PTGR JUNE HIGHLIGHTS
Dear valuable clients,
Please find the following key insights from our aggregated research:
Overall Take-Home Message:
As the cryptocurrency market struggles to retain its momentum after a short comeback earlier this year, Bitcoin had its first monthly fall of 2023. Bitcoin, which ended May at roughly $26,950, dropped 4.6% of its value, according to Coin Metrics. Since the collapse of the FTX exchange in November 2022, which led to a significant sell-off in the cryptocurrency market, this is Bitcoin’s poorest monthly performance.
The Federal Reserve’s rising interest rates, which have diminished the attraction of alternative assets, and the increasing competition from other cryptocurrencies and blockchain applications, such as Ether and Ordinals, are the key causes of Bitcoin’s decline.
These later ones employ the tiniest Bitcoin unit to store material on the blockchain and are a new sort of non-fungible token (NFT). While some claim that Ordinals stay true to Bitcoin’s initial intent as a peer-to-peer electronic currency system, others counter that they diverge from it.
Although Bitcoin lost money for the month, several experts are nevertheless upbeat about its long-term prospects, pointing to its solid fundamentals and its popularity among institutional and individual investors. They also note that Bitcoin has increased by more than 60% since the beginning of the year and that the cryptocurrency market is naturally volatile.
Others, however, caution that technological difficulties, legal ambiguity, and environmental worries might pose new difficulties for Bitcoin in the next months. Other cryptocurrencies that promise quicker transactions, reduced costs, and more anonymity are increasingly challenging Bitcoin.
Bitcoin’s dominance has decreased as more investors diversify their portfolios with other currencies, going from more than 80% in 2017 to less than 40% in 2023. Several network upgrades, including SegWit and Lightning Network, have not been able to fix Bitcoin’s scaling problems.
NEWS UPDATE OVERVIEW
1) What happened in May?
The Select Committee on Artificial Intelligence and National Science and Technology Council just released The National Artificial Intelligence R&D Strategic Plan: 2023.
The 9 key strategies to navigate our AI future are as follows::
1️⃣ Investing in fundamental, responsible AI research for long-term benefits. Prioritizing next-gen AI will enable responsible innovation that serves public good, ensuring the U.S. remains an AI world leader.
2️⃣ Enhancing human-AI collaboration methods. The goal is to foster AI systems that effectively complement and augment human capabilities while mitigating misuse risks.
3️⃣ Addressing ethical, legal, and societal implications of AI. The plan includes interdisciplinary research to safeguard our values, advance AI explainability, privacy-preserving design and analysis, and develop metrics for accountability, fairness, privacy, and bias.
4️⃣ Ensuring AI systems’ safety and security. The plan advocates for trustworthy, reliable, and safe AI systems, with research on testing, validating, and securing AI against cybersecurity and data vulnerabilities.
5️⃣ Developing shared public datasets and environments for AI training and testing.
6️⃣ Implementing standards and benchmarks to measure and evaluate AI systems.
7️⃣ Understanding the national AI R&D workforce needs to better tailor our efforts.
8️⃣ Expanding public-private partnerships to accelerate AI advances.
9️⃣ Establishing a coordinated and principled approach to international AI research collaboration.
This strategic plan reiterates the commitment to AI, underlining its importance in shaping the future of the U.S. and the world. Stay tuned for more exciting developments!
On May 26, the total number of Ether held on exchanges reached 17.86 million after the balance of accessible Ether across all cryptocurrency exchanges fell to a five-year low. Since April 2018, the exchange supply of ETH has not seen such a sharp drop. In contrast to the 25–26% of supply held during the 2021 bull run, just 14.85% of the entire Ether supply is presently held on centralized exchanges, according to Glassnode statistics.
The recent fall in ETH holdings on controlled exchanges may have been caused by two important occurrences. The first is the FTX crypto exchange’s failure, which led many people to switch their cryptocurrency holdings from exchange wallets to self-custody wallets; the second, and most significant, is the Shapella update. Numerous validators were able to withdraw their staked ETH thanks to Shapella. Contrary to common opinion, however, the bulk of validators just withdrew their staking payouts while a small percentage of them chose to unstake. A bullish indicator is the flow of assets away from exchanges, which shows that traders are not eager to sell at the present price. Re-staking ETH is the most obvious cause of the decreasing exchange supply in the case of Ethereum.
