Market Wrap: Recession Fears Halt Crypto Bounce

Hi, I’m Krisztian Sandor, here to take you through the day’s crypto market highlights and news.

Bitcoin (BTC) traded at about $20,800 Monday afternoon, paring some of its gains from last week.

The largest cryptocurrency by market capitalization is holding ground above the key $20,000 level, but analysts aren’t optimistic about the prospects for a sustained rally, Jimmy He reported today.

EToro’s crypto analyst Simon Peters said that crypto has suffered from the same toxic mix of poor company earnings, inflation and central bank rate hikes that have hurt stocks and other assets this year. Crypto prices have correlated increasingly to equity indexes, particularly those with a heavy technology component. Oanda senior market analyst Craig Erlam said that fizzling bitcoin rallies reflect an overall downbeat sentiments about riskier assets.

On Monday, however, panic over troubled crypto lender Celsius Network and insolvent crypto hedge fund Three Arrows Capital seemed to ease. Howard Greenberg, president and co-founder of Prosper Trading Academy, told CoinDesk that the Bitcoin Fear & Greed Index is easing.

Greenberg said that he was “watching the 200-week SMA (simple moving average) at $22,650 as the key price we need to regain and hold to see a return to higher trading ranges across the crypto sector.”

Most other cryptocurrencies slid on Monday. Ether (ETH), the second-largest cryptocurrency, was recently changing hands at just below $1,200, down 2.3% during the last 24 hours. Polygon’s MATIC token, which was one of last week’s biggest gainers, led the declines among altcoins, falling 9.8%.

In traditional markets, the fear of a recession curbed the optimism that fueled last week’s bounce, as bearish sentiment among investors increased 11.4 percentage points to 58.3%, while bullish sentiment dropped to 19.4%, according to the AAII short-term investor optimism survey that market research firm Macro Hive cited in a note.

The S&P 500 traded fell 0.3%, and the Nasdaq index was down 0.8%.

Industrial metals such as copper and tin are on track to have their worst quarter since the financial crisis in 2008, Bloomberg reported, underscoring the looming prospect of a recession.

“We are in a bear market, and it is a bear that will probably keep growling,” Bilal Hafeez, CEO and research head at Macro Hive, wrote in a newsletter.

Latest prices

Grayscale Lines Up Jane Street and Virtu as ‘Authorized Participants’ if GBTC Converts to ETF

By Michael Bellusci

Grayscale Investments said Monday it would work with market-making heavyweights Jane Street and Virtu Financial as authorized participants should its Grayscale Bitcoin Trust (GBTC) gain Securities and Exchange Commission approval to be converted into an ETF.

“Authorized participants” are specialized traders who can create and redeem shares of an ETF.

A decision on Grayscale’s ETF application is due on or before July 6, and the heavy betting is that the SEC will deny the proposal. Nevertheless, CEO Michael Sonnenshein reiterated his company’s “unequivocal” commitment to converting GBTC from a trust to a spot ETF.

The owner of the $13.5 billion Grayscale Bitcoin Trust awaits an imminent decision from the SEC on its spot Bitcoin ETF proposal. GBTC trades at a nearly 30% discount to net asset value – an amount that would be quickly erased were the trust to become an ETF. (Grayscale’s parent company is Digital Currency Group, which also owns CoinDesk.)

Read the full story here

Altcoin roundup

• XCarnival loses $3.8M in an exploit, recovers 50%: The Ethereum-based platform that acts as a lending aggregator for non-fungible tokens (NFTs) lost $3.8 million after a hacker exploited a smart contract flaw. XCarnival managed to get back $1.9 million from the hack. Read more here.
• FTX token raises $7 million: A community dedicated to FTT, the native token of crypto exchange FTX, has raised $7 million (250,000 FTT). The money will be converted into an ecosystem fund that will contribute to community-led projects across decentralized finance (DeFi) and crypto education. Read more here.
• Crypto hedge funds are shorting USDT: Crypto-focused hedge funds are increasingly shorting tether (USDT), a U.S. dollar-pegged stablecoin, nearly a month after the implosion of the terraUSD (UST) stablecoin, the Wall Street Journal said in a report on Monday. One trader says the positions are worth at least “hundreds of millions” of dollars in notional value. Read more here.

Relevant insight

• Listen ????: Today’s CoinDesk Markets Daily podcast discusses the latest movements on the market and explores the pros and cons of on-chain credit protocols.
• Goldman Cuts Coinbase to ‘Sell’ Due to Fall in Crypto Prices and Industry Activity; Shares Drop: The company faces a difficult choice between shareholder dilution and effective employee compensation, the report said.
• B2B Payments Platform Tribal Joins the Blockchain Association: The emerging markets-focused company is becoming a member of the crypto-lobbying group and plans to engage with regulators and other stakeholders.
• Recent Crypto ‘Bloodbath’ Is Not Necessarily Bad, Regulators Say: The recent crypto market downturn can help weed out bad actors and unsustainable projects, a number of regulators and entrepreneurs said at a forum in Zurich last week.
• Voyager Digital Issues Default Notice to 3AC, Draws Down $75M of Alameda Revolver: Shares in the crypto exchange plunged last week on disclosure of its exposure to Three Arrows Capital.
• Nexo Sends Cease-and-Desist Letter to Anonymous Twitter Account Accusing It of Embezzlement: The firm’s co-founder has been accused of stealing money from a charity.
• NFT, Private Wallet Fates Hang on EU Crypto Talks This Week: Officials could this week make final controversial privacy and licensing rules for the sector – once they decide how to treat NFTs and unhosted wallets.
• Crypto Exchange Unizen Receives $200M ‘Capital Commitment’ From Investment Group GEM: The investment is milestone-based and performance-related as a means of ensuring the funding is optimized fully.
• Azuro Raises $4M for ‘Decentralized Sportsbook Protocol’: The funding marks the latest injection of capital into the nascent blockchain betting industry.
• Australian Crypto Exchange Banxa Lays Off 70: The company cut 30% of its staff, citing the crypto winter.

Other markets

Most digital assets in the CoinDesk 20 ended the day higher.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.