Crypto Update 6/21/22 | Hard Times in Crypto Lead to Price and Macro Risk - Transcripts

June 21, 2022

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With altcoins leading gains as bitcoin recovers from weekend lows and fights to stay above $21,000, plus a look at the risks as hard times come to crypto, CoinDesk’s “Markets Daily” is back with the latest news roundup.

Transcript

this episode of Markets Daily is sponsored by cava and BCB group.

It's Tuesday june 21st 2022 this is markets daily from coindesk. I'm gonna be living here again with Adrian blush for your daily news roundup on today's show we're talking Bitcoin traditional markets and look at the risks as hard times come to crypto and just a reminder that coindesk is a news source and does not provide investment advice. Mhm Bitcoin was up this morning in day two of a breather or slight recovery after a brutal past week of trading the world's largest Cryptocurrency by market capitalization is now 20% higher compared to the 2022 lows set around $17,000 over the weekend. The surge came even as big banks morgan Stanley and Goldman Sachs stated in client notes that recession risks were quote not fully priced in the bear market will not be over until recession arrives or the risk of one is extinguished, morgan Stanley said in its note. Meanwhile, Goldman analysts and stock traders were pricing in a mild recession quote, leaving them exposed to a further deterioration in expectations and quote, that's according to Bloomberg. Some analysts like FX pros Alex coupes, Markovich said, Bitcoin managed to hold above the $20,000 round level on monday amid weak trading activity due to the U. S. Holiday. Bitcoin ended up quote attracting enough speculative demand to feel movement in the past two days, he added. But coop sick of it remained unconvinced of a continued rally quote. It will be too early to talk about a long term reversal. All negative fundamentals remain until sharp monetary policy tightening becomes the norm.

Financial market pressures can quickly negate bounces in cryptocurrencies, he told coindesk in an email prices of Bitcoin fell below the $20,000 last weekend and moved that mark to drop below previous highs for the first time in the assets history, the dynamic caused a record 7.3 billion in losses for Bitcoin holders over the weekend. This short and sharp downward movement was triggered by liquidations and some miners selling positions around $20,000 to reenter at a lower price. That's according to Pablo Yoder, financial products manager at Storm Partners whose assistant provider for the Cryptocurrency space in europe. Although Btc is seeing some consolidation towards the $23,000 price level, It still needs to break that support to start considering a higher movement back towards 30K. said Yoder, the 19,000 level is still the key support to the downside quote. If the 23 K level is broken, we might have a bull summer for Kryptos and potentially a good end to the year. But volatility remains quite high. To make such an assumption, they said. Another reliable metric to test market sentiment are the in and out transfers from exchanges to private wallets according to Yoder. The metric provides insights into what whales or individuals or entities that hold large amounts of Cryptocurrency are doing with their funds Over the last month, there were many inflows and exchanges from Wales liquidating their positions. But this has started to change with big outflows spotted monday from exchanges to private wallets. According to data from glass note quote.

You see tremendous outflows when BtC came down to $17.6000 and then net flows being less negative. Now said Yoder price action for the last few weeks has been in hindsight pretty interesting as financial contagion made its way largely unrestricted through the sector powered by companies who got in too deep with defined collateralized lending. We'll discuss that more tomorrow. During the headlines elsewhere, all coins are taken lead early morning on Tuesday with polygons. Matic up 11%. Salon a soul token up by 9.5% and the token for the near protocol up by 9% as well. Today's crypto coverage comes courtesy of coindesk markets analysts little Lola Desmond Mishra Bitcoin is currently trading at 21,000 and $96. That's up about 3% in the last 24 hours while ether is trading at $1149. That's up nearly 2% in the same time period according to the coindesk price index in traditional markets. Us stock features returned from yesterday's holiday and start in the morning on a positive note in what is at least a momentary break from the bleak trading environment that's characterized much of the year so far Futures for the S&P 500 and NASDAQ each gained 1.7% in early morning trading while the Dow Jones industrial average added some 1.5% before the opening bell overseas. The regional stocks Europe 600 share index added 1.1% after rising on Monday but still closing down almost 17% for the year. In London, the footsie 100 gained half a point while Germany's Dax gained 3/10 of 1%.

