt in more than a century." (The New York Times)



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Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

CoinDesk - Unknown

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.