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Market Wrap: Bitcoin Expected to Pause Before Next Rally

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·6 min read
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Bitcoin buyers are in profit-taking mode as the cryptocurrency tests the $40,000 resistance level. Sentiment has significantly improved over the past week, although some analysts think it’s time for a pause before another leg higher.

“BTC easily broke through $35K, but I think it will probably have a harder time going through $40K this time,” Justin Chuh, a senior trader at Wave Financial, wrote in an email to CoinDesk.

“Miners & sellers are coming in to cash out once more and buyers unable to push it higher after absorbing that hit,” Chuh wrote.

Latest prices

Related: Bitcoin Overbought at $40K Resistance; Support at $34K-$36K

Cryptocurrencies:

Traditional markets:

  • S&P 500: 4403.9, +0.056%

  • Gold: $1808.1, +0.5%

  • 10-year Treasury yield closed at 1.233%, compared with 1.238%

Moving average watch

Sentiment can easily shift from bullish to bearish as bitcoin remains in a consolidation phase with strong overhead resistance.

“BTC was already rejected again by its 200-day moving average, just like in early June, but it should try again after a breather, and hopefully not crawling lower than $35K,” Chuh wrote. 

Related: Think Tank Rand Says Crypto Should Be Included in US-Japan Digital Trade Deal

“If (and when) bitcoin does cross the 200-day, this will signal confidence in the market and demonstrate to many players that the bulls have regained control of the market,” Alexandra Clark, a trader at U.K.-based digital-asset broker GlobalBlock, wrote in an email to CoinDesk.

For now, trading activity is sharply higher compared with June. Short-dated call options were actively traded Wednesday morning as bitcoin approached $40,000, according to data from Skew.

GBTC discount narrows

Grayscale Bitcoin Trust (GBTC) shares have narrowed their discount relative to the underlying cryptocurrency held in the fund – possibly a sign that buyers are using the vehicle to bet on the recent recovery rally in digital-asset markets.

The GBTC shares traded at a discount of 6.6% to net asset value (NAV) on Tuesday, the smallest margin since June 22, based on data provided by the crypto derivatives research firm Skew. The discount had widened to 15% in mid-June. 

Some investors may have snapped up GBTC shares in hopes that the discount will evaporate with a bull revival in bitcoin. In that scenario, the buyers would reap any price gains on bitcoin while pocketing extra profit from a narrowing of the discount. (Grayscale Investments, which manages the trust, is a unit of Digital Currency Group, which also owns CoinDesk.)

Ether trading volumes surge

The ether market grew three times faster than the bitcoin market did in the first six months of the year as large investors diversified into the native token of Ethereum’s blockchain, according to crypto exchange Coinbase’s half-yearly review published on Monday.

Crypto CEOs are bullish

Crypto investors have just endured one of the toughest quarters on record. Despite a recent rebound, fears of overregulation, a clampdown on mining in China and environmental concerns have all contributed to negative sentiment in the sector. Most CoinDesk 20 assets, which constitute about 99% of the crypto market by verifiable volume, finished the second quarter with negative returns. 

The CoinDesk Bitcoin Price Index (XBX) fell 40%, its third-worst quarter ever. Conversely, the CoinDesk Ether Price Index (ETX) ended the quarter up 18.7%. While bitcoin has recovered some of its losses, the level of optimism is far from what it was at the start of the second quarter.

Some crypto CEOs, however, still expect a six-figure bitcoin price, saying that the medium-term outlook for the crypto market is positive, even if sentiment is not, CoinDesk’s Will Canny reports

Why stablecoins are in the spotlight

Stablecoins have existed for roughly seven years, but talk about them has never been as heated as in recent weeks, not only within the crypto community but also among regulators and traditional market investors. 

Much has been going on the world of stablecoins recently, and some of it can be overwhelming. Here are the three big things happening now:

  • Tether is under a cloud: As the most traded cryptocurrency in the market, USDT has become a backbone for the entire cryptocurrency ecosystem. Over half of all bitcoin trades are made against it. However, Tether, the company behind the digital token, has been plagued by regulatory issues.

  • Regulatory heat: Stablecoins had a total market capitalization of $116 billion as of Monday, an almost fourfold increase since the start of this year, according to CoinMarketCap. As growth has increased, so has the attention from U.S. and other regulators. 

  • Circle going public, other stablecoin issuers disclose more info: Circle, the issuer of USDC, the second largest stablecoin, has also been in the spotlight. Circle plans to go public through a merger with Concord Acquisition Corp., a publicly traded special purpose acquisition corporation (SPAC). The deal would value the crypto financial services firm at $4.5 billion. Another stablecoin issuer, Paxos, also released for the first time a breakdown of reserves for its stablecoins, Paxos standard and the Binance-labeled BUSD. Some 96% of the reserves was held in cash and cash equivalents, while 4% was invested in U.S. Treasury bills as of June 30.

Altcoin roundup

  • XRP rallies: XRP, a cryptocurrency used by Ripple in its payments network, rallied to a five-week high on Wednesday after the company said it is targeting the $1.8 billion Filipino remittance market. The cryptocurrency changed hands at $0.74 during the European hours, hitting its highest level since June 21 and representing a 13% gain on the day, according to CoinDesk 20 data. 

  • Ether Trading Volume Surges: Ether’s trading volume totaled $1.4 trillion in the January-to-June period, a 1,461% rise from $92 billion observed in the first half of last year.

  • Burger King Brazil accepts dogecoin: Burger King Brazil now accepts dogecoin (DOGE, +2.64%) as a payment method to purchase the fast-food chain’s Dogpper, a dog snack. The service has been available since Monday, according to the company’s official website, though users should check the availability of delivery in their region, the company said. Each Dogpper – a dog treat that plays on the name of Burger King’s best-known menu item, the Whopper – costs 3 DOGE. The company recommends purchasing a maximum of five units per order for “availability reasons.” 

Relevant News:

Other markets

Most digital assets on CoinDesk 20 ended up higher on Wednesday. 

Notable winners of 21:00 UTC (4:00 p.m. ET):

xrp (XRP) +12.51%

eos (EOS) +6.43%

uniswap (UNI) +4.77%

Notable losers 

the graph  (GRT) -0.31%

yearn Finance (YFI) -0.23%

USD Coin (USDC) -0.06%

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