Market Wrap: Bitcoin, ETH Rise After Wrapping Up Worst Month
High correlation between crypto and the broader equity markets and concerns over inflation still need to be watched in the second half of the year, analysts say
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- BTC rose 4.3% Tuesday after a flat long weekend while ETH went up by 3.7%
- Oil prices hit after West Texas Intermediate crude oil futures dipped below $100 per barrel Tuesday morning
After a relatively flat holiday weekend in the US, the top cryptocurrencies rebounded, if ever so slightly, Tuesday.
Bitcoin (BTC) climbed to over $20,300 by early morning trading — after holding its ground by fluctuating between the relatively narrow band of $19,000 to $20,000 since moving into July. BTC continued its rise, gaining 4.3% over the past 24 hours to around $20,600 as of 4:10 pm ET. Ethereum (ETH) ticked up about 3.7% to $1,160.
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Wrapping up the second quarter last Thursday, the crypto market’s drop in June was the worst month since it was made available on exchanges in 2010. BTC’s value dropped more than 38% for the month, and ETH’s market capitalization fell by 47%, CNBC reported. The slide followed Luna’s collapse in May and crypto lending platform Celsius’ crisis that led to a broad sell-off in the space.
Traditional markets also had a rough time. The six months through last Thursday were the US stock market’s worst first half of a year since 1970.
Concerns about inflation continued to put pressure on the benchmark Dow, which closed down 0.42% Tuesday. The broader S&P 500 index closed 0.16% higher, though, and the tech-heavy Nasdaq climbed 1.75% with the outperformance of video game software development company Unity Software’s shares going up 12.9% higher as of market close.
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Oil prices have seen a significant drop after West Texas Intermediate crude oil futures dipped below $100 per barrel Tuesday morning. Based on reporting from the G7 summit held in Germany last week, some officials think President Joe Biden’s plan allowing Russian oil to trade under a price cap could be used as a source of leverage to prevent price surges.
As major cryptos, such as bitcoin, have become a more mature global macroeconomic asset, it also pointed to a higher correlation with broader equity markets, Tom Dunleavy, senior research analyst at Messari, told Blockworks.
“Continued monetary tightening, coupled with no immediate signs of reprieve on the inflation front, is hurting all risk assets. Crypto still trades like a high beta risk asset,” Dunleavy said.
In the wake of the Covid-19 omicron variant surge, the economy this year took a hit from the energy crisis after Russia’s invasion of Ukraine. Gas and food prices have risen significantly, and inflation has hit a 40-year high. Now, investors are watching for another possible Federal Reserve interest rate hike that many are concerned could tip the US economy into recession.
Craig Erlam, senior market analyst at OANDA, wrote in a note last Thursday, that the US economy is among the best positioned to “fend off a recession but it’s not completely immune to the cost-of-living crisis. It may be catching up.”
- Despite the unstable market condition, some digital asset investment management firms still think opportunistic investors stand ready to allocate their capital.
- Digital Asset Investment Management’s research shows that crypto’s four largest stablecoins — Tether’s USDT, Circle’s USDC, Binance’s BUSD, and MarkerDAO’s DAI — by market capitalization have since grown considerably over a two-year period.
- Australian-based digital asset manager and custodian Zerocap told Blockworks that the circulating supply of the top four stablecoins increased by 12.6%.
- London-based cryptocurrency lender Nexo has signed a term sheet with Coinbase-backed digital assets platform Vauld, outlining its plan to acquire the firm’s assets.
- “Upon successful completion of the transaction, Nexo plans to acquire up to 100% of Vauld and reorganize its future operations with the aim to accelerate its deeper presence in Asia,” Nexo said in a statement on Tuesday.
- The firm has a 60-day exploratory period related to its intended acquisition, according to the agreement.
- Four Europe-domiciled exchange-traded products by 21Shares had a total return below -40%. 21Shares Aave ETP had the highest negative returns in Europe in June, yielding -52.6% according to Morningstar data.
- US ETFs have also taken a hit: Seven of the 15 worst-performing funds in June were crypto funds, according to Morningstar.
Entering the second half of 2022, what does it mean for crypto markets? Dunleavy thinks it’s worth watching how inflation impacts the bottom line for companies.
“Right now, price to earnings ratios on the broader indexes are in line with historic averages. If earnings miss, the indexes should meaningfully rerate lower, which should also drag crypto down,” Dunleavy said.
“Analysts have historically been too optimistic on earnings, particularly during recessions. That seems to be the case again with earnings being revised downward.”
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