Daily News | Institutional Interest Fuels Bitcoin Rally; Europe's Digital Euro Plan; Fed's Tightening Sparks Market Volatility

Crypto Daily Digest: Bitcoin Rally Amid Institutional Interest, Coinbase Lawsuit, and Europe’s Digital Euro Proposal

Bitcoin (BTC) has experienced a surge in investor interest, particularly from institutional players, driving its recent price rally. The gains in BTC’s price and trading volume have primarily occurred during U.S. market hours, with financial giants like BlackRock, Fidelity, and Citadel showing increased involvement in BTC. This influx of institutional interest has sparked Optimism among investors and suggests a growing acceptance of cryptocurrencies in traditional finance.

ETF Filing Dates - Data per Bloomberg

While Bitcoin has enjoyed this rally, smaller cryptocurrencies have struggled due to regulatory scrutiny and limited offerings by trading platforms. The increased attention from regulators has prompted these platforms to curb the trading of popular tokens to mitigate potential risks associated with unregistered securities.

BTC’s gains during U.S. market hours have outpaced trading sessions in Asia and Europe, indicating a preference for Bitcoin among U.S. traders.

Bitcoin Volatility By Timezone - Data per CryptoQuant

This trend was further intensified after BlackRock’s filing for a spot BTC exchange-traded fund (ETF) in mid-June, which triggered a spike in trading activity. The surge in BTC’s price has also coincided with its decoupling from U.S. equities, signifying that U.S. traders are diversifying their portfolios by allocating to BTC.

Bitcoin Volatility By Timezone - Data per CryptoQuant

Institutional investors have played a significant role in the recent market developments. Open interest on the Chicago Mercantile Exchange (CME) futures market, a preferred platform for sophisticated investors, has reached near all-time highs. Moreover, digital asset funds witnessed their largest inflows in almost a year, with Bitcoin-focused funds accounting for a significant portion of these inflows. This institutional adoption represents a crucial milestone for the cryptocurrency market and suggests a shift towards a long-term investment approach.

While Bitcoin continues to make headlines, Coinbase, the largest U.S. crypto exchange, is engaged in a legal battle with the U.S. Securities and Exchange Commission (SEC). Coinbase is seeking the dismissal of the SEC’s lawsuit, claiming that the allegations lack merit. The company asserts that the SEC had conducted an exhaustive review of its business practices before its public listing in April 2021. Coinbase’s legal team argues that the SEC’s current stance goes against the statutory obligation to consider the legality of Coinbase’s business.

Meanwhile, the European Commission has presented its vision for a digital euro, primarily designed as a digital wallet for facilitating payments rather than serving as an investment instrument. The proposal outlines a legal framework, leaving operational details to the European Central Bank (ECB). The digital euro aims to provide offline payment capabilities and privacy protections similar to cash transactions. It would be widely accepted by businesses in the euro area, and basic services related to the digital euro would be provided free of charge to individuals. The ECB will make a decision on whether to proceed with the development of the digital euro in the fall, and the process is expected to take around three years.

Bitcoin (BTC) $30,448 (+1.29%) - Neutral Outlook

Overview:

• Closest daily support zone: 30025 - 29475
• Closest daily resistance zone: 30690 - 31015
• Key Level: 28420 (Weekly High Between Dec. 21-28, 2020)

Daily Resistance zones

1. 30690 - 31015
2. 31530 - 32255
3. 33100 - 33600

Daily Support zones

1. 30025 - 29475
2. 29095 - 28420
3. 27970 - 27265

Macro: Fed’s Tightening Expectations Spark Volatility in US and Asian Markets

Asian stock markets are expected to open on a mixed note as the quarter comes to a close, following a volatile session in the US. The surge in Treasury yields, driven by expectations of tighter monetary policy by the Federal Reserve, has had a significant impact on market sentiment. While Japanese equities have performed strongly, with gains exceeding 20% in the first half of the year, Chinese stocks have struggled, and Australian stocks have seen only marginal growth.

Investors have been closely monitoring the bond market, where sell-offs have led to a notable increase in yields. This development aligns with the Fed’s view of gradually tightening policy. The focus in Asia will be on key economic indicators such as China’s purchasing managers’ index data and Tokyo’s inflation figures. There are concerns about continued weakness in China’s manufacturing sector and doubts about whether the government’s efforts to stimulate the economy are sufficient.

Despite positive economic data in the US, including better-than-expected readings on jobless claims and gross domestic product, inflation remains a concern. While key inflation indicators have been revised slightly downward, they still remain well above the Fed’s target of 2%. This has led to expectations of further rate hikes by the central bank, with swap markets now indicating a nearly 50% chance of a second hike by the end of the year.

The two-year rate exceeded the 10-year by nearly 107 basis points - Date per Bloomberg

Investors are cautious about the potential long-term risks associated with higher interest rates. The possibility of rates staying elevated for an extended period could eventually hamper economic growth and increase the risk of a recession down the line.

Looking ahead, there is uncertainty in the market, but the S&P 500 is poised to conclude the first half of the year with a strong performance, despite concerns. Short sellers have been betting against large technology companies, reflecting growing skepticism about the sustainability of their recent gains.

As the year progresses, investors will closely monitor the Fed’s policy decisions and their impact on economic growth. The central bank’s commitment to combat inflation while maintaining a balanced approach to supporting the economy will continue to shape market dynamics in the coming months.