Continuing to the east Hong kong's hang seng index rose by 1.9%. And in Japan, the Nikkei 2 to 5 gained 1.8% in china. The shanghai composite bucked the trend falling by 0.3%. Today's traditional coverage shows from the Wall Street Journal, the FT and CNN stay tuned for after the break, we'll take a moment to recalibrate on risks in today's markets back in a minute

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Today's featured story is an opinion piece from coindesk George. Clooney's today's story is entitled Hard Times in Crypto Lead to price and macro risk Quote there is in general a lot of what we call grift in the space where 99.9% of the crypto projects out there probably don't solve anything and quote that's attributed to some guy. Oh gosh, here we go. Except that some guy was this guy. It was me. I said that I went on Td Ameritrade network to chat crypto and given the breadth of things I wanted to discuss, I'm co opting that appearance as an excuse to talk about the big risks as we enter Hard times in crypto. Now the Bitcoin is down over 50% in 2022. The main big risks I'm paying attention to our one price in macro risk two platform and protocol risk and three public company risk in future feature segments we'll talk about those other two but today we're going to talk about price and macro risk. So from the top before that though it's worth mentioning that there's a lot of general market stress. There aren't many places to hide. Even cash is being gobbled up by 8.6% inflation according to the U. S.

Consumer price index. Unless you're strictly invested in commodities which you aren't, your portfolio is probably not having a good time. Bitcoin is flirting with price levels that would have been considered high as in December of 2017. That was when Bitcoin first touched up against $20,000 only to fall precipitously then scratch and claw for three years to reach 20,000 again by December of 2020. Bitcoin's price has fallen out of the 30,000 range over the last two weeks and has even dipped down below $20,000. It might sound painfully obvious to point out that Bitcoin's price going down is not good but Bitcoin's price going down is not good. This is true for all assets but it's especially true for Bitcoin in late 2020 there was lots of chatter about institutional adoption of Bitcoin. Much of the response from institutions was we can't take Bitcoin seriously until it's at least a $1 trillion asset. But then Bitcoin did become a $1 trillion asset. So Black rock entered the chat and people started talking about Bitcoin as a new type of reserve asset counterintuitively. As the value of Bitcoin goes up, it becomes more, not less investable. Coupled with the price risk is macro risk.

The latest Federal Open Market Committee or FOMC meeting signaled a 75 basis point increase to interest rates. And as expected, the stock market surged. Except that's literally the opposite of what you would actually expect to happen. Perhaps the markets were happy that Federal Reserve Chairman called the 75 basis point move unusually large. In any event, stocks went up during paul's prepared remarks and so did Bitcoin, which I guess is good. But with inflation proving itself a formidable foe and the possibility of a recession looming. Keeping a close eye on the Fed is critical. It's important not only from the angle of assessing if the U. S. Can right the ship, but also from Kryptos perspective given Bitcoin's vacillation between risk on to risk off to neither at a moment's notice if the world's biggest economy struggles to recover, that could spell doom or opportunity for Bitcoin, depending on how you view it time will tell. Meanwhile, after trawling through data to back up the notion that interest rate increases should lead to lower stock prices, I came across something interesting looking at the 30 day correlation of Bitcoin to 10 year US Treasury yields and the NASDAQ to 10 year US Treasury yields. These relationships have been scattered in the second quarter.

These correlations moved from somewhat negative to somewhat positive correlations and moved sharply again towards somewhat negative in the last few weeks when treasury yields go up. That's either because interest rates have increased or demand for Treasuries has fallen. This might be counterintuitive, but in order to get someone to buy a Treasury, the seller would have to sell it for less if fewer people wanted, which increases the yield since yield takes the price you paid for the instrument into account. Higher interest rates mean that investors could get higher interest on Treasuries from the government. So they'll pay less for already issued Treasuries with lower interest rates. All said, given we're in a rising interest rate environment, I expect this relationship to be negative. At least. I expected it to be consistent as yields go up because of increased interest rates. Risk on assets like stocks and sometimes Bitcoin should go down. Perhaps investors remain unconvinced that we're headed towards a recession. So yields are up because of suppressed demand for Treasuries. Maybe investors believe that a supply driven economic slowdown will prove less potent than a demand driven one.

My take is that markets were expecting higher interest rate hikes and signaling that more heavy hikes were on the way. So the previously priced in doomsday scenario was undone after the announcement. But like I said, time will tell and that's our show for today. Thank you so much for listening. This episode is edited by Adrian blushed, and we'll be back tomorrow with another news roundup and just a reminder that coindesk is a new source and does not provide investment advice.

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