Proactive Investors - Bitcoin (BTC) had a wild ride on Thursday.
The BTC/USDT pair scored an eight-month high of US$25,250 before hitting a sharp correction, ultimately sending the benchmark crypto asset spiralling all the way back down to US$23,500.
As seems to be the case lately, traders are heavily invested in what the macroeconomic calendar has to tell us.
In this instance, a persistently tight US labour market and inflationary producer prices have strengthened the hawkish case for a longer rate hike cycle, which spells bad news for risk assets.
Federal Reserve officials Loretta Mester and James Bullard were particularly hawkish in their comments, with the former advocating for another hike above 5% and holding it there “for some time”.
It is worth noting that neither Mester nor Bullard have a place on the Federal Open Market Committee (FOMC), which actually sets the rates - not that traders were paying attention.
Bitcoin (BTC) retreats from eight-month highs – Source: currency.com
Concurrent with BTC’s reversal, the S&P 500 index dipped 1.7% while US tech stocks sank around 2.5%. Nasdaq-listed crypto exchange Coinbase (NASDAQ:COIN), which was on a tear this week, also took a sharp U-turn.
There are two things to glean here. A) the markets aren’t as dismissive of the Fed hawks as previously imagined, and B) with all of this short-term volatility, it pays to look at the wider picture.
A case could be made for a worst-case support line scenario of US$21,300, which is where BTC/USDT was positioned prior to last November’s FTX implosion, and also where the pair bounced off after finding support earlier this month.
More optimistic investors would be hanging on BTC/USDT staying within the US$22,500 to US$23,500 channel and in fairness to that scenario, the Binance order book shows a fair chunk of buyers’ support at the upper end of that range.
FOMC minutes are due next Wednesday; they will be ones to pay close attention to.
Ethereum (ETH) hit an intraday high of US$1,740 yesterday before closing the session 6% lower at around US$1,640. The ETH/USDT pair has since recovered above US$1,655.
Speaking of ETH, recent data shows that the total ETH supply sitting on exchanges has fallen 37% since last September’s Merge protocol upgrade.
This suggests more ETH holders are HODLing their coins offline. Combined with post-Merge deflationary tokenomics, this could spell bullish news for the world’s second-largest cryptocurrency.
Not that we’ve seen the fruits of this dynamic yet - the ETH/BTC pair has dipped around 3.2% year to date.
Altcoins go red
The market-weighted CoinDesk Market index fell 2.7% overnight, with losses piling up in response to those hawkish economic data releases.
Losses were fairly uniform among the large caps, with BNB, Ripple (XRP), Cardano (ADA), Dogecoin (DOGE) and Solana (SOL) shedding low single digits from their respective market capitalisations.
Polygon (MATIC) bucked the trend by continuing to rally, as it has been in the past four days.
MATIC is currently changing hands at a 10-month high of US$1.47, helped in some small part by the Valentine’s Day announcement of its zero-knowledge Ethereum Virtual Machine (zkEVM) beta launch, scheduled for March 27.
zkEVM intends to make Polygon’s Ethereum scaling solution faster and cheaper.
Top daily risers among the top-100 set include Filecoin (FIL), Rocket Pool (RPL) and MAGIC, while top daily losers include Aptos (APT), Render Token (RNDR) and Frax Share (FXS).
Global cryptocurrency market cap is currently US$1.08tn, while total value locked (TVL) across all decentralised finance (DeFi) protocols dipped 3% to US$49bn overnight.
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