Good morning. Here’s what happens:
Prices: Bitcoin at $26.8K maintains its debt ceiling holding pattern.
Insight: Crypto as a hedge? Citizens of two major emerging countries and other key economies appear to be turning to digital assets as their currencies struggle.
Boring Bitcoin slumbers near $27K
Bitcoin held comfortably in its recent range on Monday as investors weighed the latest developments on the US debt ceiling.
The largest cryptocurrency by market cap recently traded at around $26,866, up 0.4%. BTC has hovered between $26,500 and $27,500 for nearly two weeks, according to CoinDesk data, amid macroeconomic uncertainty, including concerns that US President Joe Biden and the House leadership would not be able to agree on raising the nation̵[ads1]7;s debt limit.
“Crypto traders are not sure how Bitcoin will behave through the next few days of debt ceiling negotiations,” Edward Moya, senior market analyst for forex market maker Oanda, wrote in a note.
Moya added: The risk of default is very small, but if it were to happen, it could feel like an upper bound to risk appetite, which would send cryptos sharply lower. Bitcoin seems content to trade near the lower bounds of its recent trading range between $26,500 and $30,000.”
Since 1960, the government has raised the debt limit 78 times, but the current fraught political environment has raised concerns about lawmakers’ willingness to cooperate.
In a letter to Speaker of the House Kevin McCarthy (R-Calif.), Treasury Secretary Janet Yellen repeated a May 15 warning that without a deal, “the Treasury Department would not be able to meet all of the government’s obligations by early June , and potentially as early as June 1.”
“We have learned from past debt limit impasses that waiting until the last minute to suspend or raise the debt limit can cause serious damage to business and consumer confidence, increase short-term borrowing costs for taxpayers, and negatively affect the credit rating of US states,” Yellen added. “We have already seen Treasury loan boats increase significantly for securities maturing in June.”
Ether recently changed hands at around $1,820, up 0.8%. The second largest crypto by market cap has similarly been bounded between $1,750 and $1,850 over the past two weeks. Other major cryptos were largely in the green, albeit paler shades, with TRX and AVAX, the symbols of smart contract platform Tron and Avalanche, recently up 3.8% and 2.3% respectively. The CoinDesk Market Index, a measure of crypto market performance, recently rose 0.4%
Among the major stock indexes, the technology-focused Nasdaq Composite climbed 0.5% to hit a 2023 high, while the S&P 500, which has a major technology component, and the Dow Jones Industrial Average (DJIA) rose 0.2% and 0.4%, respectively . Yields on Treasurys rose and the price of gold dipped slightly to $1,990, well below a near-record high earlier this month as investors turned more to safe-haven assets.
Meanwhile, in an interview with CoinDesk TV’s “First Mover” program on Monday, Ahmed Ismail, CEO of quant-based liquidity aggregator Fluid, said the withdrawal of market makers Jane Street and Jump Trading from crypto trading in the US had spooked investors and slowed. an already decreasing supply of market liquidity.
“One of the very big problems that crypto suffers from is that liquidity is massively fragmented, and events like this only exacerbate the problem,” Ismail said. “So what we’re seeing right now is there’s not a lot of activity because liquidity is even more fragmented, and the markets are very inefficient. As a result, you’ll see I think we’re seeing certain narratives come back.
Ismail noted an increase in call options on crypto exchange Bybit, a signal of unease around the debt ceiling and other macroeconomic uncertainties. “The narrative of people withdrawing liquidity because they’re afraid of what’s going to happen and the uncertainty around the debt ceiling, that’s certainly a big problem in keeping (the) crypto crisis so narrow now.”
With the US mired in political stasis while other regions build crypto frameworks, it’s worth watching the development of, and prospects for, demand for crypto assets on the ground. This is becoming more and more relevant as many large countries struggle with sky-high inflation, fluctuating currencies and autocratic control over financial access, and as the population becomes increasingly crypto-aware and the lack of trust in centralized institutions grows.
Noelle Acheson is the former head of research at CoinDesk and Genesis Trading. This article is an excerpt from her Crypto is macro now newsletter, which focuses on the overlap between the changing crypto and macro landscape. These opinions are hers and nothing she writes should be taken as investment advice.
On the surface, this may sound like an overreaction to the FATF’s crypto stance – last Thursday, the organization’s president published a letter titled “An End to the Lawless Cryptospace” calling for crypto regulation instead of a total ban.
Then again, Pakistan has a somewhat strained relationship with the FATF, and last October was taken off its “grey list” (which labels certain countries as having “deficiencies” in AML controls, which in turn could lead to limited participation in global finance).
It is also not difficult to see the hand of the International Monetary Fund. Pakistan is currently in talks with the organization over a bailout package, although negotiations appear to have stalled and concerns about the country’s political and economic problems are beginning to affect neighboring countries. The IMF has not been shy about its unease with crypto markets, and a few months ago reports surfaced that it had used crypto suppression in negotiations with Argentina.
Read the full story here:
Glassnode data revealed that bitcoin (BTC) is settling into the tightest price range it has seen in months, despite looming concerns about the stability of US regional banks and the nation’s debt ceiling. FLUID CEO Ahmed Ismail shared his crypto market analysis. Additionally, Polygon co-founder Sandeep Nailwal discussed launching a Web3 fellowship program. And Litecoin Foundation CEO Alan Austin weighed in on the recent surge in Litecoin activity amid the Ordinals frenzy.