(Kitco News) – Financial markets struggled to generate momentum in trading on Monday ahead of a busy week of economic data that holds the promise of clarity on the near-term path for interest rates.
With job growth slowing according to recent measures, investors will be paying close attention to the release of June's Consumer Price Index (CPI) on Thursday to see if it will support the calls for an interest rate cut in September. Other key events include testimony from Federal Reserve Chair Jerome Powell before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.
Equity prices climbed higher in the morning session but saw the gains largely evaporate in the afternoon as investors opted to wait on the sidelines ahead of key inflation data.
“The market has experienced its fourth positive week out of the last five, driven by optimism that easing inflation might prompt a Federal Reserve interest rate cut,” said analysts at Secure Digital Markets. “The June consumer price index, set to be released on Thursday, could reinforce these hopes if it shows a slight improvement. Additionally, producer price index data will be released on Friday.”
At the closing bell, the S&P and Nasdaq finished higher, up 0.10% and 0.28%, while the Dow lost 0.08%.
For cryptos, the week got off to a choppy start as bulls looked to reestablish support above $56,000 while bears soundly rejected attempts to push higher.
BTC/USD Chart by TradingView
“Bitcoin (BTC) is attempting a recovery from its recent lows after a tumultuous week,” Secure Digital Markets said. “The critical support level of $53,000, which has been the subject of much discussion across online forums and dinner tables alike, has finally been tested.”
“The RSI indicator has signaled its first oversold condition since August, just before the upward squeeze,” the analysts added. “For Bitcoin to gain further momentum, prices need to surpass $58,500, with a breakthrough above $60,500 marking a return to bullish territory.”
They noted that “the recent shake-up in the crypto market has been influenced by Germany's Bitcoin sales and Mt. Gox's reimbursements. Germany, the eurozone's largest economy, still holds 39,826 BTC valued at $2.2 billion, according to Arkham Intelligence. This significant holding represents a potential source of selling pressure, accounting for nearly 9% of Bitcoin's 24-hour trading volume of $25.3 billion, suggesting continued price volatility.”
While headlines across the crypto industry have focused on the sales by the German government and the distribution of the Mt. Gox Bitcoins as the impetus for the recent weakness, analysts at Bitfinex pushed back against this narrative, opting instead to point to normal seasonal weakness.
“It is important to note that the realised capitalisation of Bitcoin flowing onto the market since 2023 - that is the value of Bitcoin bought and sold - amounts to $224 billion,” they said. “This compares to only $9 billion from Bitcoin that was seized and subsequently sold by governments, including that from the United States and Germany. This represents only four percent of the total cumulative realised value added to the market since the start of 2023.”
“Despite the large nominal value, the actual number of Bitcoins transferred to exchanges amounts to only hundreds of millions of dollars, which suggests that the real market impact and the supply overhang from government-seized Bitcoins are relatively minimal,” the analysts added. “This suggests that while the sales of seized assets are significant in terms of individual transactions, their overall effect on the market dynamics and BTC price stability is less substantial than it might initially appear.”
Bitfinex analysts said that, historically, “periods of negative funding rates combined with low short-term SOPR values (a financial metric that gauges the realised profit or loss on a given day for wallets falling under a specific cohort of investors) have often marked the bottom of price corrections.”
“Negative funding rates suggest that selling pressure is high or sellers are dominating the market, but it can also indicate that the market is oversold,” they added. “When this oversold condition aligns with a recovering SOPR, it often signals that the market is finding a floor.”
“Further, the funding rate across BTC perps have turned negative for the first time since the May 1st bottom,” the analysts said. “This might be seen as increased bearish sentiment but it also reinforces the view that BTC might be stabilising or nearing a potential bottom, as the balance of buying and selling pressures evolves.”
Swing trader Crypto Rob posted the following chart highlighting the potential formation of a bullish cup and handle pattern which supports the stabilization thesis from Bitfinex.
$BTC Building a multi-year massive pattern here ?
But you don't believe it ✍️ pic.twitter.com/2xInGBGaxC— Crypto-ROD (@RodMaartin) July 6, 2024
But IWantCryptoNews highlighted a less optimistic trend between price action and RSI that has historically been followed by a large pullback, suggesting that Bitcoin is not quite out of the danger zone yet.
$BTC | Let us pray it is different this time. pic.twitter.com/hd0C2oYGJq
— iWantCoinNews? (@iWantCoinNews) July 8, 2024
At the time of writing, Bitcoin trades at $56,278, a decrease of 1.73% on the 24-hour chart.
Altcoins start the week mixed
Altcoins were a mixed bag on Monday, with slightly more tokens in the top 200 recording losses than gains.
Daily cryptocurrency market performance. Source: Coin360
The field was led by aelf (ELF), which increased 21.5% to trade at $0.421, followed by gains of 14.5% and 10.1% for Celestia (TIA) and Curve DAO Token (CRV), respectively.
The overall cryptocurrency market cap now stands at $2.07 trillion, and Bitcoin’s dominance rate is 53.5%.
