First Mover Asia: Bitcoin Has Not Bottomed Out, Data Suggests; Ether and Other Altcoins Fall in Monday Trading

Good morning. Here’s what’s happening:

Prices: Bitcoin rises but ether falls in Monday trading.

Insights: Bitcoin may not have reached its lowest point, data from two research firms suggests.

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Bitcoin and Ether Take Different Paths in Monday Trading

By James Rubin

Monday trading offered a tale of two cryptos.

Bitcoin rose but ether fell a day before the release of the latest U.S. inflation reading and three days before the launch of the Merge.

BTC was recently trading at about $22,200, up almost 2% over the past 24 hours. The largest cryptocurrency in market value soared past $22,000 early Monday as investors’ appetites for riskier investments returned.

Ether recently plunged over 2% from the previous day to trade just below $1,700 after rising over this threshold late Sunday. Investors continue to eye Thursday’s expected Merge, the technological overhaul of the Ethereum blockchain that will shift its protocol from proof-of-work to more energy efficient proof-of-stake.

In an email, Oanda Senior Market Analyst Edward Moya attributed the two cryptos’ differing paths to some traders’ “sell the event” reaction. “It looks like some of the profit-taking with Ethereum is benefitting Bitcoin and other blockchain crypto bets such as Cardano, Solana, and Polkadot,” Moya said.

Moya added optimistically that “Many are still skeptical of September crypto rebound, but if price action does not turn south here, momentum traders could trigger a decent move higher.”

Most other major cryptos were recently in the red with ADA and CRO both off more than 3% over the past 24 hours but SOL rising over 3%.

Cryptos’ earlier gains tracked equity markets, which continued a mini winning streak with the tech-heavy Nasdaq, S&P 500 and Dow Jones Industrial Average all climbing more than a percentage point. Investors have been feeling more upbeat about the prospect of a positive Consumer Price Index (CPI) on Tuesday showing inflation’s momentum continuing to wane. Consensus expectations are for a CPI equal or less to July’s 8.5% figure. Other indicators, including job figures, have remained strong suggesting the economy will achieve the U.S. central bank’s hoped-for, soft landing. Asset markets may also be responding positively to Ukraine’s successful counteroffensive in its war with Russia and the prospect of diminishing macroeconomic activity.

“The start of the trading week was supposed to be all about the August inflation report, but Kyiv’s sudden momentum has many hoping that this moment is a turning point with the war against Russia,” Moya wrote, although he noted ominously that “Russia’s strategy may now shift to attacking civilian infrastructure, which could lead to widespread blackouts and slow the current counteroffensive moves.”

In crypto news, financial services giant Fidelity is contemplating whether to let individual brokerage customers trade bitcoin (BTC), The Wall Street Journal reported, citing people familiar with the situation. The initiative would offer the latest evidence of traditional financial services firms’ growing interest in the crypto space.

Earlier in the day, crypto exchange Huobi said that it would delist seven tokens, including Monero and Zcash.

In an interview on CoinDesk’s First Mover TV program, head economist of decentralized protocols at software company ConsenSys, said that cryptocurrencies respond to external events similar to other riskier assets. “The story about the macroeconomic environment is, if it allows consumers to have a larger budget – and certainly the COVID environment was that – they’re more likely to take risks, they’re more likely to use Web3 and try new protocols,” he said. “And if they’re compressed, and they’re much more worried about paying down their mortgages or their rents, they’re going to have less discretionary budget. And so that’s going to be damaging for crypto prices in the short term.”

Bitcoin Could Be Headed Down Again

By Sam Reynolds

The price of bitcoin is fickle. One day it’s a risk asset, and the next day a hedge against inflation.

A surge Monday sent bitcoin over $22,000 for the first time in more than three weeks after the largest cryptocurrency by market capitalization spent the past three days comfortably above $21,000.

But a recent report from South Korea-based CryptoQuant outlines a number of different price valuation metrics that show bitcoin bottoming out between $10,000 and $14,500.

The Delta price metric is at the high end of CryptoQuant’s bearish model. The delta price measures the difference between the realized – the average price at which all bitcoin in existence has moved – and the historical moving average price. CryptoQuant puts the delta price at $14,478.

