First Mover Asia: Crypto Prices Rise on Better-Than-Expected US Inflation News

Good morning. Here’s what’s happening:

Market moves: Bitcoin rose to its highest point in a week; most of the leading altcoins also saw increases.

Technician’s take: BTC'ssell-off appears exhausted as buyers attempt to reverse a short-term downtrend.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis.

Prices

Bitcoin (BTC): $43,907 +2.5%

Ether (ETH): $3,369 +3.7%

Markets

S&P 500: $4,726 +0.2%

DJIA: $36,290 +0.1%

Nasdaq: $15,188 +0.2%

Gold: $1,826 0.2%

Market moves

Bitcoin (BTC) rose to its highest price in a week, recovering somewhat after last week's abysmal start to the year.

At the time of publication, the largest cryptocurrency was changing hands around $43,900, after dipping a few days ago below $40,000 for the first time since September. The bitcoin price is still down 5.2% so far in 2022.

The bitcoin market may have gotten a boost from a U.S. Labor Department report Wednesday showing that the Consumer Price Index, a key inflation gauge, rose to an annual clip of 7% in December, the highest since the early 1980s.

But there had been fears in the market that prices might have climbed even faster, which would have put additional pressure on the Federal Reserve to move more aggressively to tighten monetary conditions and cool down the economy.

Bitcoin is viewed by a growing number of investors as a hedge against fast inflation, and the price has climbed since the Fed started printing money – more than $4 trillion so far – and pursuing ultra-loose monetary policies since the coronavirus hit in March 2020, roiling markets and the economy.

"The market reaction to this new data might be a bit confusing as we see the crypto markets taking a victory lap," Mati Greenspan, founder of the cryptocurrency and foreign-exchange analysis firm Quantum Economics, wrote Wednesday in his newsletter. "This time however investors seem a lot more relaxed about the Fed."

U.S. stocks closed higher, also due to cooling concerns that the Fed might get more aggressive in tackling inflation, according to Reuters.

In cryptocurrencies beyond bitcoin, the Near Protocol's NEAR token rose Wednesday to an all-time high, on signs the up-and-coming blockchain might be undervalued as it attracts more activity.

Some analysts warned that NEAR might be looking frothy on some metrics, and that bullish bets on another popular blockchain token, Fantom's FTM, have become a "crowded" trade.

Ether (ETH), the native cryptocurrency of the Ethereum blockchain and the second-largest overall, rose 4.2% over the past 24 hours to about $3,370, based on CoinDesk pricing.

Technician's take

Bitcoin Rises Above $43K; Resistance at $45K-$48K

Bitcoin (BTC) buyers held support around $40,000 as oversold signals appeared on the charts.

The recent bounce suggests the cryptocurrency is starting to recover after a near-30% decline from its all-time high around $69,000 in November.

The relative strength index (RSI) on the four-hour chart is approaching overbought levels, similar to what occurred in late December, which preceded a brief pullback. The RSI on the daily chart, however, continues to rise from oversold levels, which means buyers could remain active on price dips.

Still, given the short-term downtrend, upside appears limited toward the $45,000-$48,000 resistance zone. And on weekly and monthly charts, momentum signals remain negative, which means price rises could be limited for now.

Important events

2 p.m. HKT/SGT (6 a.m. UTC) Japan machine tool orders (Dec. YoY)

5 p.m. HKT/SGT (9 a.m. UTC) European Central Bank Economic Bulletin

9:30 p.m. HKT/SGT (1:30 p.m. UTC) U.S. producer price index (Dec. MoM/YoY)

11 p.m. HKT/SGT (3 p.m. UTC) Speech by Federal Reserve Board member Lael Brainard

CoinDesk TV

In case you missed it, here are the most recent episodes of “First Mover” on CoinDesk TV:

US Economy Sees Highest Inflation in 4 Decades, Is Bitcoin Still an Inflation Hedge?

"First Mover" hosts spoke with PwC Global Crypto Leader Henri Arslanian for his analysis on the crypto markets as the U.S. December consumer price indexes increased 7% from a year ago, the highest level in four decades, and he shares his top crypto prediction for 2022. Plus, former SEC Branch Chief Lisa Bragança shared insights into the current state and outlook for SEC crypto regulation.

Latest headlines

NBA Top Shot Bans User ‘FreeHongKong’The user was banned with little explanation from the site’s support team after attempting to cash out their earnings.

Solana Could Become the Visa of Digital-Asset World:Bank of America: Solana and other blockchains may snag market share from Ethereum over time, the bank said in a research note.

Checkout.com Raises $1B, Eyes Web 3 Push:The payments processor counts FTX, Coinbase and Crypto.com among its customers.

Wikipedia Faces Pressure to Stop Accepting Crypto Donations on Environmental Grounds: A proposal by a contributor has sparked discussions on crypto’s environmental footprint, but the foundation hasn't made a decision on the issue yet.

Blockchain Indicator Suggests Bitcoin Could be Close to Bottoming Out:Bitcoin looks undervalued relative to the annualized dollar value of coin dormancy.

Longer reads

Kevin O'Leary's Crypto Investing Playbook:Mr. Wonderful, who holds 32 cryptocurrencies, advocates for portfolio diversification.

Today's crypto explainer: What Are Privacy Coins and Are They Legal?

Other voices: CBDC and stablecoins: Early coexistence on an uncertain road

Said and heard

"If you bet heavily on a slight inflation beat by buying bitcoin at 8:29 a.m. this morning, you made money by 9 a.m. That’s a risky trade analogous to what stock traders do frequently." (CoinDesk columnist David Z. Morris) ... "The Travel Rule means that providers of virtual assets need to collect and share customer data for transactions over a certain threshold. This is not a radical idea. It simply means crypto providers must stick to international rules that ensure the protection of legitimate finance and prevent illicit finance." (Marcus Pleyer, deputy director general in Germany’s Federal Ministry of Finance and president of the Financial Action Task Force for CoinDesk) ... "When Elon Musk moves entire markets with single tweets, it becomes clear that the cryptocurrency market in its current form is a dangerous beast that Western governments have no idea how to contain." (James Caan, the founder of the Hamilton Bradshaw private equity firm for CoinDesk) ... “Obviously 7[%] is a pretty big sticker shock." (Omair Sharif, founder of the research firm Inflation Insights, to The New York Times) ... “My gut feeling is that the pace of appreciation is going to be slower in 2022 than it was in 2021. But I don’t see rents actually dropping or getting more affordable.” (Zillow Senior Economist Jeff Tucker)