Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for July 11, 2019. The text below is an excerpt and does not contain the full analysis.
As was widely expected, the Federal Reserve came out in strong support of the financial markets yesterday. What wasn’t expected was their change in tone regarding Facebook’s Libra project.
The last time he was asked about Libra, Fed Chairman Jerome Powell stated that he did not feel that it posed a risk but yesterday it was quite clear that the Fed is now on high alert.
Whether connected or not, we may never know, but the drop in bitcoin yesterday definitely happened on the heels of the Fed Chair’s comments. The purple circle here shows the exact moment that the Fed addressed the Libra situation.
The crypto community feels very strongly that the Libra project is bullish for bitcoin as it is attracting mainstream attention to the space and may one day create a new gateway where people will be able to buy bitcoin with Libra. So, the Fed’s call for increased oversight certainly has the potential to delay this from happening.
Now, we certainly know that correlation does not equal causation and my personal feeling is that most cryptotraders are not exactly watching the Fed testimony for signals of when to buy and sell bitcoin. However, the timing here is more than enough to raise suspicion.
In my mind, bitcoin should probably be reacting to the headline news that the Fed is cutting rates and supplying more liquidity to the market. More liquidity means more money for investments, which should send the price up, but what do I know?
Today’s Highlights
- Blockstack Cleared by the SEC to Hold First Regulated Token Offering: The SEC has given Blockstack the green light to raise up to $50 million by offering a utility token to average investors under a license known as A+. This could be considered the first regulated token offering.
- BTC Tests Lower Bounds Despite Harsh Volatility: After failing to breach a new high, bitcoin began very quickly testing the lower bounds of the current range. If it were to breach $10,000, it could signal a longer cooldown.
- Fed Friendly to Markets, Not Libra: Fed Chairman Jerome Powell’s remarks yesterday signaled accomodation to markets. He also warned of the potential risks of Libra, which coincided with a drop in bitcoin price.
Please note: All data, figures & graphs are valid as of July 11th. All trading carries risk. Only risk capital you can afford to lose.
Traditional Markets
The strong jobs numbers from last Friday are apparently not considered heat. Or so says the Fed.
Apparently, neither does the trade truce between the US and China remove the risk of trade-related risks. Well, I suppose that part makes sense. As long as Donald Trump is in office, we do need to be aware of the possibility that a Presidential Tweet can change the outlook for better or worse.
Markets were glad about the Fed’s dovish signal and indices did see a nice pop. The excitement didn’t seem to last too long though as much of the initial reaction was reversed fairly quickly as the Dow Jones ran into resistance at 27,000.
The rest of the markets also remained consistent with what we might expect while entering a rate cut environment. The question analysts are now squabbling over is, if it will be a one and done, or if the Fed is looking to enter a rate-cutting cycle that will bring the interest back towards zero?
Most likely, the Fed themselves haven’t decided just yet and are awaiting cues from the market.
A+ for Crypto
Despite the Fed’s abovementioned newfound fear of Libra, it’s becoming increasingly clear that US lawmakers are finally warming up to cryptoassets.
Yesterday, we saw another first for the American crypto market…
Blockstack is a company that is currently building a platform for the decentralized web and already has several notable projects built on top.
The SEC has now given them a green light to raise up to $50 million by offering a utility token to average investors under a license known as A+. This is opposed to a D license that only allows projects to raise money from accredited (rich) investors.
This is a massive step towards the much-needed clarity for the US crypto space.
Trading in the range
Though yesterday’s volatility was a bit harsh, this is the kind of thing that bitcoin traders should be used to already. After failing to breach a new high, the market began very quickly testing the lower bounds of the current range.
As we’ve stated before, the upper bound is very clearly defined. A breakout above $13,800 (yellow line) would no doubt spur FOMO. However, the bottom of the range is a bit less clear. Various chartists will no doubt identify several key points within the blue box that could be named as support.
No doubt, the big one that many will gravitate to is the psychological round number of $10,000 per coin.
If it turns around here, it would be a strong signal of higher lows and increased momentum. The lower we go, the longer the cooldown could last.
Let’s have an amazing day ahead.
Mati Greenspan can be found on LinkedIn, Twitter, or etoro.Â
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