Market Wrap: Bitcoin Up Slightly Despite Fed Chairman's Hawkish Comments

Price Action

Bitcoin (BTC) and ether (ETH) rose in Thursday trading along with traditional risky assets after hawkish comments by Federal Reserve Chairman Jerome Powell mixed with better-than-expected jobs data increased the probability of tighter monetary policy.

During a question-and-answer session held by the Cato Institute on Thursday, Powell reiterated the Fed’s commitment to stemming inflation, which increased expectations for a 75 basis points rate hike in September.

• Bitcoin rose 0.4% despite Powell’s hawkish comments. The largest cryptocurrency by market cap traded lower the hour prior to Powell’s comments, but reversed course in the hours following. BTC’s daily trading volume was slightly below average when compared to its 20-day moving average of volume.
• Ether, the second-largest cryptocurrency by market cap, was 0.94% higher on the day, on above-average volume. ETH also fell before Powell’s comments and rose after them. ETH’s 30-day correlation to BTC remains strong, at 0.9.

A White House report on Thursday stated that the environmental impact of mining digital assets like bitcoin “could impede U.S. efforts to combat climate change.” The report appears to be a precursor to additional studies on the impact of crypto mining on the environment.

BTC traded down slightly following the release of the report, as did ETH, despite the upcoming Merge, the Ethereum blockchain’s shift from a proof-of-work method of maintaining its network to a more energy-efficient proof-of-stake way.

Economic Calendar: Initial jobless claims for the week ended Sept. 3 were 222,000, versus expectations of 230,000. This marks the fourth consecutive week of declines and brings initial claims to their lowest level since May. The positive jobs data provides the Federal Reserve with more reason to increase interest rates.

U.S. Equities: Traditional financial markets closed higher, with the Dow Jones Industrial Average, S&P 500 and tech-heavy Nasdaq Composite increasing 0.6%, 0.7%, and 0.6% respectively.

Commodities: Crude oil futures increased 1.1%, and natural gas futures rose 1.6%. The price of gold, a traditional safe-haven asset, declined 0.54%

Currencies: The dollar index (DXY) rose 0.10%.

Altcoins rose, as polkadot (DOT), solana (SOL) and AAVE increased 2.6%, 2.7% and 0.8%, respectively.

Latest Prices

●Bitcoin (BTC): $19,373 +0.9%

●Ether (ETH): $1,647 +1.0%

●S&P 500 daily close: 4,006.18 +0.7%

●Gold: $1,719 per troy ounce +0.2%

●Ten-year Treasury yield daily close: 3.29% +0.03

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.

Technical Take

BTC and ETH Trade at Different Technical Levels

Although BTC and ETH prices have moved largely in sync, they possess different levels of support and resistance.

According to the volume profile visible range (VPVR), BTC is trading below resistance, while ETH appears to be trading above support. VPVR displays trading activity across various price levels over a specific period of time. In the chart below, prices were viewed as of Jan 1.

The price point where the highest levels of volume occur is the point of control and represents areas of substantial activity and agreement on price.

Assets that trade below their point of control will often find resistance as they approach the higher price point. Conversely, assets trading above their point of control will often find support at the lower price point.

CoinDesk’s chart highlights BTC trading at an approximately 10% discount to its $21,400 point of control, while ETH is trading at a 42% premium to its point of control of $1,147. ETH also appears to be generating strong volume at its current price point, signaling a move higher in ETH support.

The divergence implies a distinction in the narrative between the two largest cryptocurrencies. While BTC appears to be the more undervalued of the two, the connection to macroeconomic hurdles has placed a short-term lid on its price.

Wednesday’s Market Wrap highlighted the inverse relationship between U.S. dollar strength and the price of bitcoin. As that relationship continues, actions that push the value of USD higher are likely to have a negative impact on bitcoin's price.

ETH, meanwhile, appears to be benefiting from the upcoming Merge. Investors appear to be viewing the software update as a catalyst that at least partly overcomes hurdles related to inflation and economic growth.

The ETH/BTC currency pair is up 60% since July, highlighting the difference in performance between the two assets.

Altcoin Roundup

• Ethereum Merge May Not Be Immediately Deflationary, Crypto Trading Firm QCP Says: While the Merge is likely to cause a reduction in ether's supply, making it a deflationary asset, low network usage may delay the expected bullish effect. Read more here.
• Crypto Terra Luna Classic Surges as Traders Speculate on New Supply Burn Rule: Luna classic (LUNC) is the renamed native token of the Terra blockchain that dramatically imploded in May. In an attempt to revive the failed Terra blockchain’s token, the approved proposal will destroy 1.2% of every transaction to reduce supply. Read more here.
• Crypto Exchange Binance to Issue 'Soulbound' Tokens to Users Who Complete Know-Your-Customer Checks: The tokens will allow users to participate in building projects on the BNB chain. Proposed by Ethereum co-founder Vitalik Buterin, soulbound tokens are non-transferable non-fungible tokens (NFT). Read more here.

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• White House Calls For Crypto Mining Standards to Minimize Environmental Impact:The report is the first public response to U.S. President Joe Biden's executive order on crypto. It called for standards to be set to reduce energy usage.
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