The Hong Kong Securities and Futures Commission (SFC) said that regulated platforms will soon be able to cater to ordinary investors. The SFC stated operators of virtual asset trading platforms are invited to apply for a license if they are ready to follow the SFC’s suggested rules in a statement on May 23. The standards for virtual asset trading platforms will include, among other things, asset custody security requirements, cybersecurity requirements, and client asset segregation. According to Julia Leung, CEO of SFC, establishing clear regulatory requirements is “key” to fostering an atmosphere for responsible and creative growth.
The rules will go into force in June 2023, but no platforms for trading virtual assets with retail investors have been given the SFC’s clearance. The SFC reportedly received 152 written responses from the industry throughout the consultation period, per the release. A “number of robust measures” will also be put in place, according to the SFC, to guarantee that retail investors are protected. These include transparency, increased token due diligence, excellent governance, and appropriateness throughout the onboarding process.
2) Where do we stand?
The next Bitcoin halving, which is less than a year away, has already sparked discussion among market players. Some claim that, similar to prior halving cycles, the event will build the groundwork for the next all-time high.
The new BTC price record, however, should materialize in Q2 2024, according to TechDev. Earlier in May, a Market Update blog article first discussed the concept. It was said to be his main time-based concept this week.The road to the Q2 peak was shown on a chart that was posted on Twitter by resistance lines, Fibonacci retracement levels, and the current record high from 2021. It forecasts that BTC/USD would eventually reach a peak of about $160,000.
With network fundamentals expected to reach new all-time highs, Bitcoin bulls and bears compete for control of a crucial sector on the BTC chart.
As the new month gets underway, Bitcoin is battling for the bull trend as the market is operating in a vital area. As a steadfast trading zone continues to hold, Bitcoin is aiming to solidify support after finishing the weekly candle at just under $27,000. Bitcoin hit two-month lows and had a brief plunge below $26,000 last week, which led to traders’ fears of an impending bigger bearish breakdown. Nerves still exist on both shorter and longer timescales, despite the fact that this has not happened. Where is the price movement likely to go next? There is less possibility of volatility from outside sources during a week with relatively few macro events. The argument might be made for upside continuation if the next difficulty adjustment, which will bring it to yet another record high, is included.
The founder and CEO of the trading business Eight, Michal van de Poppe, said that the BTC/USD exchange rate was ready for continuation. Part of a Twitter post claimed that “Holding crucial level at $27K and we’ll be ready for a potential run toward the highs,” adding that “Litecoin LTC is giving a taste of what might be to come.”
The U.S. Securities and Exchange Commission (SEC) and other international authorities tightened the clamps on digital assets in May, causing Bitcoin (BTC) and other leading cryptocurrencies to retreat from 2023 highs.
In March and April, investors rushed to Bitcoin and other cryptocurrencies over worries of a contagion due to the U.S. financial crisis. However, concerns about the viability of the American financial system vanished as swiftly as they had appeared, abruptly putting a stop to the surge.
As authorities create new guidelines to dictate how cryptocurrency trading should be conducted, the cryptocurrency community continues to be laser-focused on regulatory conflicts throughout the globe. Additionally, investors are anticipating that the Federal Reserve would at least hint at stopping interest rate rises in June or at least put a halt to them altogether.
On Chain Data:
With its most recent weekly finish, BTC/USD may not have been very inspiring, but some well-known traders are finding new reasons to be hopeful.
The likelihood of a breakthrough toward $30,000 is rising despite the fact that the price is still firmly inside its constrained trading range, as shown by Cointelegraph Markets Pro and TradingView.
It feels like it’s only a matter of time until Bitcoin finally breaks that 30k level once and for all, trader Jelle noted in part of his most recent research.
Like others, Jelle saw that the 200-week moving average (MA), a crucial support line, was unaffected.
Various support structures that were on trader and analyst Rekt Capital’s radar for daily timeframes were also intact.
He summed up the prospect for a higher exit by saying, “So far, so good,” possibly invalidating a bearish “head and shoulders” pattern from the previous weeks.
