Bitcoin and Alt Markets Continue Bleeding as Corporation Earnings Come into Picture

Bitcoin (BTC) price successfully claimed $30,000 in the first half of April, setting a ten-month high of $31,005 on April 14 before losing its foothold across the better part of last week. The bulls initially attempted to defend the new heights but failed as the market slowed and regressed towards the end of the week. Bitcoin led the group dropping further on Thursday and Friday in a display of markets edging lower due to a lack of strength.

The leading crypto remained vulnerable heading into the weekend, as BTC price tracked downwards to as low as $27,200. Notably, the slump erased the last of gains raked by crypto assets post-Shapella. Coinglass data shows that the still-prevailing correction resulted in negative weekly returns (- 8.85% for Wk. 16), making it the first red weekly close since Wk. 10.

The extended BTC/USD price chart indicates that the seven-day price decline to lower consolidation grounds is the largest weekly loss since early November.

Crypto markets this week

Though crypto assets mostly made significant returns across Q1 in contrast to Wall Street indices, prices have moved in tandem with the Nasdaq-SPX ratio in recent weeks. The lockstep swings with the NDX/SPX correspond to growing hopes for an early Federal Reserve pivot.

Bitcoin price action

In its weekly report, CoinShares reported that Bitcoin saw outflows totaling $53 million last week, consequently ending a multi-week streak of inflows into digital asset investment products. The report attributed the trend to profit-taking action as Bitcoin traced a plateau at $30,000. Some market commentators theorize that the BTC/USD pair could continue consolidating in its current range or even lower until speculators get a sense of constructive development in regard to regulation.

Notwithstanding the latest market-wide correction, the flagship crypto has maintained its lead on gold, as seen in the BTC-to-gold ratio that has been tracing upward since the start of the year. The steadily growing ratio from its lowest level recorded following the collapse of the FTX exchange implies that Bitcoin has recovered decently and performed better than the precious yellow metal.

On Monday, Standard Chartered Bank analyst Geoff Kendrick projected BTC price to rally to around $100K by the end of the year on account of several catalysts like bitcoin halving. In the report, Kendrick pointed out increased appetite in the aftermath of the recent banking crisis and better perception of the asset, specifically as a branded haven, as significant price drivers.

The bank also forecasted a steady increase in Bitcoin’s dominance to unlock the 50-60% range. BTC market dominance hovered around 42% in the last week of 2022 before falling to 40% in January and regaining 44% before February. The dominance fell again in March at the time when several crypto-focused banks experienced liquidity issues before spiking to 49% on April 11.

Altcoins

Ethereum (ETH) price also pulled back on Monday to an intraday low of $1,810 as part of the market slump and was spotted down 12% in the last seven days. Solana (SOL) and Polygon (MATIC) have slumped by even bigger margins on the day, retracing 3.45% and 3.75% respectively.

To learn more about Ethereum, check out our Investing in Ethereum guide.

Stablecoins

The SEC’s regulatory action on Paxos in February, which included orders to halt the issuance of BUSD, has reshuffled the stablecoin market. Recent developments in the niche so far this month have resulted in even more changes.

Tether (USDT) market capital continues rising

Last week, Tether (USDT) extended its dominance in the niche as its market capital swelled, approaching the May 2022 record high of $83 billion at the time of the collapse of Terra. Tether’s treasury includes cash and cash equivalents, which account for 82.13%, with the rest held across corporate bonds, secured loans, and other crypto assets.

In its auditors’ report on Tether stablecoin reserves, public accounting firm BDO noted that Tether’s consolidated assets exceed liabilities. Sharing the findings, the stablecoin issuer said it gained $700 million in profits in the last quarter and reached its highest proportion of assets held in US treasury bills. Tether noted that the attestation conforms with its own Consolidated Reserves Report (CRR) that showed its total consolidated assets backing USDT were worth $67.05 billion – 82% of which were in cash and cash equivalents, while the total liabilities were $66.06 billion, as of Dec 31, 2022.

