First Mover Asia: Traders See Bitcoin Falling to 2017 Levels Amid Ongoing Inflation, Economic Concerns; Cryptos Struggle

Good morning. Here’s what’s happening:

Prices: Bitcoin and Ether continue to struggle.

Insights: Crypto traders are pessimistic about bitcoin's future pricing.

Technician's take: In place of the Technician's Take, First Mover Asia is republishing a Consensus 2022-related column by columnist Daniel Kuhn on Pussy Riot founding member Nadya Tolokonnikova.

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.

Bitcoin (BTC): $21,985 -1.8%

Ether (ETH): $1,201 -0.4%

Bitcoin and Ether Continue to Struggle

The day after the biggest crypto crash in two years brought little relief.

Digital assets continued to flounder Tuesday in a whirlwind of inflation fears and economic uncertainty with bitcoin and ether in a red muck for much of the day, and other cryptos struggling to regain ground they lost in Monday's dramatic sell-off.

Bitcoin was recently trading below $22,000 down roughly 2% during the last 24 hours. The decline was bitcoin's eighth consecutive day of losses. The largest cryptocurrency by market capitalization has now dropped nearly 30% of its value over the past month and is threatening to test the not-long-ago unthinkable idea of support below $20,000, roughly where it stood in 2017.

Ether, the second-largest crypto by market cap, was changing hands at roughly $1,200, about flat from Monday when it hit a more than 18-month low. Among altcoins, SOL and XLM were recently up more than 5% after plunging on Monday, but WBTC and TRX continued to suffer with the latter off by over 13% at one point.

Crypto investors are nervously awaiting the U.S. central bank latest interest rate increase, which many observers now believe will be 75 basis points, harsh, inflationary medicine that seemed unlikely until the Consumer Price Index showed inflation continuing at four-year highs. Whether hawkish policy can tame inflation without sparking a recession remains uncertain.

"Bitcoin traders better be buckled up heading into the FOMC decision," Oanda senior analyst Americas Edward Moya wrote in an email. Bitcoin is still holding the $20,000 level and if Wall Street gets a very hawkish decision and press conference, Treasury yields and the dollar could surge once again and that would test the line in the sand many crypto traders have drawn."

Stocks were calmer on Tuesday after the previous day's battering with the S&P 500, Dow Jones Industrial Average and Nasdaq all about flat. Gold, a traditional safe haven asset, was also down, however, a reminder of the degree of skittishness among investors.

"Wall Street was quick to fade the morning rebound that stemmed a modest improvement with producer prices, possibly providing some hope that core inflation continues to ease for businesses," Moya wrote.

Meanwhile, bad news and disturbing trends continued to plague crypto markets, with exchange giant Coinbase announcing the layoff of about 18% of its workforce – some 1,100 jobs. The cuts were the latest among major exchanges, following those in recent days by Winklevoss twins-led Gemini, Middle Eastern-based Rain Financial and Latin America-based Bitso and Buenbit.

Data on Tuesday also showed that crypto-tracked futures had lost over $1 billion over a 24-hour period, a victim of the fraught investment environment. Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).

Also late Tuesday, Fox Business reported that the Securities and Exchange Commission (SEC) was investigating whether crypto exchanges have sufficient protections against insider trading. The SEC has sent a letter to a major crypto exchange inquiring about its safeguards and comes amid increasing scrutiny of the terraUSD stablecoin implosion and more widely, according to the report.

Oanda's Moya was pessimistic about crypto's prospects going forward. "If bitcoin breaks below the $20,000 level, support might not emerge until the $17,000 level," he wrote. "Another crypto plunge might not see major support until the 2019 summer high around the $14,000 level."

S&P 500: 3,735 -0.3%

DJIA: 30,364 -0.5%

Nasdaq: 10,828 +0.1%

Gold: $1,808 -0.6%

Traders See Bitcoin Dropping Below $20,000

Bitcoin stabilized Tuesday at about $22,000 after crumbling Monday amid inflation fears and wider macroeconomic weakness. The largest cryptocurrency by market capitalization had followed major Asian indices which continued their own recent spiral, closing at least 1% lower.

Japan’s Nikkei 225 dropped 1.32% as the yen tumbled to its lowest level against the dollar since 1998. The currency has declined 15% this year, becoming one of the worst-performing major currencies. Meanwhile, stocks in Tokyo slid the most since March and bond yields hit ceiling values, the Japan Times reported.

