We report the traditional weekly crypto market analysis based on the contribution by Aayush Jindal (Cryptonews.com). The analysis was made on July 10.
After a steady rise, bitcoin price struggled to continue higher above the $9,480 and $9,500 levels. BTC is correcting lower and it is trading well below 9,300. The price is approaching the 9,150 support and it might revisit the 9,050 and 9,000 support levels.
On the downside: if there are more losses below 9,000, there is a risk of more downsides.
On the upside: the price is likely to bounce back above the 9,300 resistance level.
Ethereum price is down over -2.0% and it is trading below $240. It seems like ETH is approaching the 235 support level.
On the downside: the next major support is near 230, below which the bears are likely to take control.
On the upside: the price might start a fresh increase above the 240 and 242 resistance levels. The next major resistance is seen near 248.
Bitcoin cash price failed to continue above $245 and recently declined below the $240 support.
On the downside: the current price action suggests BCH is likely to continue lower towards the 232 and 230 support levels. On the upside: 240 might once again act as a barrier in the near term.
Litecoin failed to stay above the $45.5 pivot level and it started a downside correction. LTC is trading below 45.0 and it is approaching 44.0. The first key support is near 43.2, below which the price might test the main 42.2 support zone.
XRP price traded to a new weekly high above $0.210 before starting a fresh decrease. The price broke the 0.202 and 0.200 support levels.
On the downside: XRP is approaching the 0.196 support and it might even continue to move down towards the 0.192 support.
On the upside: 0.202 is a hurdle before the 0.205 resistance.
In the past three sessions, a few small-capitalization altcoins gained over +10.0%, including ERD, BTT, SERO, and TMTG. Conversely, FXC, HEDG, DOGE, VET, SC, and SNT are down more than -10.0%.
Bitcoin Balances on Exchanges Hit New Low
Fredrik Vold (Cryptonews.com) writes that Bitcoin balances held on exchanges has continued their falling trend, hitting a 13-month low last week.
“The new low in exchange balances was reported by blockchain analytics firm Glassnode, which said on Twitter that the 13-month low of about 2.62 million BTC held on exchanges is a further step down from June 30, which saw 2.63 million BTC held on exchanges.
Exchange balances have been in decline for the better part of 2020. Meanwhile, several theories have been discussed as the reason for the move away from exchanges, with some insiders pointing to over-the-counter deals, while others have said an increase in the bitcoin whale population shows that large holders increasingly prefer to take full control of their own coins.
And although 2020 has seen a decline in exchange balances of bitcoin, the downtrend is still a relatively new phenomena for bitcoin, which can be seen when zooming out on the longer-term chart back to 2017. Since then, exchange balances have pretty much been in a continuous uptrend, with relatively minor pullbacks along the way”.
The Fed’s Declining Balance Sheet Might Not Be Bearish for Bitcoin
Omkar Godbole (Coindesk.com) reports that the Federal Reserve’s balance sheet is contracting, but despite popular opinion that’s not necessarily bad news for bitcoin.
The Fed’s balance sheet “declined by $88 billion to $6.97 trillion (-1.5%) in the week ending July 8, having hit a record high of $7.16 trillion in early June, according to the data source Federal Reserve Bank of St. Louis. The decline is the largest in 11 years.
The drop is a sign of the Fed starting to unwind the liquidity-boosting measures rolled out over the past four months to counter the economic effects of the coronavirus crisis. Some have anticipated a pullback in bitcoin prices as a result.
That’s because the leading cryptocurrency by market value has recently developed a relatively strong positive correlation with the S&P 500. Wall Street’s equity index has rallied by over +40.0% since a slump in March, largely on the back of Fed’s balance sheet expansion. As such, a contracting balance sheet could portend a pullback in stocks, and perhaps bitcoin.
However, zooming into the details of the Fed’s balance sheet reveals the reduction has been primarily driven by a drop in demand for emergency liquidity measures, a sign the coronavirus-induced stress in the financial system has eased.
Notably, dollar swap lines – reciprocal agreements between central banks to keep currency available for their commercial banks – have fallen by over $40 billion. The Fed opened dollar swap lines with other central banks after the coronavirus crash caused a dollar shortage in the international markets. Therefore, the latest decline in the dollar swap lines could be considered good news.
Meanwhile, the balance of outstanding repurchase agreements, or repos, slipped to zero from $61.2 billion seen in the week ended July 1. Repos are a source of short-term funding for commercial banks. The Fed began injecting liquidity in the repo market in mid-September 2019 and ramped up the effort following the market crisis in March.
As such, the decline in repos to zero indicates that the coronavirus-induced stress in the funding markets has eased significantly.
However, the Fed is still injecting liquidity into the U.S. economy via purchases of U.S. Treasuries at a faster pace. The central bank accumulated Treasuries worth $18 billion during the past week, pushing the overall bond holdings to a new high of $4.23 trillion.
All in all, the Fed’s balance sheet contraction and drop in repos and swap lines appear indicative of a Goldilocks scenario for equities, given the ongoing crisis at least, and seems unlikely to pose a threat to bitcoin’s price. The cryptocurrency would still face stronger selling pressure if stocks once more collapse on adverse coronavirus news”.