Market Wrap: BTC Tumbles Further Ahead of Fed Meeting; Extreme Fear Among Traders

The largest cryptocurrency by market capitalization dropped further on Tuesday as crypto industry layoffs widened and traders fretted over a likely steeper-than-expected rate hike by the U.S. central bank.

Down for the eighth consecutive day, bitcoin regained little strength after falling to a 30-month low of $20,834.50 on Monday night but was still down over 5% over the past 24 hours.

The 15% price drop at the start of the week was the biggest since the crash prompted by COVID-19 on March 12, 2020.

Not just bitcoin, but cryptocurrencies of all market cap sizes have suffered in the current sell-off, tracking steep declines in stocks, as Arcane Research noted in a report Tuesday.

“We're coming off of about a decade of monetary stimulus and money supply has grown rapidly, and for the first time market participants are getting the punch bowl taken away from them,” said Fundstrat Global Advisors head of digital asset strategy Sean Farrell on CoinDesk TV. “I think we're still going to need to see inflation start to roll over before we can be confident in any run to the upside and relief to the upside.”

An article in The Wall Street Journal on Monday hinted at a 75 basis point rate hike by the Fed at the conclusion of its two-day, closed-door meeting Wednesday.

This leaves traders fearing monetary tightening throughout the year with no break, as Atlanta Fed President Raphael Bostic suggested earlier this month, temporarily buoying crypto markets. Economists at Goldman Sachs (GS) now are forecasting 75 basis point rate hikes for both June and July, followed by a 50 basis point increase in September plus a 25 basis point hike in November and in December.

“Investors should be braced for volatility and sticky correlations at least in the coming days,” Arcane researchers wrote.

As a result, the bitcoin Fear and Greed Index reached 8, signaling extreme fear. While the market has been in extreme fear territory for the 56th consecutive month, this level hasn't been seen since March 2020.

Latest prices

●Bitcoin (BTC): $22185, −4.99%

●Ether (ETH): $1206, −3.12%

●S&P 500 daily close: 3735, −0.38%

●Gold: $1809 per troy ounce, −1.04%

●Ten-year Treasury yield daily close: 3.48%

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Celcius's CEL token jumps 8-fold in intraday spike

By Tracy Wang

The beleaguered crypto lending platform Celsius’s CEL token jumped eight-fold to an intraday high of $2.57 from 30 cents, according to data from FTX, before falling back to about 54 cents. That's still up from 35 cents prior to a recent crash when Celsius halted withdrawals on June 12, citing "extreme market conditions."

According to exchange data, it appears the latest price jump stemmed from a big spot buyer on crypto exchange FTX.

A trader who spoke with CoinDesk says the price action indicated a short squeeze, as shorting Celsius’s token had become an “overcrowded trade.” A "short" position is when traders bet on a token's price to fall.

A short squeeze occurs when the price of a token moves sharply higher, prompting traders who bet against it – often with borrowed money or tokens – to buy it back or "cover" the position, to avoid greater losses.

Questions surrounding Celsius's financial health have been making waves in cryptocurrency markets.

Altcoin roundup

• ETH underperformance echoes ‘Crypto Winter’: The largest altcoin, ether (ETH), is underperforming bitcoin (BTC), just as it did during the downturn in crypto markets in 2018, investment bank Morgan Stanley (MS) said in a report Monday. “When the ETH/BTC relative cross falls, it is a sign that the broader crypto enthusiasm is waning” as money is being pulled out of the more volatile alternative coins, according to the note. The analysts added that this time around it’s largely institutional investors driving sales. ETH has dropped about 75% from its November peak, and changed hands at $1,215. Read more here.
• Shorts and longs liquidated: Crypto-tracked futures lost over $1 billion in a day as major cryptocurrencies declined by an average of over 15%, data shows. Among altcoin futures, ether (ETH) liquidations led with $308 million in liquidations, followed by SOL with $18.8 million and ADA with $7.5 million. The move-to-earn app Stepn’s GMT futures saw $6.6 million in losses. Liquidations happen when a trader fails to have sufficient funds to keep a leveraged position open so the trade is forced to close. Read more here.
• OpenSea change: The leading non-fungible token (NFT) marketplace OpenSea is revamping its back end and moving from the Wyvern protocol to its self-developed Seaport protocol. The company estimates the switch will save users $460 million in the next year by lowering transaction costs on the platform. The move will also allow OpenSea to eliminate initiation fees, let users make offers on entire collections and make its wallet signatures easier to read and understand, the firm said. Read more here.

Relevant insight

• Coinbase Lays Off Around 1,100 Employees: The exchange is reducing its workforce by roughly 18%. CEO Brian Armstrong admits the company "grew too quickly."
• EU Finance Commissioner Calls for Speedy Passage of Crypto Law: Mairead McGuinness also said if it were in place the MiCA framework could also facilitate sanctions implementation.
• MicroStrategy Defended at BTIG; Saylor Not Expecting Imminent Margin Call: Shares of the technology company have tumbled alongside bitcoin, down 35% over the past few days and nearly 75% so far this year.
• With Market Crash, El Salvador Is Down $52M on Its Bitcoin Bet: The country has made $104 million in investments in the cryptocurrency since it made bitcoin legal tender last September.
• Bond Traders Raise Bets for Fed Rate Hike, Adding to BTC Pressure: The CME FedWatch Tool shows traders see a 94% chance of a 75 basis-point hike to be announced Wednesday.
• NY City Mayor Eric Adams Wants State's Governor to Veto 2-Year Moratorium on PoW Mining: The city's pro-crypto mayor plans to ask Gov. Kathy Hochul to veto the bill to stop proof-of-work mining temporarily.
• Gaming DAO Merit Circle, YGG ‘Terminate Relationship’: Merit Circle members had proposed canceling YGG’s investment in the organization because of a lack of perceived added value. Now the two are parting ways.

Other markets

Most digital assets in the CoinDesk 20 ended the day lower.

Biggest Gainers

Asset Ticker Returns DACS Sector Chainlink LINK +7.1% Computing Internet Computer ICP +2.3% Computing Polkadot DOT +2.1% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector Polygon MATIC −8.0% Smart Contract Platform Bitcoin Cash BCH −7.4% Currency Bitcoin BTC −5.1% Currency

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.