The decline came after the U.S. released poorer-than-expected inflation data for May in a report last week, which saw inflation increase by 8.6% compared to last year. Traders are now pricing in rate hikes of over 175 basis points through September, which is expected to bring down company revenues and slow down consumer spending.

“The crux of the concern plaguing investors is how harshly the [U.S. Federal Reserve] plans to tackle rising inflation in the face of stark new [consumer price index] data,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, in an email. “Getting the balance wrong and hiking interest rates too aggressively could see recession fears become a reality.”

Crypto traders and analysts are remaining similarly bearish. FxPro senior market analyst Alex Kuptsikevich said in a note Tuesday that market sentiment remained in “extreme fear” mode as bitcoin saw its biggest decline since early 2020.

Kuptsikevich added that bitcoin prices could tumble to 2017 highs under $20,000 before long-term buyers return to the market, and provided macroeconomic sentiment improves.

Bradley Duke, co-CEO at crypto exchange-traded product provider ETC Group, also stated bitcoin could retest 2017’s levels with the “next major support” at “$20,000.” “Crypto markets are in extreme fear mode, with the only recent comparable period of extended low sentiment stretching back to March 2020,” he said.

Meanwhile, some investors said a decline in bitcoin prices was tied to a rout in global stocks.

“The global economic environment is becoming extremely tough to navigate for investors involved in all kinds of markets, so it is no surprise that bitcoin is also facing increased downward pressure,” said Mikkel Morch, executive director at crypto/digital asset hedge fund ARK36. He added: “Over the past couple of years, cryptocurrencies have become a global macro asset and so it is to be expected that they will react negatively now when investors realize that central banks haven’t reacted nearly as aggressively as they will need to in order to get inflation under control.”

Pussy Riot, Political Action and the Future of DAOs

Growing up, Nadya Tolokonnikova, one of the founders of protest collective Pussy Riot, wanted to be a feminist. That’s what the 32-year-old artist and punk rocker told CoinDesk at Consensus 2022 in Austin, Texas.

Pussy Riot, Tolokonnikova explained while sitting on the floor of the Austin Convention Center, is often mistakenly thought of as just a punk-rock outfit – one that first made headlines in 2012 for its anti-Putin anthems. But the group, which operates like an off-chain decentralized autonomous organization (DAO), is so much more.

This article is excerpted from The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

“Anyone can join Pussy Riot,” Tolokonnikova said on the Big Ideas stage on Saturday. “We're open source, we write our own code … We’re decentralized, we’re autonomous and we’re an organization.”

The artistic, political collective – which counts over 100 members, of which a punk band is just a small part – is working toward a more equal world. Over the past decade, Pussy Riot has founded media companies, published books and staged protests on and offline to further their “global feminist protest art movement.”

See also: Crypto: The Gift That Keeps On Giving (to Charity) | Opinion

Lately, the group has been using the censorship-resistant tools enabled by crypto. Tolokonnikova was a co-founder of women and LGBTQ+ activist group Unicorn DAO. She also helped found Ukraine DAO, which auctioned an image of the Ukrainian flag in March for 2,258 ETH (approximately $6.75 million at the time) to support people affected by the Russian invasion.

“My goal is for future generations that are going to be onboarding into Web 3 … will have gender equality,” Tolokonnikova said. “This is how I see my role in crypto.”

Last week, as the Consensus event was unfolding a few blocks to the south, members of Pussy Riot, UnicornDAO and the Lakota Indigenous group Ikiya Collective charged into the Texas State Capitol building to stage a protest.

They unfurled a 45-foot banner reading “MATRIARCHY NOW!” from the third floor and then rushed out of the building. The moment of “domination” was minted as a non-fungible token (NFT) using auction platform Party Bid. To date, the group has raised 2.38980764 ETH – worth just shy of $3,000 – from 23 contributors to fund reproductive rights.

John Caldwell, a founder of Unicorn, said the group was “surprised” by how little attention and support this protest action has received. Texas, a U.S. state known for supporting the ideals of autonomy, personal freedom and limited state intervention, has been at the forefront of the conservative-led charge to roll back abortion rights, he said.

“I didn’t come here for the conference, I came here to protest,” Tolokonnikova said, adding that the crowdfunding model allows anyone who’s so inclined to contribute dollars or cents to their cause. Decrypt reported “mixed reactions,” with some Capitol building visitors snapping pictures and others hurrying out of the way.

Though she’s similarly taken aback by how little buzz the Capitol publicity stunt generated, Tolokonnikova said crypto is full of energy. “A lot of people here are visionaries. They want to build a better world,” she said.

