First Mover Asia: Bitcoin Minnows Are Resilient as Long-Term Whales Capitulate to Pressure

Good morning. Here’s what’s happening:

Prices: Most cryptos decline as investors await the U.S. central bank’s likely decision to increase interest rates a half-point.

Insights: Minnows show their commitment to bitcoin.

Technician’s take: BTC is at risk of a breakdown as price momentum slows.

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Bitcoin (BTC): $37,841 -2%

Ether (ETH): $2,796 -2.5%

Bitcoin, other cryptos decline

Bitcoin and other cryptos continue their spiral of the past five days as investors await the worst-kept secret in recent U.S. monetary policy, a half-point rate interest rate hike by the Federal Reserve.

The largest cryptocurrency by market capitalization was recently trading at approximately $37,800, down over 2% over the past 24 hours. Ether, the second-largest crypto by market cap, was changing hands at about $2,800, off similarly for the same period. Most other major cryptos were in the red, albeit not by much. SOL, ADA and AVAX had all recently fallen more than a percentage point. CRO and TRX each rose roughly 5% and ALGO jumped nearly 6% a day after announcing that it would become the official blockchain platform of FIFA, soccer’s world governing body.

“The macro issues, whether it’s the Ukraine war, global supply chain issues and inflation that’s affecting every other country as far as leading the Fed to tighten its policies, and in times like these risky assets generally don’t perform well,” Kapril Rathi, co-founder and CEO of digital asset trading platform CrossTower, told CoinDesk TV’s “First Mover” program. “One can argue crypto is pretty much in the same category as tech in terms of risk. We see macro pressure on tech and cryptos at the same time.”

The Federal Reserve has been widely expected to begin a more hawkish approach to taming inflation, which has hit 40-year highs and threatens to increase further amid Russia’s continued aggression in neighboring Ukraine. The conflict has sent energy prices skyrocketing as many countries look to alternatives from Russian energy, and supply chains have suffered ongoing delays. The price of Brent crude oil, a widely watched measure of energy markets, dropped slightly from Monday but was still trading at about $105 per barrel, up about 40% since the start of the year.

In a report, Arcane Research noted that futures premiums remained historically low, “signaling persistent pessimism from active market participants,” and that the Fear and Greed Index was registering “Fear” or “Extreme Fear,” for a fourth consecutive week, its longest period of fearful market sentiment this year.

Rathi struck a cautiously optimistic tone about bitcoin’s pricing later in the year. “In the next six to nine months, we will see an important role that bitcoin will play as countries deal with inflation so I am expecting a bounce back in the market.”

S&P 500: 4,175 +0.4%

DJIA: 33,128 +0.2%

Nasdaq: 12,563 +0.2%

Gold: $1,867 +0.2%

The conviction of bitcoin minnows

Bitcoin opened the week in the red, with no relief in Asia and support hitting the $37,000 mark.

As the market continues to be range-bound and not make any aggressive moves in an upward direction, Glassnode has noted in a recent report that the newest “Long Term Holders” (defined as those who bought before bitcoin’s all-time high in October 2021) are “peering into the abyss of holding unprofitable positions” and are preparing to capitulate and sell off like their peers that have held for longer are already doing.

“The current market structure for bitcoin remains in an extremely delicate equilibrium, with short-term price action and network profitability leaning bearish, whilst long-term trends remain constructive. The capitulation of Long-Term Holders appears to be continuing,” Glassnode wrote.

In prior reports, Glassnode has noted that there’s a great redistributing occurring in crypto where the long-term holders panic sell to new entrants.

We’ve called this cohort the minnows, as these mighty but small fish have bought crypto from large-holder whales because of their conviction in the asset class.

And these minnows continue to grow and multiply. Despite that the last month has been comparatively boring and compressed for the markets the supply held by wallets with between 0.1-10 BTC has continued to rise to the point where they collectively hold 2.5 million bitcoin.

There’s a long way to go until the “flippening” happens. Glassnode thinks this trend could be reversed if the minnows find themselves outside their pain tolerance. After all, Glassnode points to $46,910 as the entry point for most of these short-term holders, putting the average coin held by a minnow at an unrealized loss of -17.9%.

The question is, when will these short-term holders capitulate? Many of the long-term holder whales are professional investors or funds that can afford to lose, whereas minnows are retail investors. Long-term investors also have a conviction in the asset class; that’s why they invest. But they also have a profit and loss statement to publish to their fund subscribers at the end of the month, and these capital allocators won’t like seeing lots of red.

Retail investors, however, are usually purely based on conviction and ideology. If bitcoin continues to be range-bound below $46,000, where many of them entered, it will be interesting to see the strength of their convictions and how long they last.

Bitcoin Stalls Below $40K Resistance, Support at $30K-$32K

Bitcoin (BTC) continues to hold support above $37,500, but could face higher volatility over the next few days.

The cryptocurrency was roughly flat over the past 24 hours and over the past week. That indicates indecision among traders – a common theme so far this year.

Momentum signals have weakened on daily, weekly and monthly charts, which increases the chance of a breakdown in price. Lower support is seen at around $30,000-$32,000, which could stabilize pullbacks over the short term.

Still, other technical indicators are neutral, which means intraday buying could be short-lived. There is strong resistance at $46,700 that could cap upside moves, similar to what occurred in late March.

The relative strength index (RSI) on the daily chart has remained below 50 (a neutral reading) over the past month. The last time the RSI sustained low readings was last November and December, which preceded a price drop below $46,000.

For now, buyers have failed to maintain consecutive weekly closes above $40,000, which is the midpoint of a three-month price range.

Marathon Digital first quarter 2022 earnings

9:30 a.m. HKT/SGT(1:30 a.m. UTC): Australia home loans (March)

9:30 a.m. HKT/SGT(1:30 a.m. UTC): Australia investment lending for homes (March)

5 p.m. HKT/SGT(9 a.m. UTC): Eurostat retail sales (MoM/March)

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

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What a Mining Moratorium Could Really Mean for New York’s Crypto Industry: The state’s proposed two-year ban is inching closer to reality, and experts warn about its potentially chilling effect.

Otherside and the Future of NFT Consolidation: In the wake of its chaotic metaverse land sale, Yuga Labs says it has outgrown Ethereum. Quelle surprise.

Today’s crypto explainer: What Does It Mean to Burn Crypto?

Other voices: The New Way to Get a Tax Break: NFT and Crypto Donations(The Wall Street Journal)

“The [European Union] is not ready for a gas embargo, but it imposed a ban on Russian coal after the massacre in the Ukrainian town of Bucha. And the high probability of an agreement on oil underscores how much the war in Ukraine has forced Europe to rethink its reliance on Russian energy. In 2020, the bloc imported about 35% of its oil, 40% of its natural gas and just under 20% of its coal from Russia, according to the EU statistics office.” (Washington Post) … “Coronavirus cases are surging again in South Africa and public health experts are monitoring the situation, eager to know what’s driving the spike, what it says about immunity from previous infections and what its implications are globally.” (The New York Times) … “Fees have risen so dramatically because Bitcoin has a competitive market for transaction fees, which fund network security, and rising demand has made transactions more pricey. The last time Bitcoin fees were low enough for anything close to micropayments was June of 2015, when the cost of a simple send broke 5 cents. They haven’t looked back since. Even in the deep dark doldrums of the 2019 bear market, with the bitcoin (BTC) currency trading as low as $3,000, fees were consistently above 10 cents.” (CoinDesk columnist David Z. Morris)