It’s another risk-off day in crypto markets, with major assets trading in the red and the ether-bitcoin exchange rate (ETH/BTC) pointing to a continued worsening of investor sentiment.
At 08:30 ET, bitcoin (BTC), the biggest cryptocurrency by market capitalization, changed hands at $29,300, representing a 3.4% drop on a 24-hour basis. Ether (ETH), the second-largest coin, lost the $2,000 handle, falling 4.7% to $1,970, according to Forbes data.
The ETH/BTC ratio fell below a bullish trendline connecting June 2021 and October lows, indicating the potential for a continued ether underperformance relative to bitcoin in the coming weeks. In other words, investors are likely to stay risk-averse over the near term.
The relationship between ether and bitcoin is useful in gauging investor risk appetite. When it goes up, it can signal investors getting more bullish – a drop indicates that bitcoin is gaining on ether and investors are moving to safety.
In traditional markets, the S&P 500 futures fell 0.5%, signaling a partial reversal of Monday’s 1.8% gain after a profit warning from Snap Inc weighed over tech stocks in pre-market trading. The dollar traded under pressure as the Japanese yen drew haven demand and the euro rallied on expectations the European Central Bank would raise rates in July and September.
Lingering macroeconomic uncertainty and tightening financial conditions are keeping the crypto and stock market bulls at bay. Crypto fund assets under management fell to $38 billion last week, the lowest since July 2021, according to data tracked by CoinShares.
“By some measures, the tightening of financial conditions has gone well beyond the 2018 tightening when the Fed was last on a path to normalize policy. This swoon in financial conditions comes despite the fact that 10y real rates peaked about 80bp lower than in 2018. This provides evidence that Fed policy is currently more restrictive than it was at the peak of the 2018 tightening cycle and that the ‘practical neutral’ real rate is significantly lower than it was in the last cycle,” Bank of America recently noted, according to efxdata.com.
The markets are also disappointed by China’s restrained stimulus measures announced yesterday to bolster economic growth. Beijing will increase annual tax cuts by more than 140 billion yuan ($21bn) to 2.64 trillion yuan, offer tax rebates to more economic sectors and postpone social security payments worth 320 billion yuan until the end of the year, the state-run Xinhua news agency quoted the State Council, China’s Cabinet, as saying.
Analysts, however, were expecting more aggressive steps like the issuance of special bonds to fund fiscal spending and direct measures to boost consumption.
Looking ahead, the focus will be on the Federal Reserve (Fed) Chairman Jerome Powell’s speech, scheduled at 12:20 PM ET. Risk assets, including bitcoin, may bounce if Powell talks about the scope for moderation in the tightening cycle.
On Monday, Atlanta Fed President Raphael Bostic said the central bank might be able to pause rate hike after two more increases of half a point each.
Markets expect the Fed to hike rates by 50 basis points in upcoming meets and begin quantitative tightening or balance sheet runoff from next month.
According to charts provided by TradingView, bitcoin’s immediate outlook is unclear, with prices locked in the range of $28,60 to $31,000. The cryptocurrency is likely to see an extended move in the direction in which the range is eventually breached.
Tronix or TRX, the native token of blockchain-based decentralized digital platform Tron, is trading nearly 5% higher at $0.0813, shrugging off the broader market weakness.
Now ranked 14th per market cap, the cryptocurrency has gained 22% in the past 30 days to top the list of the best performing coins with at least $1 billion market valuation.
TRX has shown remarkable resilience of late, holding well above its January low of $0.05, even as bitcoin and the broader market have cratered to the lowest since late 2020.
Tron launched its native stablecoin USDD early this month, promising annualized yields as high as 30%. The stablecoin’s algorithm is similar to Terra’s recently crashed TerraUSD or UST.
The decision to launch USDD appears to have galvanized investor interest in Tron. According to Defillama, the total value locked in the Tron-based DeFi ecosystem has jumped by 27% to $5.4 billion in 30 days, making Tron the third-largest smart contract chain.