Market Wrap: Bitcoin Up Slightly Despite Fed Chairman's Hawkish Comments

Bitcoin (BTC) and ether (ETH) rose in Thursday trading along with traditional risky assets after hawkish comments by Federal Reserve Chairman Jerome Powell mixed with better-than-expected jobs data increased the probability of tighter monetary policy.

During a question-and-answer session held by the Cato Institute on Thursday, Powell reiterated the Fed’s commitment to stemming inflation, which increased expectations for a 75 basis points rate hike in September.

A White House report on Thursday stated that the environmental impact of mining digital assets like bitcoin “could impede U.S. efforts to combat climate change.” The report appears to be a precursor to additional studies on the impact of crypto mining on the environment.

BTC traded down slightly following the release of the report, as did ETH, despite the upcoming Merge, the Ethereum blockchain’s shift from a proof-of-work method of maintaining its network to a more energy-efficient proof-of-stake way.

Economic Calendar: Initial jobless claims for the week ended Sept. 3 were 222,000, versus expectations of 230,000. This marks the fourth consecutive week of declines and brings initial claims to their lowest level since May. The positive jobs data provides the Federal Reserve with more reason to increase interest rates.

U.S. Equities: Traditional financial markets closed higher, with the Dow Jones Industrial Average, S&P 500 and tech-heavy Nasdaq Composite increasing 0.6%, 0.7%, and 0.6% respectively.

Commodities: Crude oil futures increased 1.1%, and natural gas futures rose 1.6%. The price of gold, a traditional safe-haven asset, declined 0.54%

Currencies: The dollar index (DXY) rose 0.10%.

Altcoins rose, as polkadot (DOT), solana (SOL) and AAVE increased 2.6%, 2.7% and 0.8%, respectively.

BTC and ETH Trade at Different Technical Levels

Although BTC and ETH prices have moved largely in sync, they possess different levels of support and resistance.

According to the volume profile visible range (VPVR), BTC is trading below resistance, while ETH appears to be trading above support. VPVR displays trading activity across various price levels over a specific period of time. In the chart below, prices were viewed as of Jan 1.

The price point where the highest levels of volume occur is the point of control and represents areas of substantial activity and agreement on price.

Assets that trade below their point of control will often find resistance as they approach the higher price point. Conversely, assets trading above their point of control will often find support at the lower price point.

CoinDesk’s chart highlights BTC trading at an approximately 10% discount to its $21,400 point of control, while ETH is trading at a 42% premium to its point of control of $1,147. ETH also appears to be generating strong volume at its current price point, signaling a move higher in ETH support.

The divergence implies a distinction in the narrative between the two largest cryptocurrencies. While BTC appears to be the more undervalued of the two, the connection to macroeconomic hurdles has placed a short-term lid on its price.

Wednesday’s Market Wrap highlighted the inverse relationship between U.S. dollar strength and the price of bitcoin. As that relationship continues, actions that push the value of USD higher are likely to have a negative impact on bitcoin's price.

ETH, meanwhile, appears to be benefiting from the upcoming Merge. Investors appear to be viewing the software update as a catalyst that at least partly overcomes hurdles related to inflation and economic growth.

The ETH/BTC currency pair is up 60% since July, highlighting the difference in performance between the two assets.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.