News Updates July 25, 2022
1. Bitcoin drops below $21.8K realized price as FOMC spooks markets
Anticipated volatility comes right on schedule for crypto as the weekly close already looks like a distant memory. Bitcoin (BTC) stuck to its realized price just below $22,000 on July 25 as Wall Street opened with a flat performance.
Bitcoin gives up more key levels
Data from Cointelegraph Markets Pro and TradingView tracked BTC/USD as it consolidated after falling from $23,000 overnight.
The pair echoed equities in cool trading prior to the July 27 United States Federal Reserve decision on interest rates. Analysts were expecting several days of volatility, and despite buyer interest in Bitcoin being strong below spot price, everything could still change.
“Big week ahead for the markets,” Umar Ashraf, founder of trading tool TradeZella, forecast.
“Tons of big names reporting earnings alongside with the FOMC starting Tuesday followed by the announcement on Wednesday. Big week doesn’t always mean market must see action, it could be a time period for the market to digest info for next move.”
With traders primed for reactions, Bitcoin became unsettled by struggling to hold any of its 200-week moving averages (MA), 50-day MAs or realized prices, these lying at $22,700, $22,200 and $21,850, respectively.
2. The battle between crypto bulls and bears shows hope for the future
Bitcoin traded below its mining cost basis in June, DeFi experienced a 33% decline in TVL, and mid-month weekly BTC options peaked to their highest on record.
The blockchain space is seeing some areas of strength despite the perceived downturn in the market. The perpetual futures funding rates for Bitcoin (BTC) and Ether (ETH) have flipped back to positive on major exchanges, which shows bullish sentiment among derivatives traders. In addition, Bitcoin started trading below its cost basis, which has marked previous areas of market bottoms. In contrast, June saw decentralized finance (DeFi) experience a 33% decrease in total value locked and crypto stocks provide a -42.7% average month-over-month return.
There is an ongoing battle between bullish and bearish sentiments in different areas of the market. To help cryptocurrency traders maneuver through the battlefield, Cointelegraph Research recently launched its monthly “Investor Insights Report.” In the report, the research team breaks down the past month’s top market-moving events and the most critical data across the various sectors of the industry. The researchers provide expert analysis and insights that can benefit serious blockchain market participants.
Derivatives may provide a key indicator of changing sentiments
Leading up to June, there had been a strong bearish sentiment in the market. One indicator of bearish and bullish sentiment is the volatility skew of a market. The larger the skew range, the more volatile, while tighter ranges suggest less volatility — which implies more confidence in the market. On June 18, the Bitcoin options 25-delta skew peaked at 36%, the highest ever on record. Since then, some optimism has returned, sending the skew down to 17%. This signals a strong belief that the crypto market will rebound over the next few months.
3. US Stablecoin Bill Delayed, but Draft Language May Soon Emerge
As negotiations slow down the release of a bipartisan bill to regulate stablecoins – until possibly September – lawmakers may put out some initial language soon to spur discussion.
A potential bipartisan bill to regulate stablecoins has been bogged down in negotiations, according to three people familiar with the talks, but lawmakers developing the legislation are considering releasing some draft language that may spur wider input.
With Washington’s legislative efforts, it’s common to see a fast-moving bill suddenly slowed down by debate as it gets close to the finish line. The hangups over this U.S. effort to establish rules for stablecoins – digital tokens designed to maintain steady valuations by being tied to assets such as the dollar – are expected to delay it until September, when the lawmakers return from their summer break, the people said.
Meanwhile, the committee is talking about issuing a discussion draft – a document that would include the legislative language the members are working on, the people said. That could happen much sooner.
The narrowly focused bill aims to establish a U.S. oversight regime for stablecoins, which crypto markets depend on to counter the volatility of more speculative assets. The bill is expected to set a path for nonbank firms to be able to issue stablecoins, though they’d have to meet new capital and liquidity standards. The bill would also ban commercial companies from becoming issuers, people familiar with the effort have said. And when the Treasury Department sought to expand the bill into another area of consumer protection, the negotiations slowed, one of the people said.
Stablecoins such as Tether’s USDT and Circle Internet Financial’s USDC represent a relatively small slice of the $1 trillion in overall crypto value but are traded at very high volumes because they’re often used by investors to move in and out of bitcoin, ether and other coins.
Treasury Department officials -- including Secretary Janet Yellen -- have also been involved in the discussions with lawmakers, according to one of the people. An administration push for further investor protections caused the latest rift in the talks over the weekend. The Treasury and Democrats added a request that the bill include safeguards for customers' wallets, specifically that their money be walled off from the assets of crypto platforms hosting the wallets. The administration has been seeking answers for this consumer hazard since Coinbase (COIN) disclosed that customer funds may be vulnerable in a hypothetical bankruptcy and other crypto firms began freezing customer accounts as they faced their own real-world failures.
