Daily News | Bitcoin Stagnation and Regulatory Uncertainties Weigh on Investors as Market Confidence Shifts to TradFi
Crypto Daily Digest: Stagnant Bitcoin and Regulatory Uncertainties Drive Investors Away from Cryptocurrencies
Investor interest in the cryptocurrency market has waned significantly in 2023, with nearly $172 million exiting global exchange-traded products tied to cryptocurrencies in the first half of the year. This comes after a record inflow of almost $10 billion in 2021, highlighting a stark shift in sentiment. The decline in interest can be attributed to several factors plaguing the industry.
One of the major concerns for investors is the prolonged stagnation of Bitcoin‘s price below the $26,000 mark. Despite a positive initial response to the release of the May Consumer Price Index (CPI), which indicated lower-than-expected inflation, Bitcoin failed to gain substantial momentum. Investors eagerly awaited the Federal Reserve’s interest rate decision, speculating that the central bank might shift its hawkish monetary policy stance in light of the lower inflation figures.
Adding to the unease is the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and two prominent crypto exchanges, Binance and Coinbase. The SEC’s lawsuits against these exchanges have introduced an element of uncertainty into the market. However, the clarity provided by the lawsuits might also attract fresh investments as it puts an end to the speculation surrounding potential regulatory actions against these industry giants.
The broader economic landscape is another cause for concern. The U.S. Treasury plans to issue over $850 billion in new bills, which could lead to higher yields and borrowing costs. This, coupled with the already restrained credit market following recent banking crises, could severely impact gross domestic product growth in the coming months.
Miners selling their Bitcoin holdings have also added pressure to the market. On-chain analytics firm Glassnode reports that miners have been offloading their Bitcoin since the beginning of June. This, along with reduced earnings from a cooldown in mining activity, has contributed to the downward pressure on prices.
Given the uncertain regulatory environment and the potential economic risks, institutional investors remain cautious about entering the crypto market. The Securities and Exchange Commission’s heavy-handed approach to enforcement has drawn criticism from U.S. lawmakers, who are proposing changes to the regulatory framework. These ongoing regulatory challenges further dampen the appeal of cryptocurrencies for traditional investors.
As a result, Bitcoin futures and options markets indicate a bearish trend. Traders closely monitor premiums and options pricing to gauge market sentiment. However, the overall lackluster performance of the crypto market and concerns about economic stability continue to weigh heavily on investor sentiment.
Bitcoin (BTC) $25,977 (+0.16%) - Neutral Outlook
Building upon the previous day’s analysis that focused on the relationship between price and volume, it is noteworthy that Bitcoin (BTC) has experienced three consecutive days of heightened trading activity. Interestingly, during this period, the closing price of BTC has remained relatively stable, implying a potential decline in bearish market behavior. Nevertheless, it is important for investors to exercise caution in light of the upcoming Federal Reserve rate decision scheduled for Thursday, as this event could trigger unforeseen fluctuations in the market.
Overview:
- Closest daily support zone: 25818 - 25360
- Closest daily resistance zone: 26280 - 26700
- Key Level: 25290 (Daily 200EMA)
Daily Resistance zones
- 26280 - 26700
- 26970 - 27265
- 27790 - 28420
Daily Support zones
- 25818 - 25360
- 25240 - 24270
- 23855 - 23470
Macro: Market Confidence Grows as Fed’s Tightening Campaign Takes a Breather
Asian equities are expected to rise as traders anticipate a reduced risk of a Federal Reserve interest rate hike following slowing US inflation. Positive outlooks from the People’s Bank of China and the Bank of Japan also contribute to the positive sentiment. Futures for Japan, Australia, and Hong Kong indicate gains, following the strong performance of the S&P 500.
Wall Street experienced a boost as the possibility of a pause in the Federal Reserve’s tightening campaign gained traction. This led to a rise in stocks, with the S&P 500 enjoying its longest winning streak since April, nearing the 4,400 mark. The CBOE Volatility Index dropped below 15, reflecting support for risk assets. Short-term Treasury yields surged, indicating a decline in expectations of rate cuts.
Investors are eagerly awaiting comments from Fed Chair Jerome Powell regarding the recent breakout in the US equity benchmark. They will also closely examine the Fed’s dot plot of economic projections for insights into future rate hikes. While inflation concerns persist, as a key price gauge continues to rise at a concerning pace, the consumer price index and core CPI have decelerated on an annual basis.
Meanwhile, oil prices edged lower, while gold remained stable. Oil had rebounded by over 3% from a three-month low, driven by China’s potential measures to stimulate its economy.
Market experts hold differing views on the Fed’s stance. While some anticipate a pause in interest rate hikes, they do not interpret it as an end to the tightening cycle. Inflation remains a concern, but the expectation is that the Fed will signal its intention to continue raising rates. The focus on tightening financial conditions to tame inflation was emphasized by Powell in December.
