PRICE VOLATILITY
Bitcoin experienced a 2.12% price drop in response to news regarding the approval of spot Ethereum ETFs, surprising traders who were optimistic about potential new all-time highs in light of a recent strong rally that had seen the cryptocurrency gain 9% and hit $72,000 earlier in the week. This sudden downturn saw BTC plummet from a peak of $71,980 on May 21 to a low below $66,700. Analysts have suggested that the current correction might be a “fake out”, which is a familiar pattern for Bitcoin where it consolidates within a range for a period before breaking below the range, trapping bearish traders before quickly bouncing back and resuming its upward trajectory. Furthermore, analysts have highlighted that BTC’s price is now approaching a retest of the demand zone that falls between $64,000 and $67,000, marking the neckline of an inverse head-and-shoulders pattern. This breakout above the pattern could be indicating a bullish structure, with potential resistance testing on the horizon before aiming for all-time highs. However, on May 23, individuals banking on BTC’s recovery faced hefty losses as $227.51 million in leveraged positions were liquidated over 24 hours, with $159.3 million coming from long positions, including $46.75 million liquidated in BTC leveraged positions in the last hour alone, $39.6 million of which belonged to longs.
TOKEN BOOM
Ethena’s synthetic dollar cryptocurrency, USDe, has surged in market capitalization to over $2.66 billion, driven by anticipations of a spot Ethereum (ETH) exchange-traded fund (ETF) being approved by the U.S. Securities and Exchange Commission (SEC). The rise in USDe’s value follows an increase in Ethereum open interest on exchanges and a rise in perpetual funding rates in the market. The growth in market capitalization for USDe was propelled by a 4% increase in the past three days, boosted by Bloomberg analysts raising the odds of the SEC approving the spot Ether ETF to 75%. The appeal of Ethena’s USDe staking yield, currently at 37.2%, considerably higher than 27.55% just days earlier, was also a contributing factor. Moreover, Ethena Labs founder Guy Young is optimistic about the future, anticipating strong support for Ethena due to the rise in interest and funding rates in the market, further solidifying USDe’s position in the cryptocurrency market.
DELAY STILL POSSIBLE
Federal Reserve Bank of Atlanta President Raphael Bostic recently mentioned that current monetary policy hasn’t been as effective in slowing down economic growth as in the past. This suggests that interest rates might need to stay high for a longer time to control inflation. Bostic noted that progress in reducing inflation has been slow, but the recent data shows it may be moving closer to the target of 2%. Let’s highlight that due to changes in the economy during the pandemic, people and businesses are less sensitive to interest rates, and this is because many refinanced their debts at lower rates when inflation rose, making the impact of the Fed’s policies less significant. Bostic predicts that this situation will persist longer than expected, and believes the earliest time the central bank could start reducing interest rates would be towards the end of the year.
DRIVING TOWARDS RELIEF
Bank of America economists predict relief may be on the horizon for the escalating auto insurance costs that have been a driving force behind inflation. Factors such as underwriting losses, increased vehicle prices, rising repair expenses, and a surge in accidents have all contributed to the steep climb in premiums. Recent data offers a glimmer of hope with decreasing vehicle sales prices and stabilizing repair costs. Although auto insurance expenses continue to surge, there is anticipation that the rate of increase will slow down. This development could potentially ease the pressure on the Federal Reserve in its ongoing battle against inflation, particularly given the significant weight auto insurance holds in the Consumer Price Index calculation. Should this trend persist, it may instill greater confidence in the Fed to consider rate cuts later in the year. The potential decrease in auto insurance costs could prove pivotal in shaping the Fed’s future monetary policy decisions and may pave the way for a possible cutting cycle to address inflation concerns.
INTERNATIONAL NEWS
Asian markets are not having such a good day as many losses were witnessed. Hong Kong stocks led losses in Asia Pacific as Wall Street’s decline due to rate concerns impacted global markets. In addition, inflation data from Japan was also a factor. The Hang Seng index in Hong Kong fell by 1.71%, while China’s CSI 300 dropped 1.11%. South Korea’s Kospi and Kosdaq ended 1.26% and 0.85% lower, respectively, with Samsung Electronics contributing to the decline. In Japan, the Nikkei 225 and Topix decreased by 1.17% and 0.44% as investors analyzed Japan’s April inflation rates. Core inflation in Japan, excluding fresh food and energy, decreased to 2.2%. Meanwhile, the Australian S&P/ASX 200 has also not been doing so well as today it was down by 1.08% as concerns about inflation and monetary policies weighed on the markets.
