Bitcoin Settles Above $27.1K After Rate Cut Early Wednesday As Rates Rise, Inflation Worries Mount

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Good morning. Here is what happens:

Price: Bitcoin settled above $27.1,000 after the president of the Federal Reserve Bank of Cleveland spooked investors with hawkish comments and China released discouraging manufacturing data.

Insights: Before House members approved a bill to raise the debt ceiling, bitcoin whales pared their holdings and sent assets to trade.

Prices

CoinDesk Market Index (CMI)

1,178

23.3 1.9%

Bitcoin (BTC)

$27,099

683.3 2.5%

Ethereum (ETH)

$1,874

32.7 1.7%

S&P500

4,179.83

25.7 0.6%

Gold

$1,980

+15.8 0.8%

Nikki 225

30,887.88

440.3 1.4%

BTC/ETH price by CoinDesk indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin sinks early, then holds above $27.1,000

By James Rubin

Hawkish comments from the chairman of the Clevelands Federal Reserve Bank, the growing likelihood of at least one more interest rate hike by the US central bank, and discouraging data from Chinese manufacturing kept crypto investors off balance on Wednesday.

Bitcoin, the largest cryptocurrency by market capitalization, was trading at nearly $27,100, down more than 2.2% in the previous 24 hours, after spending much of the previous four days comfortably at the above $27,500. BTC ended May (UTC) with its first losing month of 2023 after climbing over 60% in the first four months.

Bitcoin came under selling pressure in response to comments from a prominent Federal Reserve official indicating a lack of compelling reasons to suspend liquidity tightening measures, said Mikkel Morch, chairman and non-executive director of the fund. crypto investment ARK36. These remarks had a disruptive impact on various risky assets, including cryptocurrencies.

The story continues

Morch added: Simultaneously, the release of discouraging manufacturing data out of China added to the bearish sentiment surrounding bitcoin and other risky assets.

In an interview with the Financial Times published on Wednesday, Fed Cleveland Bank Chair Loretta Mester said she saw no reason to end the nearly year-long streak of rate hikes by Fed Cleveland Bank. the Fed, although it is willing to change its mind if the current employment market, characteristic of periods of high inflation, and prices cool. We may have to go further, she told The Times. At this point, I don’t really necessarily see a compelling reason why we wouldn’t want to take another small step to counter some of this really embedded and stubborn inflationary pressure.

Crypto markets have struggled in recent weeks amid uncertainty over the US government’s ability to extend the debt ceiling and meet its financial obligations, as well as inflationary concerns. House lawmakers finally passed the bill Wednesday night via a bipartisan effort that overcame strong opposition from far-right Republicans. Meanwhile, the expected rebound in China’s economy has slowed at least temporarily, with the official manufacturing purchasing managers’ index falling to 48.8 in May from 49.2 in April, according to the National Bureau of country statistics.

Ether recently changed hands at around $1,875, down 1.4% from the same time on Tuesday. Other major cryptos spent much of Wednesday in the red with AVAX, the Avalanche base layer network token, and UNI, the native cryptocurrency of decentralized exchange Uniswap, both recently down further. by 2%. The CoinDesk Market Index, a measure of the performance of crypto markets, recently fell more than 2.1%.

Stock markets fell with the tech-focused Nasdaq and S&P 500 both closing down 0.6% as investors pulled back following a strong job openings report and labor turnover (JOLTS) showing openings rising to 10.1 million from the 9.3 million expected in April, and snapping a three-month of consecutive declines that had offered hope to watchers of monetary policy who hoped for an accommodating turn.

In a Telegram message to CoinDesk, Strahinja Savic, head of data and analytics at crypto-focused institutional capital markets and advisory platform FRNT Financial, noted that stocks and cryptos fell together at the instead of diverging as they have over the past two months. Today the crypto is plunging with risky assets, tomorrow it may not, Savic wrote. What we can say is that the technical range has been clearly defined between a downside range of $25,000 to $26,000, and a breakout would decisively occur above $31,000. Most other activities are probably noise.

Have bitcoin and ether bottomed out? Dave Weisberger, CEO of CoinRoutes, which provides algorithmic trading strategies in the crypto space, pointed out to CoinDesk TV that bitcoin holdings are at an all-time high while BTC for sale on exchanges and volume on exchanges are at low levels.

Weisberger said trends tell you that speculators are looking to price and moving, but long-term buyers seem happy to buy into that range below $27,000 and cushion any downdraft. So we have the impression of being at the bottom of a trading range.

The biggest winnersThe biggest losersInsights

A whale risk reduction strategy before the debt deal

By Glenn Williams Jr.

On-chain data shows that large bitcoin holders reduced their bitcoin holdings in the days leading up to the debt deal. Additional data shows an increase in BTC being sent to centralized exchanges. What happens next should be watched closely as an indication of general sentiment.

(Glass node)

The supply of bitcoin held by addresses with balances exceeding 100,000 BTC increased from 663,306 to 543,958 on May 22, just ahead of the debt deal. A key question is whether the reduction was related to short-term fiscal concerns or longer-term questions about BTC prices.

While the number of addresses holding more than 100K BTC is low, whale activity can sometimes create cascading effects if they leave their positions en masse. The number of addresses with 1,000 BTC or more sending bitcoin to exchanges has also increased, showing that smaller whales may also pose an offload risk.

What happens next is most important. An increase in bitcoin supply for large holders following the debt deal will signal their renewed bullish sentiment. A continued decline would imply that they have bigger concerns.

Important events.

London Blockchain Conference

2:00 p.m. HKT/SGT (6:00 a.m. UTC) Germany Retail Sales (Annual/April)

20:15 HKT/SGT (12:15 UTC) US ADP Job Change (May)

CoinDesk TV

In case you missed it, here’s the most recent episode of “First Mover” on CoinDesk TV:

Bitcoin Slides Ahead of Debt Ceiling Vote; Rep. Davidson on the future of US crypto regulations

The U.S. debt limit deal is nearing a vote, having passed a key test at the House Rules Committee on Tuesday. Rep. Warren Davidson (R-Ohio) joined “First Mover” to discuss the potential impact of the deal and the outlook for crypto regulation. Additionally, CoinRoutes CEO and Co-Founder Dave Weisberger shared his analysis of the crypto markets as bitcoin (BTC) pulls back nearly $27,000. And, Astoria CTO Joseph Delong explained the state of NFT loans in 2023.

Securities

TradFi Giant TP ICAP brings crypto spot trading to institutional investors: The Fusion Digital Assets market opened last week and offers bitcoin and ether trading against the US dollar.

USDC’s circle of issuers dumped all $24 billion reserve fund U.S. Treasuries amid debt ceiling showdown: The stablecoin issuer now only holds cash and repurchase agreements to support its value of USDC stablecoins.

Multichain crypto-bridging protocol unable to contact CEO Zhaojun: The Multichain team says that it cannot maintain some cross-chain bridges without obtaining access permissions from its AWOL chief.

StepStone VC Raises $97M for Two Blockchain Funds: SEC Filings Show Pooled Investment Figures for the Two Private Equity Funds.

USDT issuer Tether ventures into payment processing with Georgia Investment: The stablecoin issuer announced earlier this week that it is investing in a sustainable bitcoin mining facility in Uruguay.

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