Extreme fear among traders: BTC continues to fall ahead of the Fed meeting, here’s what you need to understand

Helene is a US markets reporter at CoinDesk, where she covers the US economy, the Fed, and bitcoin. She is a recent graduate of New York University’s Business and Business Journalism program.

Tracy Wang is a senior reporter at CoinDesk. It owns BTC, ETH, MINA, ENS, various stablecoins and a few NFTs.

Krisztian Sandor is a reporter on the Crypto Explainer+ team. He has written for Forbes and Reuters. It holds BTC and ETH.

The largest cryptocurrency by market capitalization fell further on Tuesday, as layoffs in the cryptocurrency sector widen and traders worry about a likely bigger-than-expected rate hike from the US central bank.

Falling for the eighth day in a row, bitcoin has regained some strength after falling to a 30-month low of $20,834.50 on Monday night, but is still down more than 5% over the past few months. last 24 hours.

The 15% price drop at the start of the week is the largest since the crash caused by COVID-19 on March 12, 2020.

It’s not just bitcoin, but cryptocurrencies of all market capitalization sizes that have suffered in the current sell-off, following sharp declines in stocks, as Arcane Research noted in a report on Tuesday.

“We’re coming out of about a decade of monetary stimulus and the money supply has grown rapidly, and for the first time market participants are being taken away from the punch bowl,” said Fundstrat’s head of digital asset strategy. Global Advisors, Sean Farrell, on CoinDesk TV. “I think we’ll still need to see inflation start to roll before we can be confident in any bull run and slow everything to the upside. »

An article in the Wall Street Journal on Monday hinted at a 75 basis point rate hike by the Fed following its two-day closed meeting on Wednesday.

Traders therefore fear uninterrupted year-round monetary tightening, as proposed by Atlanta Fed Chairman Raphael Bostic earlier this month, which temporarily supported cryptocurrency markets. . Goldman Sachs (GS) economists now hold rate hikes of 75 basis points for June and July, followed by a 50 basis point hike in September and a 25 basis point hike in November and July. december.

“Investors should expect to see sticky correlations at least in the days ahead,” the Arcane researchers wrote.

As a result, bitcoin’s fear and greed index reached 8, signaling extreme fear. While the market is in extreme fear territory for the 56th consecutive month, this level has not been seen since March 2020.

●Bitcoin (BTC): $22,185, -4.99%.

●S&P 500 daily close: $3,735, -0.38%.

●Gold: 1809 dollars per troy ounce, -1.04%.

●Daily closing ten-year Treasury yield: 3.48%

Prices for bitcoin, ether, and gold are taken at around 4 p.m. New York time. Bitcoin is CoinDesk’s Bitcoin Price Index (XBX); Ether is CoinDesk’s Ether Price Index (ETX); gold is the COMEX spot price. Information about CoinDesk indices is available at coindesk.com/indices.

Celcius’ CEL token surges 8x on intraday spike

The two Celsius at Bitcoin Miami 2022 (Danny Nelson/CoinDesk) See also: Here’s the outlook for Bitcoin’s price as geopolitical tensions escalate and interest rates rise..

The CEL token of the lending platform of crypto-Celsius currency rose eightfold from 30 cents to $2.57, according to FTX data, before falling back to around 54 cents. That’s still up from 35 cents before the recent crash when Celsius halted withdrawals on June 12, citing “extreme market conditions.”

According to data from the exchange, it appears that the latest price jump came from a large spot buyer on the FTX cryptocurrency exchange.

A trader who spoke with CoinDesk says the price action indicated a short squeeze as the short sale of the Celsius token became an “overcrowded trade.” A “short” position is when traders bet on a token’s price falling.

A “short squeeze” occurs when the price of a token rises sharply, prompting traders who have bet against it – often with borrowed money or tokens – to buy it back or “hedge” the position, in order to avoid greater losses.

Questions limiting Celsius’ financial health have made waves in the cryptocurrency markets.

ETH underperformance echoes “Crypto Winter”: Largest altcoin, ether (ETH), underperforms bitcoin (BTC), just like during crypto markets pullback in 2018, investment bank Morgan Stanley (MS) said in a report on Monday. “When the relative ETH/BTC crossover drops, it’s a sign that the general enthusiasm for crypto is waning,” as money is pulled out of more volatile alternative coins, according to the note. Analysts added that this time around, it is mostly institutional investors who are driving the sell-off. ETH has fallen around 75% from its November high and changed hands at $1,215. More information here.

Short and long positions liquidated: Cryptocurrency futures lost more than $1 billion in one day as major cryptocurrencies fell an average of more than 15%, according to data. Among altcoin futures, ether (ETH) liquidations led the way with $308 million in liquidations, followed by SOL with $18.8 million and ADA with $7.5 million. GMT futures on the Stepn move-to-earn app posted losses of $6.6 million. Liquidations occur when a trader does not have sufficient funds to keep a leveraged position open and the trade is forced to close.

Thomas Estimbre
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