First Mover Americas: Macro Retakes Front Seat, Pushing Bitcoin Down Below $21K

This article originally appeared in First Mover, CoinDesk’s daily newsletter putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.

It looks like macroeconomics has retaken the front seat as inflation fears caused jitters in the market on Monday. Bitcoin (BTC) dipped to levels below $21,000 at around 09:30 am GMT, with a sharp sell-off following the previous week’s surge.

U.S. equity futures retreated along with European stocks as traders are pessimistic about the prospect of further interest-rate hikes. Although most investors think sentiment is looking fragile, Tom Lee, head of research at Fundstrat, said in a morning note to investors that he expects markets to rally.

“While there remains a lot of uncertainty regarding macro, we think underlying inflationary pressures are easing, which in turn means [the U.S. Federal Reserve] has less work to do,” wrote Lee. “This is not necessarily the consensus view. But it is a view increasingly transmitted in the bond market.”

Ether (ETH), the second-largest cryptocurrency by market value, has dropped to $1,500, down 17% over the last seven days. Ether reached levels near $2,000 last week on the back of optimism ahead of the Ethereum blockchain’s upcoming Merge but has since been hit as crypto’s correlation with equities strengthened.

Short term, ether and bitcoin will trade in choppy territory with a negative bias, according to Matthew Dibb, co-founder of Stack Funds.

Dibb expects the crypto market to stabilize heading into September.

“Longer term, the Merge is still a bullish event, similar to the lag that BTC experiences post every halving.”

In the news, more than 50 people gathered in Amsterdam's Dam Square on Saturday to protest the arrest of blockchain developer Alexey Pertsev, who was arrested Aug. 10 on suspicion of involvement in the Tornado Cash protocol that was sanctioned earlier this month by U.S. authorities.

And Morgan Stanley said in a report on Friday that tightening in the crypto market has paused. While the market cap of stablecoins, an indicator of crypto liquidity, has stopped falling, demand for leverage has yet to start recovering.

Bitcoin's 10% Weekly Drop Puts Bears in Control Ahead of Jackson Hole Symposium

By Omkar Godbole

Bitcoin (BTC) fell over 10% last week, its biggest drop in two months. Analysts say the price slide has put bears in control ahead of the U.S. Federal Reserve's annual economic symposium in Jackson Hole, Wyoming, on Friday.

The biggest cryptocurrency was sold as the Fed's July meeting minutes actively pushed back against hopes of liquidity easing in 2023. Chatter about Jump Crypto selling ether spurred profit taking in the native token of Ethereum's blockchain.

Bitcoin's drop has broken technical charts and revived the bearish trend, according observers.

"Last week's slide has put the bears in the driver's seat. The market will take a while to reverse and would need good news," trader and analyst Alex Kruger told CoinDesk, adding that Fed Chair Jerome Powell is unlikely to offer good news later this week.

According to David Duong, head of institutional research at Coinbase, bitcoin's daily technical chart has flipped bearish and the cryptocurrency could continue to lose ground in the short term.

"BTC will likely retest support at $20,830 and $19,230 over the coming few weeks," Duong noted in the weekly markets commentary, adding that traders will be closely watching Powell's comments at the Jackson Hole symposium.

After last week's Fed minutes, there seems to be a consensus in the market that Powell will skew on the hawkish side during the Jackson Hole Economic Symposium. The annual gathering, sponsored by the Federal Reserve Bank of Kansas City, hosts central bankers, finance ministers, academics and financial market participants.

"Powell will likely try to take a more measured approach in Wyoming and emphasize that the tightening cycle isn't over yet," Duong noted. The Fed's monetary tightening has roiled the cryptocurrency market this year.

Michael Kramer, the founder of Mott Capital Management, wrote in a weekly markets update, "I would expect that Powell lays out quite clearly that the pace of future rate hikes may slow but that they have much further to climb and are likely to remain high for some time."

The Fed said in July that it would be appropriate to slow tightening at some point, triggering a relief rally in risk assets. However, according to Dean Peng, VP at Singapore-based digital asset management platform Metalpha, monetary policy operates with a lag. So, the central bank will likely stick to its hawkish script at least for some time.

The effect of higher interest rates on inflation will be evident in about six months. Peng said. "It is still too early to put in more calls for bitcoin at this time."

Read the full story here.

Ether-Bitcoin Volatility Spread Widens

By Omkar Godbole