“Historically, the market has confirmed reaching a bottom when the price has touched the delta price, as in the 2015 and 2018 bear markets,” CryptoQuant writes.

CryptoQuant also points to valuation models based on exchange flow as possible indicators of where bitcoin will bottom out.

One of them, developed by CryptoQuant’s research team, is the Whale Exchange Inflow Price. This metric, which it says signaled the bottom in 2013 and 2018, measures the price at which bitcoin whales (those that hold between 1k-10k bitcoins) have sent bitcoin to exchanges. Currently, CryptoQuant puts this number at $10,335.

Finally, there’s also the Miner Exchange Inflow Price, which comes in at $14,214 (very close to the delta price). As the name implies, it’s the price at which miners send bitcoin to exchanges. Cryptoquant says this metric signaled the bottom of the Covid-19-induced panic sell of March 2020 as well as the bottom of the 2015 bear market.

An old tale

In late 2020, CoinTelegraph compiled a list of some of the worst bitcoin price predictions. Sure, there were many guesstimates from information-light influencers, but there were also serious attempts to create predictive models.

Nexo co-founder Antoni Trenchev predicted that bitcoin would end 2020 at $50,000 because of its lack of correlation with equities markets and moves in tandem with the price of gold.

Ross Ulbricht, the founder of the Silk Road darknet market, said that the volatility of March 2020 meant there would be a prolonged bear market throughout the year.

Twitter analyst CryptoWhale’s ‘quantum model’, which “effectively predicted every major move since 2018” posited a bull run post-March 2020 that would hit $24,000 by mid-2022.

Ironically, the best predictor of bitcoin price is now the stock market. The correlation narrative to equities, ironic as that might be for bitcoin’s maximalist followers, is something that the world’s largest digital asset can’t shake until there are major macroeconomic changes.

Bitcoin price prediction isn’t anything new, but so far there just hasn’t been a reliable model or method to do it. At the start of this year, analysts were calling for bitcoin to remain in the $40k-$60k band citing macroeconomic factors.

“We predict the catalyst for this move to be stubbornly high inflation numbers coupled with a continuation of negative real interest rates,” Gavin Smith, CEO of Panxora, told CoinDesk in January.

High inflation numbers are certainly with us, but $40k bitcoin is not. As bitcoin opened the Asia Tuesday trading day at about $22,100, we’ve got a long way to go – despite some macro indicators saying we should be elsewhere.

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8:30 p.m. HKT/SGT(12:30 p.m. UTC): Consumer Price Index (August/MoM)

In case you missed it, here is the most recent episode of “First Mover” on CoinDesk TV:

Ethereum Merge Countdown; Push for Bitcoin ETF Intensifies

Bitcoin was holding firmly above $22,000 as key U.S. inflation data is set to be released Tuesday and the Ethereum Merge is looming. Plus, a closer look at why the Chamber of Digital Commerce is calling out the SEC over spot-based bitcoin ETFs.

Suggestions That Bitcoin Halving Might Come Sooner Are Mostly Wrong: Bitcoin’s hashrate is reaching all-time highs, and it’s causing confusion about “the halvening” on Twitter.

Terra’s LUNA Tumbles More Than 30%, Making U-Turn From Surge: The price action in LUNA and LUNC tokens looks more like that of meme tokens such as DOGE and SHIB.

Crypto Exchange Huobi to Delist 7 Privacy Coins, Including Zcash, Monero: The company said it is complying with regulations in different countries and regions.

Ether May ‘Inevitably’ Turn Into a Store of Value After Ethereum’s Merge, Consensys Economist Says: Lex Sokolin, head economist of decentralized protocols at ConsenSys, joined CoinDesk TV’s “First Mover” to discuss why ether could be seen as a store of value as regular and institutional users stake their tokens on the network.

Algorand Boosters Push Back on Helium’s Proposed Move to Solana: Decentralized Wi-Fi network Helium Network has proposed moving to the Solana blockchain. But a Solana competitor has another idea in mind.