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Bitcoin rebounds above $30,000 amid broad recovery

However, the total cryptocurrency market cap is still lower by about 17% or over $260 billion on the week. This would mark the worst weekly performance since January.

Some market commentators cited remarks from the chairman of the US Federal Reserve Jerome Powell as supportive of equity and crypto market sentiment late on Thursday. Powell, speaking at the Senate (who on Thursday approved his second term as Fed chair), reiterated that 50 bps rate hikes would be appropriate at the next two FOMC meetings.

His remarks were interpreted as pushback against a potential 75 bps rate hike. This came after some traders upped their bets for even faster rate hikes in wake of this week’s hotter than expected US CPI and PPI data for April.

Some cited USDT’s recovery back to its 1:1 peg with the US dollar. Along with Swiss asset manager GAM Holding’s interest in making an investment to revive Terra’s UST as potentially supporting sentiment in cryptocurrency markets.

Though analysts warn that it likely remains too early to bet with conviction that the crypto market bottom is in.

The Fed

Fed Chair Powell warned on Thursday that the Fed may choose to quicken or slow the pace of monetary tightening in the coming quarters depending on how the economic data pans out.

Thus, there remains a risk that if inflation fails to abate, as the Fed is hoping in the second half of this year, they may yet quicken the pace of monetary tightening.

This could yet send US stocks lower (weighing on crypto via the close correlation) and US bond yields surging once again (which would weigh on non-yielding crypto and commodity assets as it represents a higher “opportunity cost”).

However, with the lack of key macro risk events on Friday, along with the impressive recovery from Thursday’s lows, stabilization might be the name of the game for crypto markets this Friday.

Traders should keep an eye on the preliminary release of the US University of Michigan Consumer Sentiment survey for May at 1500BST. The release will include insights as to how US consumers are holding up in the face of still sky-high inflation. In addition to any commentary from Fed speakers that might move the needle regarding tightening expectations.

bitcoin, ethereum

After coming within a whisker of the $31,000 level in earlier Friday morning trade, bitcoin has backed off to trade around the $30,200s. It is there where it still clings on to on-the-day gains of about 4.5%.

That marks a rebound of about 19% from Thursday’s lows in the mid-$25,000s. At current levels, bitcoin’s market cap is around $575 billion. This means the cryptocurrency is still on course to close out the week more than 10% lower. Around $72.5 billion in market cap wiped out.

That would mark a second week running where bitcoin has dropped over 10%.

Turning to the world’s second-largest cryptocurrency by market cap ethereum. ETH/USD was last changing hands in the mid-$2,000s per token. It had gains of about 5.0% on the day. The cryptocurrency/fiat pair is up more than 20% versus Thursday’s lows around $1,700 per token.

However, ethereum remains on course to have shed about 18% of its value this week. Its current market cap is around $250 billion.

remarkable news

The UAE’s largest airline, Emirates, announced plans to accept bitcoin as a payment method. This marks another step towards mass crypto adoption.

Elsewhere, Japanese banking giant Nomura will now be offering bitcoin derivative trading to its clients. Traders will now be able to trade on the futures and options markets.

Tim Albers, Nomura’s head of FX Structuring in Asia excluding Japan, said that while recent volatility has been significant, “once the dust settles, valuations will become more attractive for institutional clients”. “We’re pretty excited to get this off the ground” he added, with the launch marking “the start of our journey into the (crypto) space”.

Meanwhile, in wake of the recent market drop, El Salvador’s bitcoin investments over the last few months are deep in the red. Having spent $103 million building up a bitcoin treasury (according to DeCrypt), the country’s holding’s are worth just over $70 million at current prices.

Earth Update

In the early hours of Friday (during Asia Pacific trade), Terra announced that its validators had decided to halt the blockchain at block height 7607789, the second such halt in less than 12 hours, as Terra’s developers hatch a plan to revive UST.

Swiss asset manager GAM Holdings offer hope to those still clinging to their USTs on Friday,. GAM says it is negotiating with Terraform Labs to potentially invest between $2-3 billion in order to burn excess UST supply. This is with the intention of getting the algorithmic stablecoin back to its $1.0 peg.

Terra founder Do Kwon also hinted that he might consider making UST a traditionally collaterized stablecoin similar to Tether’s USDT and USD Coin. Both of which are backed 1:1 by actual US dollars or highly liquid equivalents (ie short-term US government debt).

For reference, UST/USD was last trading around $0.20.

