First Mover Asia: Bitcoin Erases Prior Days' Gains; Altcoins Slide

Good morning. Here’s what’s happening:

Market moves: Bitcoin’s price slid in tandem with tech stocks.

Technician’s take: BTC downside could persist into the Asia trading day; support around $40K.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis.

Prices

Bitcoin (BTC): $42,581 -3.2%

Ether (ETH): $3,250 -3.5%

Markets

S&P 500: $4,659 -1.4%

DJIA: $36,113 -0.4%

Nasdaq: $14,806 -2.5%

Gold: $1,822 -0.1%

Market moves

Chart of bitcoin's price over the past month. (CoinDesk)

Bitcoin (BTC) slid on Thursday, erasing the prior day’s gains but staying within the past few weeks’ trading range of roughly $40,000 to $44,000.

News in the market included a potential ban on the use of cryptocurrencies in Pakistan along with signs that bitcoin miners are increasing their accumulation of the cryptocurrency, apparently refusing to sell at current prices.

A prominent Wall Street commodities analyst said that bitcoin is likely to outperform the raw materials staples oil and copper over the coming decade.

Tether said it froze $160 million of its dollar-linked stablecoins USDT on the Ethereum blockchain, while CoinDesk columnist David Morris weighed in on bitcoin, inflation and the expectations game.

But the likely culprit of bitcoin’s slide on Thursday was that it traded in tandem with tech stocks, with the Nasdaq 100 suddenly swooning on investor fears that the Federal Reserve will move within the next few months to start raising interest rates for the first time since 2018.

Mary Daly, president of the Federal Reserve Bank of San Francisco, told Reuters in an interview that it “seems a quite reasonable thing” to start raising interest rates in March.

A tightening of monetary conditions by the Federal Reserve could put downward pressure on prices for risky assets, from stocks to cryptocurrencies, while also curbing inflation – potentially reducing the appeal of bitcoin, which has been bought by many investors as a hedge against inflation, which is rising at its fastest pace in nearly four decades.

Is that a bullish sign, or bearish? Time may tell.

“It does feel like markets are at peak fear on U.S. monetary policy which could make relief rallies more likely,” Craig Erlam, an analyst for the foreign-exchange brokerage Oanda, wrote Thursday in a market update. “But there is also underlying anxiety in the markets that could make for some volatile price action for the foreseeable future.”

Erlam predicts that if bitcoin could break above $45,500, “we could see another sharp move higher as belief starts to grow that the worst of the rout is behind it.”

Technician’s take

Bitcoin Stalls Near Resistance; Support Around $40K-$42K

Bitcoin four-hour price chart shows support/resistance with RSI on bottom. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin pulled back after buyers took some profits near the $44,000-$45,000 resistance zone.

The cryptocurrency remains in a short-term downtrend, although support at around $40,000 could stabilize the pullback.

BTC is down about 2% over the past 24 hours and is roughly flat over the past week. A decisive break above $45,000 is needed to reverse the short-term downtrend, but slowing momentum suggests price weakness could persist into the Asia trading day.

The relative strength index (RSI) on the four-hour chart declined near overbought levels, similar to what occurred in late December, which preceded a pullback in price. Buyers will likely remain on the sidelines until oversold conditions materialize, most likely over the next few days.

Important events

8:30 a.m. HKT/SGT (12:30 a.m. UTC): Australia home loans (Nov.)

10 a.m. HKT/SGT (2 a.m. UTC): China imports and exports (Dec. YoY)

10 a.m. HKT/SGT (2 a.m. UTC): China trade balance (Dec. YoY)

3 p.m. HKT/SGT (7 a.m. UTC): U.K. gross domestic product (Nov. MoM)

3 p.m. HKT/SGT (7 a.m. UTC): U.K. industrial production (Nov. MoM, YoY)

3 p.m. HKT/SGT (7 a.m. UTC): U.K. manufacturing production (Nov. MoM, YoY)

CoinDesk TV

In case you missed it, here are the most recent episodes of “First Mover” on CoinDesk TV:

Legendary Cryptographer David Chaum on Web 3, Quantum Computing and Digital Currency

“First Mover” hosts were joined by world-renowned cryptographer and privacy advocate and Elixxir CEO, David Chaum, who shared his views on the current state of cryptocurrency and blockchain and the development of Web 3, among other topics. Wade Peery, chief administrative officer of First Bank, shared insights into the plan to offer stablecoin “USDF.” Plus, “First Mover” interviewed James Burnham, a partner at the law firm of Jones Day, on the crypto regulation turf war.

Latest headlines

Bitcoin Miners Are Starting to ‘Hodl’ Again, but for How Long?: Some bitcoin miners are likely to spend some of their mined coins to pay for expenses and growth as bitcoin price dips.

Palau President Talks Stablecoin Plans Following Island Nation’s ‘Digital Residency’ Rollout: The 20,000-person country is turning to blockchain in a digital revamp of its economy.

ConsenSys Sues Former Investment Head, Alleging Resume Fraud: The complaint comes two weeks after Kavita Gupta’s lawyer filed a complaint against the Ethereum firm asking for at least $30 million in monetary damages.

There’s a Reason Bitcoin’s Worth 500 Barrels of Oil: Bloomberg’s McGlone: “Supply, demand, adoption and advancing technology point to the crypto continuing to outperform fossil fuel in the next 10 years,” according to the commodities analyst.

House of Lords Committee Sees ‘No Convincing Case’ for UK CBDC: “While a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy,” the committee said.

Important reads

Why 2022 Should Be the Year of the Govcoin: We need a third way between fiat currencies and dangerous cryptocurrencies, argues a leading U.K. entrepreneur.

Today’s crypto explainer: What Is Cryptography?

Other voices: As Kazakhstan Descends Into Chaos, Crypto Miners Are at a Loss (Wired)

Said and heard

“While there are design options that would provide some privacy safeguards, technical specifications alone may be insufficient to counter public concern over the risk of state surveillance.” (House of Lords committee reporting on the possibility of a central bank digital currency)…”If adopted, ERC-4626, the “tokenized vault standard,” will offer a general way for platforms like Aave or Yearn to build assets that reward users. The original scope of the proposal was to standardize just yield-bearing tokens to make them easier to build with, but now it covers a wider set of use cases.” (CoinDesk editor and writer Daniel Kuhn)…”In October we announced that we’re considering building a bitcoin mining system, out in the open & alongside the community, and we’ve decided…we’re doing it!” (Block General Manager for Hardware Thomas Templeton)

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