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Crypto markets bounced and sentiment improved, but retail has yet to FOMO

The total crypto market capitalization is rising toward $1.25 trillion, but an assortment of metrics show retail and institutions are not ready to “ape.”

An ascending triangle formation has driven the total crypto market capitalization toward the $1.2 trillion level. The issue with this seven-week-long setup is the diminishing volatility, which could last until late August. From there, the pattern can break either way, but Tether and futures markets data show bulls lacking enough conviction to catalyze an upside break.

Total crypto market cap, USD billion. Source: TradingView

Investors cautiously await further macroeconomic data on the state of the economy as the United States Federal Reserve (FED) raises interest rates and places its asset purchase program on hold. On Aug. 12, the United Kingdom posted a gross domestic product (GDP) contraction of 0.1% year-over-year. Meanwhile, inflation in the U.K. reached 9.4% in July, the highest figure seen in 40 years.

The Chinese property market has caused the Fitch Ratings credit agency to issue a “special report” on Aug. 7 to quantify the impact of prolonged distress on a potentially weaker economy in China. Analysts expect asset management and smaller construction and steel-producing companies to suffer the most.

In short, risk asset investors are anxiously waiting for the Federal Reserve and Central Banks across the world to signal that the policy of tightening is coming to an end. On the other hand, expansionary policies are more favorable for scarce assets, including cryptocurrencies.

Sentiment improves to neutral after 4 months

The risk-off attitude caused by increased interest rates has instilled a bearish sentiment into cryptocurrency investors since mid-April. As a result, traders have been unwilling to allocate to volatile assets and sought shelter in U.S. Treasuries, even though their returns do not compensate for inflation.

Crypto Fear & Greed Index. Source: alternative.me

The Fear and Greed Index hit 6/100 on June 19, near the lowest ever reading for this data-driven sentiment gauge. However, investors moved away from the “extreme fear” reading during August as the indicator held a 30/100 level. On Aug. 11, the metric finally entered a “neutral” area after a fou-month-long bearish trend.

Below are the winners and losers from the past seven days as the total crypto capitalization increased 2.8% to $1.13 trillion. While Bitcoin (BTC) presented a mere 2% gain, a handful of mid-capitalization altcoins jumped 13% or more in the period.

Weekly winners and losers among the top-80 coins. Source: Nomics

Celsius (CEL) jumped 97.6% after Reuters reported that Ripple Labs displayed interest in acquiring Celsius Network and its assets which are currently under bankruptcy.

Chainlink (LINK) rallied 17% after announcing on Aug. 8 that it would no longer support the upcoming Ethereum proof-of-work (PoW) forks that occur during the Merge.

Avalanche (AVAX) gained 14.6% after being listed for trading on Robinhood on Aug. 8.

Curve DAO (CRV) lost 6% after the nameserver for the Curve.Fi website was compromised on Aug 9. The team quickly addressed the problem, but the front-end hack caused some of its users' losses.

Market may have rallied, but retail traders are neutral

The OKX Tether (USDT) premium is a good gauge of China-based retail crypto trader demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100% and during bearish markets Tether’s market offer is flooded and causes a 4% or higher discount.

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

On Aug. 8, the Tether price in Asia-based peer-to-peer markets entered a 2% discount, signaling moderate retail selling pressure. More importantly, the metric has failed to improve while the total crypto capitalization gained 9% in 10 days, indicating weak demand from retail investors.

To exclude externalities specific to the Tether instrument, traders must also analyze futures markets. Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Accumulated perpetual futures funding rate on Aug. 12. Source: Coinglass

Perpetual contracts reflected a neutral sentiment after Bitcoin and Ether held a slightly positive (bullish) funding rate. The current fees imposed on bulls are not concerning and resulted in a balanced situation between leveraged longs and shorts.

Further recovery depends on the Federal Reserve

According to derivatives and trading indicators, investors are less inclined to increase their positions at current levels, as shown by the Tether discount in Asia and the absence of a positive funding rate in futures markets.

These neutral-to-bearish market indicators are worrisome, given that total crypto capitalization has been in a seven-week uptrend. Investors’ distress over Chinese property markets and further FED tightening movements is the most likely explanation.

For now, the odds of the ascending triangle breaking above the projected $1.25 trillion mark seem low, but further macroeconomic data is needed to estimate the direction central banks might take.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

Built to fall? As the CBDC sun rises, stablecoins may catch a shadow

Will central banks allow stablecoins to survive? Maybe as a financial instrument for the unbanked or they will be able to peacefully co-exist?

There’s a ferment brewing with regard to central bank digital currencies (CBDCs), and most people really don’t know what to expect. Varied effects seem to be bubbling up in different parts of the world. 

Consider: China’s e-CNY has already been used by 200 million-plus of its citizens and a full rollout could happen as early as February — but will a digital yuan gain traction internationally? Europe’s central bank has been exploring a digital euro for several years, and the European Union could introduce a digital euro bill in 2023. But, will it come with limitations, such as a ceiling on digital euros that can be held by a single party? A United States digital dollar could be the most awaited government digital currency given that the USD is the world’s reserve currency, but when will it appear, if ever? Implementation could be at least five years away.

