Market envelope: Bitcoin Flat; Fed Powell Grilled on Crypto

Bitcoin was flat, holding around $ 33,000, after falling for two consecutive days. The largest cryptocurrency by market cap is now in its eighth consecutive week of trading roughly sideways.

Analysts said bitcoin trading had been bolstered with assets in traditional markets by assurances from Federal Reserve Chairman Jerome Powell that he still did not see “substantial further progress” on an economic recovery – signaling that the US central bank is not likely to cut monetary stimulus anytime soon.

Powell’s comments come after Tuesday’s US Department of Labor report that inflation accelerated in June at the fastest rate in 13 years. Bitcoin is viewed by some investors as an inflation hedge due to the cryptocurrency’s fixed supply schedule.

“What has helped cryptocurrencies turn positive is the widespread rally on Wall Street,” wrote Edward Moya, senior market strategist at Oanda, in an email. “The Fed appears stubbornly dovish and ready to tolerate a few more months of increasing price pressure before considering a change in tone on the transient / persistent inflation debate.”

Ether followed higher with bitcoin, but among altcoins the big story of the day was an increase in the price of the FOX token after the ShapeShift exchange announced plans to become more decentralized and ditch the token. .

With bitcoin stuck between $ 30,000 and $ 40,000 for eight weeks now, cryptocurrency analysts are scouring blockchain data for clues as to where the market is heading.

David Grider, head of digital assets at FundStrat, wrote in a weekly report Wednesday that he is taking a close look at the “return on production spent ratio,” or SOPR. The metric is calculated by dividing the average price at which bitcoin was sold by the average price at which it was purchased.

Grider writes: “When the SOPR is greater than 1, it implies that the owners of the asset are beneficiaries at the time of the transaction. Below 1 means the sellers have capitulated and sold at a loss.

The metric has remained below 1 since May, perhaps a sign that there is a “healthy reset in profit taking”, recalling a similar episode that took place in March 2020, at the start of the pandemic of coronavirus. Several months later, bitcoin prices recovered and ended up quadruple over the course of the year.

“In a bull market, as we would expect today, an SOPR below 1 may indicate a local low as sellers are reluctant to sell at a loss,” Grider wrote.

Jerome Powell has devoted much of his semi-annual testimony to the House Financial Services Committee to discussing the outlook for the US economy, the outlook for inflation, and the likely path for monetary policy.

He also asked about cryptocurrencies, as Nate DiCamillo of CoinDesk reported.

U.S. Representative Patrick McHenry from North Carolina, the. Republican ranking on the committee, asked when the Fed would release its highly anticipated report on central bank digital currencies (CBDCs) and crypto.

Powell said the report, due to arrive this month, will be released in September.

“US regulations, along with environmental, social, and governance (ESG) concerns, are the biggest risks for cryptos, so a Fed publication in September of [the central bank’s] concerns about digital currencies should be seen as good news for bitcoin, ”said Moya from Oanda.

Powell also weighed on stablecoins, arguing that they will need to be regulated more tightly if they are to become a significant part of U.S. payments networks.

“Stable coins certainly have some advantages in terms of faster payment systems and have certain attributes of CBDCs, but there are risks with stable coins right now,” said Powell. “I think the problem is that stablecoins look a lot like money market funds or bank deposits or a narrow bank.”

In response to a question from Rep. Stephen Lynch (D-Mass.), Powell said the dollar’s status as a global reserve currency is not likely to be threatened, even as other countries develop CBDCs.

The president said central bank digital currencies could undermine the case for decentralized digital assets.

“You wouldn’t need stablecoins, you wouldn’t need cryptocurrency if you had a US digital currency,” said Powell. “I think that’s one of the strongest arguments in its favor.”

Crypto trading pioneer ShapeShift is closing its doors, ceding its legacy to a Decentralized Autonomous Organization (DAO) controlled by the holders of its FOX token.

As it begins a multi-month store closure process, it will begin by dropping $ 98 million in crypto to decentralized finance (DeFi) investors across multiple blockchains.

Following the news, the price of ShapeShift’s FOX exchange token jumped. FOX was changing hands at $ 0.51 at time of publication; Before the news came out this morning, the token was trading at $ 0.28. It hit $ 0.68 about an hour after the 11:00 a.m. ET announcement.

Notable Winners at 9:00 p.m. UTC (4:00 p.m. ET):