First Mover Americas: Bitcoin Drops After CPI Data Comes In Hotter Than Expected

Good morning, and welcome to First Mover. I’m Lyllah Ledesma, here to take you through the latest in crypto markets, news and insights.

• Price Point: BTC dips 4.2%, DeFi token Aave is up 7% and more investigations are issued into troubled crypto lenders.
• Market Moves: Omkar Godbole looks at a report from Coinbase (COIN) that found long-term bitcoin investors preserved their holdings in recent weeks even as speculators fled the market.
• JUST IN: The U.S. Consumer Price Index (CPI) in June increased 9.1% from 12 months earlier, the Labor Department reported Wednesday at 8:30 a.m. ET. The jump, a new four-decade high, exceeded economists’ average estimate for an 8.8% increase. The price surge was “broad-based,” according to the Labor Department’s Bureau of Labor Statistics, with notable contributions from gasoline, shelter, food, used cars and trucks, medical care, motor vehicle insurance, new vehicles, apparel, household furnishings and recreation.

Price Point

Bitcoin (BTC) dipped in the minutes after U.S. CPI data came in hotter than expected, increasing to 9.1% in June from 8.8% in May.

Bitcoin’s price fell 4.2% to about $19,200 in the minutes since the report was released. Speculation might be that the Federal Reserve will have to keep tightening monetary conditions aggressively to tamp down inflation.

Ether (ETH), was up 1.4% on the day, at around $1,070.

Taking the lead among altcoins was AAVE, the token of decentralized finance (DeFi) protocol, Aave , which climbed 7% in the last 24 hours. The increase comes as the troubled crypto lender, Celsius Network, paid off its debt on Aave, freeing up $26 million in tokens as part of its latest debt restructuring maneuver.

The price of AAVE was around $72 at the time of writing.

Vermont’s Department of Financial Regulation (DFR) said in a statement on Tuesday that Celsius Network “is deeply insolvent,” noting that the lender lacks the assets and liquidity to honor its obligations to account holders and other creditors.

The DFR has joined a multistate investigation of the lender, according to the statement.

Meanwhile, the California Department of Financial Protection and Innovation (DFPI) is investigating several U.S.-based crypto lenders after a series of prominent lenders indefinitely halted withdrawals and transfers between user accounts, according to a press release issued on Tuesday.

In other news, BlockFi reversed its plan to stop accepting Grayscale Bitcoin Trust (GBTC) as collateral for loans. A few hours after the lender said it would no longer accept shares of the trust as collateral, it said in a statement, "We are not saying that we won't support GBTC as collateral moving forward." (Grayscale Investments, which administers GBTC, is a CoinDesk sister company.)

Crypto venture capital giant Multicoin Capital announced Tuesday a $430 million fund for crypto early-stage projects. The fund will invest $500,000-$1 million in early stage and up to $100 million for more mature opportunities.

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset Ticker Returns DACS Sector Terra LUNA −9.9% Smart Contract Platform Loopring LRC −8.9% Smart Contract Platform Polygon MATIC −7.5% Smart Contract Platform

Market Moves

By Omkar Godbole

Long-Term Bitcoin Investors Stick It Out as Speculator Selling Drives Prices Lower: Coinbase

Long-term bitcoin investors preserved their holdings in recent weeks even as speculators fled the market, driving the cryptocurrency below $20,000, according to crypto exchange Coinbase.

"Recent BTC selling has been carried out almost exclusively by short-term speculators," David Duong, head of institutional research at Coinbase, said in the monthly outlook published Tuesday.

The persistent holding by investors is perhaps a sign of confidence that the cryptocurrency would survive in what appears to be a U.S. Federal Reserve-induced bear market and eventually thrive as a fiat alternative or digital gold.

Duong called bitcoin ownership retention by investors a positive sentiment indicator, ensuring demand-supply balance in the face of speculator selling, which is a common feature of a bear market.

On-chain data tracked by Coinbase Analytics shows investors now hold about 77% of the total bitcoin supply of 21 million. While the number is off slightly from the early January high of 80%, it is still well above the peak of 60% observed during the height of the late 2017 bull run. The data show a significant amount of wealth has been distributed from speculators or traders to investor in 3.5 years.

The report titled "The Elusive Bottom" defines long-term investors as wallets holding the cryptocurrency for at least six months.

Speculators aretypicallysophisticated participants or retail traders who purchase assets for short periods and employ strategies to profit from short-term price gyrations. Speculators and traders are more sensitive to macroeconomic factors like changes in the Fed policy.

Read the full story here: Long-Term Bitcoin Investors Stick It Out as Speculator Selling Drives Prices Lower: Coinbase

Latest Headlines

• U.S. Inflation Gauge Jumps to Fresh 4-Decade High of 9.1%; Bitcoin Falls: The new Consumer Price Index (CPI) reading keeps pressure on the U.S. central bank to further tighten monetary policy aggressively at its next meeting later in July.
• US CPI Preview: Inflation Likely to Climb to New 40-Year High: U.S. consumer prices probably rose 1.1% in June, pushing the year-on-year change to a four-decade high of 8.8%, FXStreet data show. A reading above that could bring renewed selling pressure to risk assets, including bitcoin.
• What’s in Your Bear Market Backpack?: From existential dread to blissful ignorance — reactions to Ethereum’s market slump vary across the board
• International Standard Setters Publish Guidance on Stablecoin Regulations: The guidelines from the international organization of securities regulators and BIS’s global payments group set out arrangements for systemically important stablecoins.
• Jobs Growth Is the Savior of Inflation-Wracked US Economy: Economists say robust employment complicates the recession outlook.

This web version of today's First Mover newsletter was produced by Sage D. Young.