Specifically, $39.23 billion of Tether’s reserves were held in short-dated US Treasury bills, while the amount held with money-market funds grew to $7.37 billion quarter-on-quarter. Its cash and bank deposits holdings fell to $5.32 billion, secured loans slashed to $5.85 billion, and ‘other investments’ were $2.7 billion. The stablecoin issuer had also committed to getting rid of commercial paper (unsecured debt) from reserves backing the third largest cryptocurrency and most dominant stablecoin by market cap by the end of 2022. BDO confirmed that Tether achieved this goal. Though not included in the report, Tether recorded a net profit of more than $700 million in the last quarter, an amount the company dedicated to bolstering the reserves.

USD Coin (USDC) reels from March’s banking crisis

In contrast to Tether (USDT), the market capital of Circle-issued USD Coin (USDC) stablecoin has been on a decline since July 2022 with only brief periods of relief.

In the last six weeks, USDC market capital has shrunk from $44 billion on March 10 to $30.82 billion at writing. The mid-March plunge followed reports of Circle’s reserves being entangled with the now-failed Silvergate Bank.

USDC’s thinning market capital helps USDT’s dominance push beyond 60%

Tether (USDT) expectedly emerged as the biggest beneficiary as reflected in its dominance last tracked to 62.33% of all stablecoins currently in circulation, as per DeFiLlama data.

Curve’s 3pool exchange pool is coming back to normalcy

While USDC is generally performing poorly, it has quickly regained share in DeFi protocol Curve’s 3pool exchange pool. 3pool serves as a critical infrastructure for stablecoin trading. It should, under ideal circumstances, be populated with an equal measure of USDC, USDT, and DAI stablecoins.

However, as USDC started facing an exit of users, its position in the pool was hammered, but now USDC’s share has been restored. According to the Curve.fi website USDC currency reserves now lead with a 37.58% proportion, while DAI sits second with 34.72%, and the 112.2 million USDT contributes to 27.70% of the token balance in this pool. Observers reckon that the recovery course suggests that the token is no longer under as much strain, hinting at improving market conditions.

TradFi and crypto markets see sluggish start

Last week’s price downturn has been chalked up to mounting selling pressure fueled by macroeconomic uncertainties as bond yields increased and the US dollar liquidity fell.

The new crypto-week promises another treat of volatile action with several global financial events that could affect crypto markets. The majority of traders appear to have adopted even more cautious approaches this week in view of the increased probability of the Fed maintaining interest rates higher for longer. The probability of the US central bank increasing interest rates by 25 basis points (bps) is now at 87.2% per the CME FedWatch Tool.

Investors also await new events on the calendar, including global economic data. In the US, Q1 Gross Domestic Product (GDP) growth rate, employment cost index (ECI), and core Personal Consumption Expenditures (PCE) Index MoM in March, among other economic figures, are top of the watchlist.

GDP and CPI figures are also significant highlights in Europe, including Germany. In Asia, the Bank of Japan (BoJ) is set to deliver an interest rate decision in what will be Kazuo Ueda’s first meeting as the bank governor.

Earnings reports from leading S&P companies like Amazon and Meta are set for release later this week. Q1 figures for Microsoft and Alphabet are confirmed for an April 25 release. In anticipation, traders have seemingly retreated to the sidelines, fearing Big Tech’s expected mixed bag of earnings, which could disrupt the current calm market setup.

The majority of analysts contend a retest of the support zone between $25K to $27K is on the cards, in which case markets could bounce to higher grounds. Still, they caution speculators pondering the market’s next turn from ruling out further correction towards $22K in the event of a rejuvenated descent. Even in a worse scenario, i.e., a retreat to $22K, some believe the drop can still be interpreted as a healthy correction. In this case, the asset’s resilience could animate the market for upward action.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

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