If lawmakers from both parties can find common ground by September, Chairwoman Maxine Water (D-Calif.) can schedule a markup, which is an open session inviting debate or changes to the details of legislation before it gets a vote in the committee. She’s been negotiating with the panel’s ranking Republican, Patrick McHenry (R-N.C.), and in recent days, the two have briefed the other members of the committee, the people said.
Treasury Department officials -- including Secretary Janet Yellen -- have also been involved in the discussions with lawmakers, according to one of the people. An administration push for further investor protections caused the latest rift in the talks over the weekend.
4. UK finance association labels crypto a ‘good alternative’ to traditional payments.
A new study has concluded that cryptocurrencies can complement traditional finance by acting as a ‘good alternative’ to the existing settlement processes.
The study by the International Association of Money Transfer Networks (IAMTN) stated that through the blockchain technology that powers cryptocurrencies, remittances can be instant due to the ability to eliminate intermediaries like banks and in turn lower costs.
Notably, the findings are backed by leading industry players who IAMTN interviewed on the innovative technologies with the potential to improve cross-border payments. Interestingly, the stakeholders noted that blockchain and crypto possess ‘infinite opportunities’ to enhance cross-border settlement.
“The use of cryptocurrencies for the settlement of transactions can be a good alternative to traditional settlement processes. This is because of the possibility it allows to settle transactions instantly on a blockchain, without the need to go through the correspondent banking system, with its limited opening hours and long processing times,” the report said.
5. 3 signs Bitcoin price is forming a potential 'macro bottom'
Bitcoin's upside prospects are supported by at least three on-chain and technical metrics.
Bitcoin (BTC) could be in the process of bottoming after gaining 25%, based on several market signals.
BTC's price has rallied roughly 25% after dropping to around $17,500 on June 18. The upside retrace came after a 75% correction when measured from its November 2021 high of $69,000.
The recovery seems modest, however, and carries bearish continuation risks due to prevailing macroeconomic headwinds (rate hike, inflation, etc.) and the collapse of many high-profile crypto firms such as Three Arrows Capital, Terra and others.
But some widely-tracked indicators paint a different scenario, suggesting that Bitcoin's downside prospects from current price levels are minimal.
That big "oversold" bounce
The first sign of Bitcoin's macro bottom comes from its weekly relative strength index (RSI).
Notably, BTC's weekly RSI became "oversold" after dropping below 30 in the week of June 13. That is the first time the RSI has slipped into the oversold region since December 2018. Interestingly, Bitcoin had ended its bear market rally in the same month and rallied over 340% in the next six months to $14,000.
In another instance, Bitcoin's weekly RSI dropped toward 30 (if not below) in the week beginning March 9. That also coincided with BTC's price bottoming below $4,000 and thereafter rallying to $69,000 by November 2021.
6. California Overturns Ban on Political Crypto Donations
The Fair Political Practices Commission of California has walked back a previous ban against crypto donations to political campaigners.
* The state of California has overturned a near four-year ban against political crypto donations.
* Crypto contributions will need to be verified via a name, address and other revealing details
California’s political campaign financing watchdog approved measures Thursday allowing state and local offices the right to raise funds using crypto once more.
Previous regulation had denied political campaigners the right to raise or receive funds via crypto. The ruling was repealed in late May.
Thanks to a recent vote by California’s Fair Political Practices Commission (FPPC), those running for office may now receive funding in the nascent asset class — provided it’s converted to fiat immediately.
The FPPC’s motion on “Regulation 18421.2 Cryptocurrency Contributions,” put forth last month, reverses a ban implemented during crypto’s prior bear market in November 2018.
An unrelated financial limit on campaign contributions remains in place for California, which now joins 12 other states and the District of Colombia in approving crypto donations.
Concerns over how crypto could interfere with campaign transparency led the FPPC to deny its use for political campaigns, though the digital asset industry has since matured significantly since the almost four-year ban.
“In drafting this legislation, we had to address the inherent concerns with cryptocurrency and the opportunity it presents for illegal contributions,” FPPC’s general counsel David Bainbridge said in a live-streamed commission meeting on Thursday.
Political donations made using crypto must be conducted via a US-based crypto payments processor or “other service” with strict know-your-customer measures and answerable to subpoena requests for records.
Anonymous donations in crypto to political committees will be barred and those individuals contributing will be subject to identification constraints including the collection of names, addresses, occupations, and employers of each contributor at the time the donation is made.
