Major Crypto Token Prices Slip After Recent Big Gains; mixed developments in Europe

NEW YORK, NEW YORK, USA, July 21, 2022 / — ALT 5 Sigma Inc., a global fintech that provides next-generation blockchain-powered technologies for tokenization, trading, clearing, Settlement, payment and safe custody of digital data instruments publishes its Digital Assets Morning Call.

• Bitcoin and Ether correct after a week of solid gains

• Tesla’s reduction in bitcoin holdings is a short-term hit to crypto sentiment

• Eurozone news is mixed and continues to have medium-term implications for digital assets

After a week of solid gains that saw bitcoin surge almost 30% and surpass $24,000, and ether veer over 60%, both tokens are lower today, posting relatively modest declines per month. from their highest levels in more than a month.

Tesla sells bitcoin

There is obvious focus on Tesla’s disclosure that it sold 75% of its bitcoin holdings during the second quarter, news that dampened short-term sentiment in the crypto space somewhat. For the record, Tesla said it sold bitcoin to raise funds given its concerns about covid-related shutdowns in China (a major manufacturing hub for the company). Elon Musk said the company is ready to hold bitcoin in the future and that the second quarter selloff is not a “verdict” on bitcoin.

The US dollar value of Tesla’s bitcoin holdings was $218 million at the end of Q2, which translates to approximately 11,475 BTC based on the June 30 end-of-day price of approximately $19,000. This is still a significant amount of holdings, especially for a company’s balance sheet (which is usually made up of much less volatile holdings, such as cash and cash equivalents). Nonetheless, the revelation of the Q2 selloff is understandably less than positive news for the crypto space.

Risky assets are also consolidating after a strong advance

Separately but also relevant to short-term price action, the slide in crypto tokens is also consistent with the modest (so far) slide in risk assets, as US equities are lower at the start of the session after recorded solid gains in five of the last six sessions. . And it’s important to recognize that swings in the broader market’s risk appetite continue to show a decent correlation to the price action of bitcoin and ether.

Bitcoin and Ether Slide Seems More Corrective Than Reverse

So far, the price declines today look more corrective than the start of a more sustained reversal from the significant bitcoin and ether rallies seen over the past week, especially given the outsized gains noted. previously. If so, the slightly larger view remains that both tokens will eventually close their respective “gaps” established during the mid-June selloff, which targets $28,000 in bitcoin and $1,700 in ether.

European gas pipeline reopened

Several important developments in Europe are worth watching, both for traditional financial markets and for crypto-assets. First, the Nord Stream gas pipeline from Russia to Germany was brought back into service today, on schedule, mitigating (for now) the risk of a greater energy shortage for Europe. Thus, this particular risk of a slowdown in economic growth has been avoided. However, the broader context remains tense amid existing energy shortages, an excessive heatwave in parts of the continent and continued risks of disruption and war spillovers in Ukraine.

The ECB raises its rates but remains in a delicate balancing act

Second, the European Central Bank (ECB) raised its key rate by 50 basis points to 0%. This is the first rate hike by the central bank since 2011 and the first time the policy rate has been out of negative territory since 2014. Unsurprisingly, the ECB has signaled that further rate hikes are likely in the coming months as attempts to deal with an inflation problem in the same way that many other global central banks are facing.

The ECB’s task is complicated by the fact that overall economic growth is weak and decelerating, and tighter monetary policy could push the economy into recession more quickly. This reality may limit the extent to which the ECB can ultimately tighten policy. And that perception may in turn limit support that today’s outsized rate hike will bolster the beleaguered euro, which recently hit a 20-year low against the US dollar.

Growth and evolution of exchange rates are important for crypto

For crypto markets, there are several important takeaways from these developments. First, to the extent that the weak Euro translates into US Dollar strength, this could be a potential headwind for crypto token prices, given that Bitcoin can sometimes be negatively correlated with the Dollar (and this correlation was evident this year).

Second, as a key contributor to global growth, the trajectory of the eurozone economy has implications for the investment climate and global returns. Better growth equals better returns on investment, and vice versa. While this primarily has implications for traditional financial assets, the still significant correlation between bitcoin and risky assets suggests that crypto token prices will also be sensitive to these developments.

Robert Lynch
Research and Strategy Manager
ALT 5 Sigma Inc.
[email protected]


ALT 5 Sigma is a global fintech that provides next-generation blockchain-powered technologies for trading, clearing, settlement, payment and safe custody of digital instruments. ALT 5 was founded by specialists in the financial sector out of the need to provide the digital asset economy with security, accessibility, transparency and compliance. ALT 5 offers its customers the ability to buy, sell and hold digital assets in a safe and secure environment deployed with financial industry best practices. ALT 5 Sigma’s products and services are available for banks, brokers, funds, family offices, professional traders, retail traders, digital asset exchanges, digital asset brokers, developers blockchain companies and financial information providers. ALT 5’s digital asset custodian services are secured by Fireblocks.

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