Market wrap: Bitcoin weakens as US inflation hits 13-year high

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Bitcoin was down for the second day in a row, decoupling further from the stock market after a report showing consumer prices in the United States rose last month at their fastest pace since 2008.

The largest cryptocurrency is viewed by many digital asset investors as a hedge against inflation, so the price reaction has caused some headaches among Wall Street analysts. This has been the case for the past two months, as the United States Bureau of Labor’s Consumer Price Index (CPI) accelerated, with the price of bitcoin falling to around $ 32,800 now, against an all-time high of nearly $ 65,000 in April.

Interestingly, while CPI inflation rose from + 1.4% yoy in January to 5.4% in June, bitcoin has essentially been cut in half, Liz Ann tweeted. Sonders, Chief Investment Strategist at Charles Schwab.

Latest prices

S&P 500: 4,369.22, -0.35% Gold: $ 1,809.1, + 0.13% The 10-year Treasury yield closed at 1.41%, up from 1.369% on Monday

Examining the larger macroeconomic picture puts bitcoin’s price action into perspective: Bitcoin prices quadrupled last year as the U.S. Federal Reserve pumped freshly printed billions into financial markets, nearly doubling in one year the amount of money it had created over the previous 107 years. .

But the bitcoin market’s reaction to faster-than-expected inflation might also reflect the upside-down nature of financial markets, where data points matter far less than what the Federal Reserve might do in response to them.

In this case, many economists say the pace of inflation still appears to be transient, as Fed Chairman Jerome Powell said.

“Fed officials continue to tell everyone that ‘inflation is transitory’ as they pour unjustifiable $ 120 billion into the market every month,” Mati Greenspan, founder of the company, wrote on Tuesday. Quantum Economics cryptocurrency analysis.

But there is a growing chance that some of these higher prices will last longer and thus cause the US central bank to cut its easy money policies sooner than expected. This could help explain bitcoin’s weakness if “looser for longer” monetary policy starts to look less likely.

A hot report on inflation has pissed off some investors as expectations grow that the Fed will have to recognize that higher inflation will persist, Edward Moya, senior market analyst for the Oanda brokerage firm, wrote in a daily note. . This inflation shock might not be a strong enough catalyst to break the recent bitcoin trading range.

Bitcoin lineup tightens

Bitcoin is in its eighth week stuck in a range of around $ 30,000 to $ 40,000, and sideways trading is reflected in anemic cryptocurrency trading volumes of late.

The quick wins seen earlier this year are nowhere to be found. According to Alternative.mes Crypto Fear & Greed Index, cryptocurrency markets are currently in the throes of extreme fear, as a report by Norwegian firm Arcane Research noted on Tuesday.

Despite this, many buyers have shown themselves ready to leap up whenever bitcoin falls into the $ 30,000 range.

Bitcoin consolidation range is tightening, Arcane Research noted. According to the company, the market is showing healthy signs, with future prices trading at a premium to the spot market. A more aligned futures market is overall a sign of good health, the company said.

The greater volatility in cryptocurrency prices has declined recently, and a look at the historical chart (below) shows just how leisurely the market has gotten over the summer months of last year in the northern hemisphere.

Bitcoin and Ethereum volatilities (CoinDesk)

Bitcoin’s dominance recedes

Ironically, given bitcoin’s reputation as an extremely risky financial asset, the largest cryptocurrency could be considered the safest coin at the moment, with some analysts saying digital assets are in a bear market.

Over the past seven days, bitcoin has fallen 4.3%, while ether, the native cryptocurrency of the Ethereum blockchain, has lost 14%.

In a declining crypto market, bitcoin is the safest bet, Arcane Research wrote. This has led to an increase in the dominance of the bitcoin market.

Market dominance represents bitcoin market capitalization as a percentage of all cryptocurrency markets. The gauge started in 2021 at around 70%, but fell to around 40% as the price of bitcoin retreated and alternative cryptocurrencies, or altcoins, recovered. Lately it has rebounded to around 45%.

Bitcoin market dominance has rebounded after falling to around 40% last month.

Source: CoinMarketCap.com

Engaged Ether Staking Rewards

CoinDesk Researchs just released the second quarter review includes a chart comparing the returns of staking ether in Ethereum 2.0 with the available returns of the ether deposit in decentralized lending applications like Compound, dYdX, and Fulcrum.

The rates on Eth 2.0 are much more attractive, with an annualized rate of 6.72% against a maximum of 2% for decentralized finance protocols (DeFi), concludes the report.

The downside is that staking on Eth 2.0 doesn’t offer liquidity to users on their ether and requires a minimum of 32 ETH, worth $ 72,832 at the end of the quarter, ”according to the report. In the long run, as transfers are enabled on Eth 2.0 and more users trust the protocol with their Ether holdings, the performance of running a validator should decrease and play more and more. the role of a risk-free interest rate on Ethereum.

ethereum_2.0_returns (CoinDesk Research)

The CPI shows a sharp (transient?) Increase in used car prices

The US consumer price index jumped 5.4% in the 12 months to June, exceeding the 4.9% increase expected by economists.

Core CPI, which excludes food and energy prices, rose 4.5% year on year, also above economists’ expectations of a 4% increase. On a month-to-month basis, consumer prices rose 0.9%, above an expected 0.5%, and accelerating from May’s 0.6% pace. Excluding food and energy, the index also increased by 0.9% compared to the previous month.

The CPI report, released on Tuesday, shows an economy that is functioning despite supply constraints while trying to meet growing demand as the country reopens, with the end of business closures and vaccines against the diseases. coronavirus reaching more people.

Many of the same indices continued to rise, including used cars and trucks, new vehicles, air fares and clothing, the Labor Department wrote.

The CPI report is especially important for some cryptocurrency investors who view bitcoin as a hedge against inflation and currency depreciation.

Bitcoin technical analysis

According to Eqonex: “A break below $ 32,000 will allow bears to push back to support at $ 29,800, with $ 28,700 being the key level that the bulls need to protect. On the upside, the bulls will need to close the market above $ 33,600 to prevent a further fall in prices. Above $ 33,600 we are looking for $ 34,600 to limit gains as the market continues to trade is a tight sideways trend. “

Altcoin balance sheet

DeFi Education Fund turns UNI into USDC: The newly funded DeFi Education Fund (DEF), a new political organization supported by Uniswap, transformed half of the assets allocated to it by Uniswap governance, 500,000 UNI (approx. $ 10 million) in USDC via an S&P Dow Jones Crypto Indexes trade: S&P Dow Jones Indices launched five new cryptocurrency index products on Tuesday, the first major extension to its digital asset benchmarking tools since its launch. entered the market in May. Headlining the slice is a Broad Digital Market Index, or BDM, which includes more than 240 coins, according to a press release. The new sub-indices also provide different slices and dice of the BDM by market cap so that investors can follow different segments of the market, an S&P spokesperson told CoinDesk.Retail-Oriented DEX raises $ 21 million: Clipper, a new decentralized exchange (DEX) that caters to retail traders, closed a $ 21 million roundtable on Tuesday. Olaf Carlson-Wees Polychain Capital led the $ 4 million funding round and participated in the $ 17 million funding round. Other investors included 0x Labs, DeFi Alliance, and MetaCartel DAO.

Relevant news

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Most digital assets on CoinDesk 20 ended up going down on Tuesday.

Notable Winners at 9:00 p.m. UTC (4:00 p.m. ET):

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