Crypto Holds Its Ground in Volatile Conditions

By Sam Blumenfeld

It's been a solid week for crypto so far.

Most assets are keeping up with the strengthening U.S. dollar. However, while sharp bear market sell-offs beat much of the speculation out of crypto, it could still face additional pressure if stocks and bonds continue sliding.

The good news is the Bank of England has pivoted from tightening monetary policy by announcing a new indefinite quantitative easing program. It's designed to save its free-falling bonds and should hopefully assist the struggling bond market.

While the decision is inflationary for the Great British pound, a distressed bond market causes the same issues. Delaying a problem won't solve it.

But even in these chaotic conditions, crypto's holding steady.

Bitcoin (BTC, Tech/Adoption Grade "A-") and the broader crypto market are up slightly today as the established cryptocurrencies look to extend the rebound. The solid performance follows a volatile nine-day downswing earlier this month.

Bitcoin is up about 2% this week, and it's challenging the important psychological resistance of $20,000. Notably, BTC is back in the green with a 3% gain over the past three months.

The asset is looking to establish a bear market floor, but that would require holding above $17,500, or the bottom of its recent channel.

Bitcoin will likely continue trading in its recent range between $17,500 and $25,000. Today, BTC overtook its 21-day moving average of $19,800. It could continue gathering momentum if other central banks signal a willingness to pivot. And a breakout either way could shed light on the status of crypto winter.

But for now, many factors will depend on the expectations surrounding the Federal Reserve's handling of inflation.

If the Fed signals a pivot like the BoE, risk assets could jump.

On the other hand, current macroeconomic conditions may cause another leg lower and remove the remaining weak-handed investors.

Here's Bitcoin's price in U.S. dollars via Coinbase (COIN):

Click here to view full-sized image.

Moving on to Ethereum (ETH, Tech/Adoption Grade "A"), the second largest crypto by market cap is up about a percentage point today, jumping past $1,350 at the time of this writing. The asset has mostly consolidated since its sell-off following the historic Merge and shift to proof-of-stake consensus.

The upgrade allows the network to take advantage of strong tailwinds for environmentally friendly blockchain technologies, which should attract significant institutional inflows during the next sustainable upswing.

But in comparison to BTC this month, ETH lagged behind the market leader, losing 11% compared to BTC's 1% drawdown. However, its performance is significantly better over the past three months, tracking a 28% gain.

Ethereum now sits more than 50% above its mid-June low of below $900.

Miners selling over 17,000 ETH likely contributed to Ethereum's underperformance compared to BTC this month. As the Merge turned into a "sell the news" event, ETH was forced to contend with many miners selling their positions, which pressured its price.

Even though the initial selling pressure has subsided, the future is still unknown as miners move forward.

Meanwhile, Ethereum is still trading below its 21-day moving average of about $1,430, but it's moving in the right direction. If Ethereum can continue establishing momentum, it bodes well for altcoins that follow its path.

Here's Ethereum's price in U.S. dollars via Coinbase:

Click here to view full-sized image.

Notable News, Notes and Tweets

What's Next

Cryptocurrencies have traded resiliently in the face of poor stock and bond performance. While this is a positive sign for now, a lot will depend on whether the trend stands.

Long-term investors are holding strong, but the crypto market could face another period of weakness if the stock market has another downturn. If crypto turns lower, it would likely be brief as the market moves toward the end of the bearish cycle phase.

Although macroeconomic hurdles could hurt sentiment toward crypto in the short term, the search for uncorruptible monetary policy has grown more compelling. Unsustainable government spending and central bank printing has eroded trust in fiat currencies. These practices should continue pushing both individuals and institutions to search for viable alternatives.

Crypto adoption is constantly advancing, and with the current macroeconomic mayhem, institutional participation should ramp up as the market exits crypto winter.

Best,

Sam