From June 5 to June 9, there won’t be much in the way of macroeconomic data coming out of the United States, marking an unusually tranquil week for traders.
The mess around the debt limit has now passed, and the next possible triggers for volatility will be macro statistics for May, such as the Consumer Price Index (CPI) print, which won’t be available for another week. Now that oil prices are falling despite current output decreases, emphasis is turning to cuts in production from Opec+ members.
The U.S. dollar, though, presents a more direct threat to Bitcoin and other cryptocurrencies. Since the beginning of May, the US dollar index (DXY), which has historically been adversely connected with risk assets, has formed a comeback in the strength of the greenback. On weekly timescales, well-known analyst Matthew Hyland saw rising relative strength index (RSI) ratings for the DXY.
Equities responded immediately cathartically to the debt limit settlement, but crypto markets have mostly failed to match their euphoria. Market participants assert that given the S&P 500’s recent ten-month highs, this might yet change. The #SP500 has reached its highest price since August as a result of the US House passing a crucial debt ceiling agreement. Altcoins including $LTC, $LEO, and $FGC have increased today, according to a June 2 report from research company Santiment.
What Could Happen?
The upcoming SEC crypto crackdown is being anticipated by crypto exchanges. In May, Brian Armstrong, the CEO of Coinbase, said that Gary Gensler, the chairman of the SEC, had a “anti-crypto view” and that the SEC cases against Ripple and Coinbase are unhelpful for the industry in the U.S.
It is a “very difficult time” to operate in the U.S., according to Patrick Hillmann, chief strategy officer of Binance, the biggest cryptocurrency exchange in the world, who also said in May that Binance aims to do “everything we possibly can” to be regulated in the U.K.
In March, the Commodities Futures Trading Commission filed a lawsuit against Binance, saying that the exchange had violated multiple securities laws by improperly recruiting consumers in the United States.
In order to evade the governmental crackdown, Coinbase, Ripple, and other cryptocurrency startups are allegedly considering moving their operations outside of the United States. Regulators assert that further safeguards must be implemented to shield investors from the kinds of errors that resulted in the closure of many cryptocurrency lenders and exchanges in 2022.
According to Jonathan Shiery, a partner at Guidehouse Financial Services, the current legal disputes between Ripple and Coinbase and the governmental crackdown on cryptocurrencies will continue to dominate the news in June.
“These regulatory entanglements should continue to be the front and center of the cryptocurrency industry’s attention due to their ramifications on exchanges, the U.S. cryptocurrency market, innovation, the banking industry’s appetite to bank crypto companies, and the user’s ability to access digital assets,” says Shiery.
Institutional investments will probably remain limited until regulatory clarification is achieved via these instances, the author predicts.
Although May was an unusually quiet month for digital assets, June is likely to bring about a number of market-moving triggers.
The move by Argentina’s central bank to prohibit payment companies from conducting cryptocurrency transactions may compel investors to sell their holdings of Bitcoin and Ethereum in the next months. The rise of cryptocurrency in Argentina has coincided with a recent 50% drop in the value of the Argentine peso vs the US dollar.
Popular stablecoin USDT issuing company Tether has said that it would put 15% of its net earnings into Bitcoin. According to its most recent quarterly reports, 15% of the company’s net earnings would equal around $222 million in purchases, which might raise the price of bitcoin.
However, a well-known factor, Fed monetary policy, is the strongest potential driver for cryptocurrency values in June. Since March 2022, the Fed has been rapidly hiking interest rates in an attempt to reduce inflation; this has depressed the value of cryptocurrencies and other risky assets.
The bond market has the Fed eventually pausing rate rises in June at 74%, but a strong May employment report or inflation number might change that.
According to Bank of America analyst Alkesh Shah, the near-term potential for cryptocurrency values moving into June may be constrained given the present macroeconomic environment.
“Low conviction, limited catalysts, and outperformance [year-to-date] leave the digital asset sector stuck in a trading range with a challenging macro backdrop likely capping digital asset upside,” claims Shah.
“Our client conversations show that hedge funds are returning to token trading with momentum strategies, probably benefiting to some extent from increased volatility due to declining trading volumes,” the report says.
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