Traders' attention is drawn to events in the cryptocurrency market, whose capitalization recently surpassed the market value of Google's owner, Alphabet. Although today's key event is the speech of the head of the Fed, bitcoin and the company stole the whole show.
At this point, it's worth piecing together events from the very beginning. On Sunday evening, the first news broke that a large amount of bitcoin was starting to flow onto exchanges. In theory, if someone transfers cryptocurrency from their private wallet to the exchange, they generally do so to sell or exchange it. According to CryptoQuant, on Sunday, February 21, a net total of 37 thousand bitcoin with a market value (as of Sunday's trading) of more than $2 billion was expected to flow onto cryptocurrency exchanges.
37 thousand BTC is a huge value, considering that the purchases of Tesla, about which there was a lot of noise recently, amounted to "only" 1.5 billion USD, and caused a huge euphoria. The value of 2 billion therefore has the right to make an even bigger impression, only this time in the other direction, to the delight of the market bears.
It is possible that yesterday's declines, which seem to have continued also today before noon, may be a consequence of the transferred BTC and its sale. Nevertheless, it is hard not to ask why, having such a large position, one does not create a distribution, but sells everything at once, in a short time. If this was meant to cause panic, it certainly succeeded. The BTC/USD exchange rate has fallen more than 20 percent in two days, and the correction in dollar terms is already the same as in January. Back then, the BTC/USD exchange rate fell from about $42,000 to about $29,000.
The massive supply of bitcoin has also taken its toll on other cryptocurrencies. At one point, the ETH/USD exchange rate fell from its weekend peak of more than $2,000 to about $1,360, or by more than 30 percent. From the perspective of the cryptocurrency market, corrections of 20-30 percent are not something new or unusual. What is extraordinary and unprecedented, however, is the speed of execution of sell orders.
It is possible that this is just a ploy by big players who, having huge capital to put in the cryptocurrency market as adoption from Wall Street is increasing, perhaps did not want to invest at record prices. Hence, creating a panic is the best thing that could be done to acquire large volumes at attractive prices.
If this scenario is correct, we'll find out soon enough, and in the meantime, it's still worth keeping a close eye on the inflows into cryptocurrency exchanges, as well as the holdings of large funds, to see if there happen to be any sizable new positions.
For other markets, basically all of them: equities, commodities and the US dollar, Jerome Powell's speech seems to be crucial. Today, the Chairman of the Fed will present his semi-annual report on monetary policy to the US Senate Banking Committee. The main topic is the yields of US Treasury bonds and their very rapid growth at the long end of the curve. Investors may be waiting to hear whether the Fed wants to address this issue at all and, if so, how. Yields rising too fast could be a blow to Wall Street, hence this is an important issue.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
76.44% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