The native token of Terra’s now halted blockchain, LUNA, has now been delisted on the world’s largest crypto exchange Binance. The exchange also now closed all of its LUNA liquidity pools. Meanwhile, Crypto.com has temporarily suspended LUNA trading and withdrawals.

Despite the halting of Terra’s blockchain, LUNA and UST are both still available to trade on FTX and a few other exchanges. Though nothing can be settled until the blockchain restarts again, so no trades will be seen as final just yet.

LUNA/USD was last changing hands on Betfinix for under $0.005.

Altcoins

The rebound in crypto sentiment that has seen altcoins unsurprisingly outperform on Friday. Though much like bitcoin and ethereum, most still remain on course to post ugly weekly losses.

Binance’s BNB is up over 10% on Friday and 40% versus Thursday’s lows. Though it is set to end the week around 15% lower. Ripple’s XRP is up close to 15% on the day but still down over 20% on the week. Cardano’s ADA is up over 20% on the day, but on course for weekly losses of about 23%. Meanwhile, Solana’s SOL is up about 15% on Friday, but still down over 30% this week.

Finally, popular Shiba Inu-inspired memecoin DOGE is up about 8% on Friday but is still down about 28% on the week.

DOGE got another Elon Musk-related pump via Twitter late on Thursday. The Tesla and SpaceX CEO Elon Musk, who ranks as the world’s wealthiest man according to a Bloomberg Billionaire index, said that “Dogecoin has potential as a currency”.

However, DOGE tumbled in wake of news this Friday that Musk’s bid to buy Twitter has been put on hold. Musk hinted in the past that Dogecoin could be a payment option on Twitter.

stablecoins

Tether’s USDT has recovered its peg to the US dollar. Tether says its USDT tokens are backed 1:1 by US dollars/liquid proxies. Confidence that the tokens are fully collateralized seem to have shielded USDT from the kind of “bank run” seen on UST earlier in the week.

Flows, Deals & Transactions

According to Glassnode, there was a net outflow of around $190 million worth of bitcoin from cryptocurrency exchanges on Thursday. This aligns with the context of the recent rebound. Traders seem to have taken advantage of the dip into the mid-$20,000s to buy bitcoin on exchanges and then transfer the bitcoin to their wallets for storage.

Regardless of the recent rebound, the seven-day moving average number of bitcoin wallet addresses in profit reached a 21-month low of 24,306,444.720 on Friday, according to Glassnode.

Despite rebounding in tandem with bitcoin and the rest of the cryptocurrency market, ethereum still saw a net inflow to exchanges of around $80 million on Thursday, Glassnode data showed. Meanwhile, the seven-day moving average number of addresses in profit reached a 9-month low of 50,905,707.762 on Friday.

Meanwhile, USDT flows have also been in focus amid recent fears of a de-peg event. Glassnode data showed that there was a massive net inflow to exchanges of around $1.5 billion on Thursday.

On Friday the blockchain tracker Whale Alert, revealed that a total of 3 billion USDT tokens in the Tether Treasury’s wallet had been burned. “Burn burn burn,” Tether chief technology officer Paolo Ardoino tweeted.

Having hit all-time highs above $83 billion in Market cap last week, USDT market cap is now around $79.3 billion. This is in light of investors withdrawing from stablecoins in wake of UST’s demise.

Regulatory Landscape

Germany announced earlier in the week that capital gains on bitcoin and ethereum will not be subject to tax. This is so long as the owner has sold after holding the cryptocurrencies for at least one year, even if they are used for staking.

Meanwhile, recently elected South Korean President Yoon Suk-yeol said on Thursday his government aims to establish a new regulatory framework that will facilitate the institutionalization of crypto by 2024. The legislation is to be proposed in 2023.

Elsewhere, US Securities & Exchange Commission official Hester Peirce said on Thursday that “we might see some movement” around stablecoin regulation soon. Her remarks about her come after this week’s collapse of Terra’s UST from its 1: 1 peg to the US dollar.

Peirce, sometimes referred to as “crypto’s mom” within the SEC, is a supporter of a regulatory framework that would allow “room for there to be failure” when it comes to stablecoins. She has argued that the market needs to be able to experiment with what works best regarding crypto and stablecoins.

Her remarks come after US Treasury Secretary Janet Yellen said earlier in the week that the risk of stablecoin de-pegging was not yet a threat to the country’s financial stability. Stablecoins are not yet at a scale where a price drop would present a risk, she said.

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