Market Wrap: Bitcoin Expected to Hold Support Above $45K

Bitcoin is holding above $45,000 at press time and is attempting to break out from a slight downtrend over the past week. Cryptocurrencies have been consolidating near highs as a slew of negative headlines have kept buyers on the sidelines.

On Wednesday, minutes from the Federal Open Market Committee (FOMC) showed the Federal Reserve is considering slowing its pace of asset purchases later this year. Concerns about fading stimulus triggered a pullback in equities and commodities, and also weighed on cryptocurrencies.

News about a hack at Japan’s Liquid Global exchange on Thursday also weakened bullish sentiment in the crypto market. While the total amount stolen has yet to be determined, the value taken in bitcoin, ether, ripple, tron and other coins could be upward of $90 million, reports CoinDesk’s Eliza Gkritsi.

Latest prices

Cryptocurrencies:

• Bitcoin (BTC) $46582, +4.18%
• Ether (ETH) $3150.5, +4.12%

Traditional markets:

• S&P 500: 4405.8, +0.13%
• Gold: $1781.3, -0.3%
• 10-year Treasury yield closed at 1.248%, compared with 1.272% on Wednesday

For now, analysts are closely monitoring bitcoin’s 200-day moving average.

“An ability for BTC to hold the 200-day moving average would be the first domino to fall in a move towards a rally through the end of this year,” FundStrat wrote in a newsletter Wednesday.

FundStrat is bullish on crypto and expects near-term weakness to fade as macro conditions remain supportive for assets that are deemed to be risky.

“We notice a mid-cycle trend forming in which active market participants are moving from BTC and ETH and into other alternative coins,” FundStrat wrote.

Less heated rally

The cost to fund long positions in the market for bitcoin perpetual swaps, a type of derivative in cryptocurrency markets similar to futures contracts in traditional markets, remains relatively low compared with previous market rallies.

“When there are substantial increases in price, we often observe concurrent run-ups in the funding rate since investors start to chase long positions,” FundStrat wrote. “Based on the chart below, we can see that while funding rates are positive, things are not remotely overheated when juxtaposed to recent price action.”

Bitcoin underperforms

So far this month, “cryptocurrencies were flying once again as investors' appetites for high risk pushed the prices higher,” Lukas Enzersdorfer-Konrad, chief product officer at crypto exchange Bitpanda, wrote in an email to CoinDesk.

But bitcoin has taken a back seat as altcoins outperformed over the past two weeks. Cardano, XRP and dogecoin locked in gains of more than 40%, compared with a nearly 7% gain for bitcoin over the same period, according to CoinDesk price data.

The outperformance of altcoins could continue, especially given the recent technical breakout in ether relative to bitcoin.

Altcoins are considered to be riskier than BTC, and rising ETH/BTC pairs could reflect a greater appetite for risk in the crypto market, Enzersdorfer-Konrad wrote.

Cardano short-term overbought

Cardano (ADA), which is billed as a third-generation blockchain (following Bitcoin and Ethereum as the first and second generations, respectively), is approaching an all-time high of around $2.40, which was reached in May.

ADA held support at its 200-day moving average, which attracted strong buying power as the crypto selloff stabilized in June. The nearly 60% price rally over the past month appears to be exhausted given extreme overbought signals on the charts. A pullback is expected in the near-term, although the price is expected to stay above the $1.80 to $2 support zone.

Ethereum staking

Ethereum miners could be out of business in six months as the Ethereum mainnet merges with the Beacon Chain proof-of-stake system, Tim Ogilvie, co-founder and CEO of crypto staking service provider Staked, told CoinDesk.

It’s in contrast with some crypto miners’ bets on the delay of Ethereum’s upgrade to a proof-of-stake system, as they increased investments in ethereum mining, CoinDesk’s David Pan reported earlier.

“My gut is they probably are going to sort of run for six months,” Ogilvie said. “And then they're going to shift that mining equipment to mine on other chains. And so there's probably some ancillary work they can do.”

Staking on ETH 2.0 via Staked renders a nominal yield of 6.8%, and Ogilvie estimates the number will reach 8% to 9% upon completion of the Merge. Such return comes with risks, he noted.

“The risk of staking now is it's illiquid, until such time as transactions are enabled on Ethereum 2.0, so you've got some indefinite period of time, call it 12 to 18 months, before you can actually spend or use your ETH,” Ogilvie said. He also warned about the slashing of penalties in the proof-of-stake mode when a validator node “tried to cheat the system or had a technical error.”

Altcoin roundup

• Polygon to Form Decentralized Autonomous Organization: Ethereum scaling platform Polygon said it will build a decentralized autonomous organization (DAO) for the decentralized finance (DeFi) sector, CoinDesk’s Jamie Crawley reports. Polygon's aim is for the DAO to attract 100 million users and invite this community to have a say in its DeFi development, according to an emailed announcement Thursday. Forming a DAO is "the next logical step" to aiding collaboration between blockchain-based systems, given that projects such as Aave, Curve and SushiSwap are already using Polygon as a scaling system.
• Poly Network Sends Bounty as Attacker Holds $141M Hostage: Poly Network, the China-based blockchain protocol that lost more than $6000 million when it was hacked earlier this month, said Thursday it had sent a bounty worth nearly $500,000 to the attacker and that most of the looted cryptocurrency has now been fully recovered. But the attacker apparently has yet to provide a key needed to unlock the remaining $141 million. “There are users who are panicking that they might lose control of their assets, and we want to minimize the impact on them, so restoring our network and our users’ assets in a secure manner as quickly as possible is our top priority,” Poly Network wrote early Thursday in an email.
• Custody Firm Anchorage Launches Governance Voting With DeFi Giant Aave: Regulated cryptocurrency custody firm Anchorage is offering blockchain governance voting services, starting with DeFi platform Aave. Institutions and token holders can use Anchorage’s governance portal to participate in on-chain governance decisions critical to the Aave lending protocol. The system uses a separate voting key so that digital assets can remain safely in storage, the companies said Thursday.

Relevant news:

• Crypto Booster Brian Quintenz to Step Down as CFTC Commissioner
• Wells Fargo Launches Passive Bitcoin Fund for Wealthy Clients
• Former SEC Chair Jay Clayton Joins Crypto Firm Fireblocks
• DeFi Not Immune to SEC Oversight, Gensler Says: Report
• Japan’s Liquid Global Exchange Hacked; $90M in Crypto Siphoned Off
• Galaxy Digital Launches DeFi Index Tracker Fund

Other markets

Most digital assets on CoinDesk 20 ended up higher. In fact, everything was in the green except for dollar-linked stablecoins.

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

cardano (ADA) +15.27%

the graph (GRT) +12.2%

algorand (ALGO) +12.11%