Market Wrap: Bitcoin Consolidates Amid China Crackdown

Bitcoin traded sideways on Tuesday as market participants digested the latest regulatory crackdown from China. On Monday, the People’s Bank of China (PBOC) reiterated its long-held anti-crypto stance, warning institutions against providing services to crypto-related companies.

China’s announcement preceded choppy price moves around $34,000, which left traders with little sense of direction. Bitcoin trading remains in a tight range and the price is down about 6% over the past week.

Latest prices

Cryptocurrencies:

• Bitcoin (BTC) $34085, -0.24%
• Ether (ETH) $2326.6, +3.67%

Traditional markets:

• S&P 500: 4343.5, -0.2%
• Gold: $1796.8, +0.28%
• 10-year Treasury yield closed at 1.36%, compared with 1.437% on Friday

“Our strategists continue to expect a 6%-10% correction in U.S. equities this summer given that growth indicators are peaking, as well as a further sell-off in U.S. Treasurys that will see 10-year yields hit 2.25% by year end,” according to a Deutsche Bank report published on Tuesday.

For now, risky assets are still supported by accomodative monetary policy. For example, last week, European Central Bank (ECB) executive board member Isabel Schnabel pledged to do whatever it takes to support an economic recovery, according to a Bloomberg report. Schnabel also warned governments not to end fiscal stimulus too early.

Read more: Leveraged Funds on CME Trim Bets Against Bitcoin

“Retail investors are increasingly confident in the potential of crypto assets, despite this quarter’s market correction, with new eToro data revealing increases in the numbers of crypto assets being held during the last quarter,” wrote eToro, a multi-asset investment platform, in an email to CoinDesk.

Declining volume

Bitcoin trading activity dropped significantly over the past week as the price remains stuck in a range between $30,000 and $40,000. The seven-day average of BTC daily price volume reached the lowest level since December 2020, according to a Tuesday report by Arcane Research.

“The 4th of July celebration could partly explain the slow weekend, but the appetite for trading bitcoin is certainly not very high in this range-bound environment,” Arcane wrote.

Slowing volume also reflects indecision between buyers and sellers. Bitcoin faces strong resistance from the intermediate-term downtrend since April. The current range can be difficult to navigate, placing some traders on the sidelines until a decisive breakout or breakdown is confirmed.

“We expect intermediate-term oversold conditions to give way to a relief rally and would expect buyers to step in above the 50-day moving average around $36,000,” wrote Katie Stockton, managing director of Fairlead Strategies, in a newsletter published on Monday.

A breakout above the 50-day moving average would yield an upside target towards $44,000-$45,000 resistance, according to Stockton.

Fund flows rise

Digital-asset investment funds attracted net capital inflows in the week ending Friday, July 2, after four consecutive weeks of redemptions, according to CoinShares. Inflows totaled $63 million last week, of which nearly 62%, or $39 million, went into bitcoin-dedicated funds.

Higher bitcoin mining revenue

Active bitcoin miners may see their profitability doubled following the 28% downward difficulty adjustment in bitcoin mining on July 3, according to several mining sites.

Read more: 3 Crypto Chart Patterns to Help Make Sense of the Market

As more than 50% of miners went offline after China started cracking down on crypto mining, bitcoin’s hashrate dropped at one point to 84.3 EH/s, the lowest since September 2019. In response to a prolonged time for miners to find a new block, bitcoin’s code was automatically adjusted, making it easier for miners to solve the computational puzzles.

“It's become both easier and more profitable to mine bitcoin,” said Nick Spanos, one of the earliest bitcoin exchange operators. “That’s a recipe for enticing more miners back in.”

Altcoin roundup

• Quest for decentralized stablecoin: The cryptocurrency industry won’t stop trying to make a purely algorithmic stablecoin work, according to CoinDesk's Brady Dale. The dollar was once a stablecoin tied to gold. The U.S., needing more flexibility, eventually left the gold standard as the American economy grew bigger. The crypto economy will also outgrow a collateral obligation eventually, according to Lisa Jy Tan, founder of Economics Design, a crypto-economics research company.
• CAKE price boost: CAKE, the native token of the decentralized exchange PancakeSwap, had a 15% surge in its price after the project burned $72 million worth of its tokens on Monday. The jump in value represents the highest single daily gain for the exchange’s token since June 23. It’s good news for the embattled decentralized finance (DeFi) project and its token, which is trading 67% lower from its all-time high of $47.68 witnessed April 30.

Relevant news

• Most Institutional Investors Expect to Increase Crypto Exposure by 2023: Study
• LSE-Listed Argo Blockchain Is Weighing Listing on Nasdaq
• CoinShares to Buy Elwood’s ETF Index Business for $17M

Other markets

Notable winners as of 21:00 UTC (4:00 p.m. ET):

yearn finance (YFI) +14.41%

uniswap (UNI) +11.2%

aave (AAVE) +9.86%

Notable losers:

the graph (GRT) -2.81%

cardano (ADA) -0.9%

litecoin (LTC) -0.84%