It is not clear if anonymous political donations to individual campaigners will be affected. Blockworks attempted to contact the FPPC on that point but is yet to receive a response.
7. Bitcoin Dominance Rate (BTCD) Falls as Altcoins Flourish
The Bitcoin dominance rate (BTCD) has been falling since being rejected by the 48% resistance area and is showing bearish signs in the weekly and daily time frames.
In the period between May and Dec 2021, BTCD created a triple bottom pattern inside the 40% long-term support area. The triple bottom is considered a bullish pattern, meaning that it leads to breakouts the majority of the time.
This initially led to an upward movement that took BTCD to a high of 48.45%. However, the 48% area initiated a rejection (red icon) and the Bitcoin dominance rate has been falling since.
An interesting development is that the trend line of the divergence (green line) has now broken, and the RSI has fallen below 50.
Both of these are considered signs of bearish trends, meaning that they could lead to lower prices. So, this could mean that BTCD will fall towards the 40% support area and potentially break down.
8. Head of African Regional Central Bank Calls for Creation of Digital Currency
The head of the Bank of Central African States (BCAS), Herve Ndoba, has told the regional central bank’s board that it must create a common digital currency which will be used by six countries belonging to the Central African Monetary Union (CAMU). Ndoba reportedly wants the BCAS to establish a common legal framework for regulating cryptocurrencies as well.
*Digital Currency to Modernize Payment Structure*
In a move seemingly aimed at countering the Central African Republic (CAR)’s recent decision to embrace bitcoin, the head of the BCAS, Herve Ndoba, has reportedly urged the institution’s board to introduce a common digital currency for its six member states. The envisioned digital currency will ostensibly help modernize the region’s payment structure and promote financial inclusion.
According to a Bloomberg report, Ndoba’s call came just days after the BCAS concluded that the CAR’s law adopting bitcoin is “incompatible with the agreements and conventions governing the Central African Monetary Union and the Statutes of the Bank of Central African States.”
The six countries that are members of the CAMU include Cameroon, Chad, Equatorial Guinea, Gabon, the Republic of Congo, and the CAR.
*Regulation of Cryptocurrencies*
As previously reported by Bitcoin.com News, the CAR became the first country in Africa and the second in the world to make bitcoin legal tender after its legislature voted to approve the proposal. El Salvador was the first to adopt the cryptocurrency after lawmakers voted overwhelmingly in favor of a bill that made bitcoin legal tender.
Similarly to its Central American counterpart, the CAR’s bitcoin adoption has been criticized by the regional central bank and by the International Monetary Fund (IMF). However, the mounting criticism has not stopped President Faustin-Archange Touadera’s government from proceeding with the launch of the CAR’s own crypto token — the Sango coin.
In addition to the common digital currency, the BCAS head also wants the regional central bank to establish a common legal framework to govern the use of cryptocurrencies, the report said.
9. Chinese Supreme Court to Research Crypto, Asset-backed Securities
* China’s supreme court said it would conduct research into cryptocurrency to protect the legal rights of investors.
* Also, the Chinese government announced the ninth batch of 348 domestic blockchain firms, which mainly included NFT digital collections.
* Taiwan FSC wrote to the Association of Banks last week, reminding them not to engage in cryptocurrency.
The Supreme People’s Court of China has ruled that it will “actively research new cases such as asset-backed securities, cryptocurrencies, and cross-border financial product transactions.”
This statement came via the deputy chief judge of the supreme court, Zhou Lunjun, on July 25 at a press conference with the theme, “Opinions of the Supreme People’s Court on Providing Judicial Services and Guarantee for Accelerating the Construction of a National Unified Market.”
Justice Lunjun added that the essence of the research is to “protect the legal rights of investors, and provide high-quality judicial guarantee for the healthy development of the national unified capital market.”
Meanwhile, the Chinese government announced the ninth batch of 348 domestic blockchain information service names and record numbers, most of which are NFT digital collections — among which are two from NetEase, China’s second largest game company.
By and large, the current legal status of cryptocurrency in China is vague and complicated. While some reports show wholesome acceptance of crypto, blockchain, and NFT, like the Shanghai Municipal People’s Government, other institutions show great detestation.
CQ reported last week that Taiwan’s Financial Supervisory Commission (FSC) is looking to ban credit cards for crypto purchases. The FSC sent a letter to the local banking association reminding them that virtual assets “are highly speculative and risky, and the cash flow is complex and challenging to monitor transactions effectively.” In the letter, the FSC gave three months ultimatum to credit card firms that current practices do not meet its stated requirements.
