There’s a downside to having a market that never closes, as crypto bulls who were hoping to enjoy their weekend just found out.
Friday’s selloff in Bitcoin, Ethereum and other cryptoassets turned into a rout heading into the weekend, and prices aren’t yet seeing much reason for optimism yet in the new week. There was little in the way of fundamental or macroeconomic news to drive the selloff; rather traders’ appetite for risk assets has simply collapsed across the board.
Bitcoin has fallen by over 10% since Friday, currently trading at around $20,900 and back below the 200 weekly MA (which is at around $23,100). Some believe that the significant sell off on Friday was caused by Celsius Network, who are bankrupt, receiving approval to sell mined Bitcoin to cover their operations. It has been speculated that Celsius sold 7000 Bitcoin on FTX spot, which led to a cascade of liquidations.
Bearish near-term bias for Bitcoin
From a technical perspective, the big drop has done durable damage to the technicals. Looking at Bitcoin, prices bounced off their June lows, forming a rising channel to retrace back to their 50-day EMA last week. Following this weekend’s precipitous drop, the largest cryptocurrency has definitively broken below its rising channel, leaving a bearish near-term bias for a potential retest of the summer lows near $18,700.
Turning our attention to Ethereum, the world’s second largest cryptoasset saw a far more impressive rally through the summer, effectively doubling off its June lows compared to “just” a 35% rally in Bitcoin. Ethereum continues to benefit from speculation around next month’s “Merge,” when the network will transition to the more environmentally friendly proof-of-stake security and supply growth is projected to flip negative.
Nonetheless, Ethereum is falling sharply in-line with its larger rival to start this week’s trade. The ETH/USD price is now trading below its 50-day EMA, with bears now eyeing support at the late July swing low near $1375, the midsummer range high at $1275, and the multi-year low around $1000.
“After the dramatic blowups and deleveraging we saw in May and June, an long-term V-shaped bottom this summer was always unlikely,” said Matt Weller, Global Head of Research at City Index. “As we flip the calendar into September, the key question for crypto traders may well be whether we go on to break this summer’s lows or merely retest them to set the stage for the next bull cycle.”
Can Tether ride to the rescue?
Celsius’ woes have resulted in extreme fear and uncertainty surrounding the stability of the crypto market over the past few months. However, Tether, the largest stablecoin by market cap and a key component of the crypto ecosystem, has revealed a positive update to its assurance process.
It has been announced that the company is now working with BDO Italia, who will conduct monthly Tether assurance reports based on the stablecoin issuers’ reserves. Previously, Tether’s assurance reports were conducted by an auditor called MHA Cayman, but BDO are a top five accounting firm who could provide some needed clarity around Tether’s highly debated reserves.
In addition, the day after the BDO partnership was reported Tether stated, “As of June 30th, the CCR and BDO confirmed a more than 58% decrease in Tether’s commercial paper holdings over the prior quarter from $20 billion to $8.5 billion, which is on track with Tether’s commitment to the community.”
A 58% decrease in commercial paper is a colossal step for Tether’s credibility, as many critics have claimed in the past that Tether owning Chinese commercial paper is a significant risk.
Tether’s biggest competitor, Circle are being audited by Grant Thornton, another top five accounting firm as of June 2022, hence Tether integrating BDO is needed for them to remain the most adopted stablecoin issuer.
“I think this increase in transparency is a very promising step for the whole crypto space, as the legitimacy of stablecoins is a concern for many institutions,” said Marcus Sotiriou, an analyst with GlobalBlock.