Bitcoin defies spiking yields and equity market rout
Faces strong technical rejection at the 200-day SMA
Regulatory crackdown persists, all eyes on FTX trial
Cryptos exhibit resilience in adverse macro environment
The last few weeks have been characterised by risk off sentiment in financial markets as the Fed has repeatedly stated its intention to keep interest rates elevated for as long as it takes to tame inflation. As a result, US Treasury yields have been on the rise across the board, denting investor appetite towards risk-sensitive assets, which has already been more than evident in equity markets.
Interestingly, the crypto space has so far managed to dodge that bullet, with Bitcoin surging to $28,592 on Monday, its highest level in six-weeks, before surrendering some gains. In the absence of any clear catalyst behind this advance, it seems that cryptocurrencies’ decentralised nature is acting as a tailwind in periods of stress in traditional assets.
Meanwhile, raging Treasury yields are also benefiting the US dollar and that is a double-edged sword for the cryptocurrency sphere. On the one hand, the greenback is applying downside pressure on cryptos as its price is inversely related to that of digital coins. Nevertheless, cryptos could also attract inflows from investors located in emerging countries, who want to protect themselves against a continous devaluation of their domestic currency.
Double rejection at 200-day SMA
From a technical standpoint, BTCUSD has been in a steady uptrend since finding its feet at the September low of $24,915, generating a structure of higher highs and higher lows. Moreover, the price jumped above the downward sloping trendline drawn from its July peaks but encountered strong resistance at the 200-day simple moving average (SMA), which lies very close to the $28,000 psychological mark.
Generally, when a price repeatedly fails to conquer a certain technical level that leads to a solid move towards the opposite direction. Will the textbook scenario play out this time?
For the short-term rally to resume, the bulls need to propel the price above the 200- day SMA before they test the recent resistance of $28,592. A break above the latter could open the door for the $30,000 psychological mark.
To the downside, the price might challenge the recent support of $25,980 ahead of the June bottom of $24,750.
Regulatory woes re-emerge
Apart from delaying the approval of the much-anticipated spot-Bitcoin ETFs, the Securities and Exchange Commission (SEC) is also tightening the grip on major crypto exchanges. Specifically, the SEC is escalating its litigation against Coinbase, asking a federal judge to deny the firm’s motion to dismiss the regulator’s lawsuit.
At the same time, Samuel Bankman-Fried’s trial has attracted investor interest this week, with cryptocurrencies returning to the headlines but most probably for the wrong reasons. The blockbuster trial is likely to reveal a lot of dark spots within the crypto industry, confirming investor speculation regarding frauds and illegal activities within the sector.