Perhaps no one knows better than Tolokonnikova how much work goes on behind the scenes at activist causes. She said she splits her time doing logistical work for the DAO – answering emails, participating in her Discord channels, speaking to artists and auction houses – and planning showstopping events.

As co-founder of independent media outlet Mediazona, she has spoken before the U.S. Congress, British Parliament, European Parliament and performed at Banksy's Dismaland exhibition.

See also: DAOs and the Coming InDAOstrial Revolution | Opinion

At an earlier Consensus event on the Big Ideas stage, Ellie Rennie, Royal Melbourne Institute of Technology (RMIT) professor and head of the Australian university’s Blockchain Innovation Hub, said DAOs are a new type of organization that will require a new mix of interpersonal and technological skills to get right.

She noted that we should also not vilify DAOs that experiment and fail. “To be transient is OK,” she said. “We need to find what makes communities resilient.”

Perhaps the hardest task for DAO managers, faced with a tool that adds elements of financialization and speculation to social causes, is creating ways to “align” everyone’s needs. Economic incentives may encourage participation, but perhaps not commitment.

Others come to crypto precisely because it is apolitical – a space that seems insulated from the dramas, inconsistencies and superficialities of modern-day politics. Crypto, by creating tools that anyone can use, has a plausible case for being “credibly neutral.”

Of course, some would disagree. Perhaps crypto will only rebound from the unfolding bear market if it finds a way to meaningfully engage with the world. In politics, perhaps that means crypto becoming an effective tool for change.

“Being apolitical there is no such thing,” Tolokonnikova said. “Apolitical just means supporting players that are already in power.”

U.S. Federal Reserve meeting

Australia House Price Index (Q1/QoQ/YoY)

10 a.m. HKT/SGT(2 a.m. UTC): China industrial production (May/YoY

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

Deep Crypto Sell-Off, Coinbase Layoffs, Celsius Pausing Withdrawals, All Eyes on Fed as Investors Fear What’s Next

Crypto market capitalization fell by some 12% in the last 24 hours to nearly $970 billion on Monday morning amid fears over aggressive Federal Reserve rate hikes. Sean Farrell of Fundstrat Global Advisors and Gritt Trakulhoon of Titan Investment provided markets analysis. Plus, Swan Bitcoin CEO Cory Klippsten discussed the potential risks associated with crypto lending service Celsius.

Coinbase Lays Off Around 1,100 Employees: The exchange is reducing its workforce by roughly 18%. CEO Brian Armstrong admits the company "grew too quickly."

Cryptos See Over $1B in Liquidations as Bitcoin, Ether Lose Major Support Levels: Bitcoin lost the $25,000 level, while ether briefly slid to nearly $1,200.

Morgan Stanley Says Ether Underperformance Echoes Crypto Downturn of 2018: Expectations of higher Federal Reserve interest rates are weighing on crypto prices, the bank's analysts said.

Celsius’s CEL Token Jumps 8-Fold in Intraday Spike: The lender’s token reached a high of $2.57 in what appears to be a short squeeze.

MicroStrategy Defended at BTIG; Saylor Not Expecting Imminent Margin Call: Shares of the technology company have tumbled alongside bitcoin, down 35% over the past few days and nearly 75% so far this year.

Wanna Bet? Crypto Prediction Markets Could Be a New ‘Source of Truth’: Andrew Eaddy and Clay Graubard made the case for empowering individuals through technology as trust in institutions declines.

Today's crypto explainer: What Are Liquidity Pools?

Other voices: The crypto industry just had one of its worst days ever — Here’s what happened (CNBC)

"Economic conditions are changing rapidly: We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment." (Coinbase CEO Brian Armstrong in blog post announcing layoffs) ... ".@CelsiusNetwork is working around the clock for our community. It’s all hands on deck, so there will be no Twitter Spaces this week." (Crypto lending platform Celsius/Twitter) ... "There has been continuing volatility and further significant movements of the stETH:ETH exchange rate again today. While the discount on stETH on secondary markets is ~5% at the time of writing, Lido continues to operate normally." (Liquid staking platform Lido/Twitter) ... For the current market extreme condition, @trondaoreserve has received another 500 million USDC to defend #USDD peg. Now USDD collateralization rate is 310%. (Tron) ... "Like the man said, single digit hashprice comes at you fast...In response to yesterday's brutal market action, Bitcoin's hashprice has dipped to $0.0950/TH/dayHashprice has not traded below $0.10/TH/day since October 2020." (Hashrate Index, bitcoin mining data analytics by Luxor Mining, on Twitter)