Cryptos Rebound Again

Cryptocurrencies recovered from the low levels of Monday when Bitcoin and Ethereum had plunged below the psychological $40k level (to $39,796.57) and $3k level (to $2,947.68) respectively in a moment of panic over the Fed’s likely actions going forward.

Aggregate market capitalization has recovered to $1.96 trillion, from the low of $1.86 trillion on Monday.

Amount of crypto money parked in stablecoins, or in other words, the stablecoins’ dominance dipping to 8.42 percent from 8.60 percent a day ago is indicative of the re-emergence of risk-on sentiment in a small way.

Bitcoin is now trading at $41,836.11, gaining 2.25 percent overnight whereas Ethereum is trading at $3,124.73 having moved up 2.88 percent in the past 24 hours.

Bitcoin’s dominance has slipped to 40.4 percent, from 40.5 percent on Monday. Ethereum’s share edged up to 19 percent from 18.9 percent on Monday. The residual altcoins’ market share remains stable at 40.6 percent.

Open interest in the Bitcoin Futures contracts at Chicago Mercantile Exchange declined marginally to 11262 on Monday, from 11297 on Friday. Open interest in the Ether Futures contracts declined to 11262 on Monday, from the level of 11297 on Friday. The extent of leverage as revealed by the open interest could be an indication of imminent volatility in the days ahead.

Meanwhile, crypto markets appear to have taken in its stride SEC Chair Gary Gensler’s remarks in an interview to CNBC, that projects raising money from the public, where the public is in anticipation of profits based upon the promoter’s efforts, could be within the securities laws.

4th ranked BNB (BNB) has gained 5.82 percent overnight and is currently trading at $451.03.

6th ranked Solana’s overnight gains are more modest at 0.58 percent.

7th ranked Cardano has advanced 3.08 percent from Monday’s levels.

Among the top-ranked cryptos, 20th ranked NEAR Protocol (NEAR) has gained 16 percent overnight. 13th ranked Polygon (MATIC) follows with gains of close to 11 percent. Among the wider top-100 cryptos, 80th ranked Oasis Network (ROSE) has gained 22 percent.

Tuesday, the Fed Chair Jerome Powell’s testimony before the Senate Banking Committee will be keenly watched. The questions by the Senate and his responses on subjects ranging from inflation, rate hikes, the labor market, monetary policy stimulus and the speed of the economic recovery could provide cues on the pace and pressure of monetary policy normalization by Fed that would ensue.

The decisive U.S. inflation numbers due on Wednesday could also throw light on the Fed’s likely urgency in fighting the inflationary inferno.

As the hyper-inflation narrative gets stronger, the debate over whether Bitcoin can be an effective inflation hedge would continue to rage. The digital assets would have to demonstrate inflation-beating returns and offsetting negative correlation with the riskier assets to justify a widespread diversification into the crypto space.

Bitcoin’s annual returns of 23 percent, Ethereum’s annual returns of close to 200 percent, Gold’s negative annual returns of 2.6 percent and Brent Crude Oil’s annual surge of 45 percent are all to be viewed in this context. The comparative annual performance of the big names in the global financial assets landscape, viz Google which has gained 57 percent, Microsoft which has advanced 45 percent, Apple which gained 34 percent, Tesla which has rallied 31 percent, Facebook which has moved up 28 percent and Amazon which has edged up 3.7 percent too deserve to be contrasted from this perspective.

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