Amid all this uncertainty, one question has persisted, at least in the cryptoverse: What impact will large-economy digital currencies have on stablecoins? Would it leave them any oxygen to breathe?

On the positive side, some believe that most large-scale CBDCs will go the wholesale route, i.e., allowing direct access to digital money by a limited number of large financial institutions. If so, could this leave a “retail piece” for stablecoins in the payments sector?

“Their wallets or accounts might be held by intermediaries like commercial banks, who then have claims on the central bank. But effectively, most CBDCs will be used for retail payments,” Gerard DiPippo, senior fellow at the Center for Strategic & International Studies, told Cointelegraph: “This includes China’s e-CNY, which many believe will be the first large-economy CBDC to be rolled out at scale.”

“While it’s still early to make a call, I would expect that CBDCs will be accessible by both retail and wholesale parties,” Arvin Abraham, a United Kingdom-based partner at law firm McDermott Will and Emery, told Cointelegraph, adding that:

“Governments have a competitive imperative to allow for retail use of CBDCs to keep their currencies relevant in a world with stablecoins and other cryptocurrencies that are increasingly being accepted as means of payment.”

A competition for users?

Assuming, then, a retail contest arises between stablecoins and CBDCs, which is likely to prevail?

“The obvious advantage of stablecoins is that they exist or are at least further along than most CBDCs. This is especially true in the U.S. context,” said DiPippo. “I think a U.S. CBDC would take many years to deploy even if authorized by Congress today.”

On the other hand, others believe that CBDCs, if and when they appear, will make stablecoins redundant. Consider that the two leading stablecoins, Tether (USDT) and USD Coin (USDC), are both linked to the U.S dollar and both aim for a 1-1 peg.

“In a world with a U.S. dollar CDBC, the need for these coins goes away, as there will be a crypto native alternative that is always backed 1-1 by the dollar and is effectively interchangeable with its fiat equivalent,” said Abraham.

But, maybe the outcome isn’t binary; a choice of one or the other. Perhaps they can peacefully coexist, a possibility that has been put forth by no less of an authority as the U.S. central bank’s second-highest-ranking official.

“If private monies — in the form of either stablecoins or cryptocurrencies — were to become widespread, we could see fragmentation of the U.S. payment system into so-called walled gardens,” Fed Vice Chair Lael Brainard testified in a May Congressional hearing, adding that: “CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem.”

Can stablecoins and CBDCs exist side by side?

Is this harmonious scenario realistic? “I see no reason why stablecoins and CBDCs cannot coexist,” DiPippo told Cointelegraph. “In practice, their degree of coexistence will depend in part on regulations, specifically whether some governments even allow stablecoins for payments — especially in the cross-border context.”

Much will depend on the user experiences, cost advantages, and general usability of each instrument, DiPippo added. “In general, I have more confidence in the private sector to succeed in these respects. I’m not so much worried about stablecoins being ‘crowded out’ as I am worried about them being banned.”

Coinbase cryptocurrency exchange not only believes in cohabitation but says CBDCs may even boost stablecoins, according to a July white paper. “We strongly believe CBDCs will complement and encourage robust, inclusive, and safe innovation for stablecoins and the broader digital asset economy.”

Stablecoins are in a better position to innovate than CBDCs, Coinbase added. “In addition to having a first-mover advantage, stablecoins are expected to continue to rapidly evolve and innovate over the coming years, experimenting in ways CBDCs may not be able to due to differences in size and scope.”

Related: Metaverse visionary Neal Stephenson is building a blockchain to uplift creators

CBDCs, too, may come freighted with certain constraints from which stablecoins could be exempt. In its quest for a digital euro, the European Central Bank is “exploring a 3,000 euro limitation on the amount of digital euro that can be held by one party, based on various policy considerations,” the white paper noted. If that were to happen, stablecoins would arguably be able to serve those “needing a larger holdings of a digital fiat currency equivalent.” Stablecoins might also offer higher interest rates than CBDCs, the paper suggested.

“There could still be a role for stablecoins alongside CBDCs, although it would be more limited than today,” acknowledged Abraham. Stablecoins could have utility in providing a convenient means to have an interest in a basket of stocks, commodities and others. That is, “their function would be more akin to tracker funds where value is pegged to several assets.”

Then, too, a U.S. CBDC may not be ready for a full rollout for another five years, wrote Thomas Cowan, part of the team at the Boston Fed that, in February, released a technical research paper on potential CBDC designs in a recent blog:

“By the time a U.S. CBDC is issued, regulated stablecoins could provide solutions that a CBDC may have been designed for–such as boosting financial inclusion, cutting transaction costs and settlement time, increasing access to USD, and even expanding the dollar’s role as the global reserve currency.”

MiCA darkens stablecoin prospects in Europe

In Europe, though, the outlook for stablecoins – or “so-called ‘stablecoins’” as some EU officials call them – could be more problematic. The Markets in Crypto-Assets (MiCA) regulation, expected to take effect in 2024, presents “a number of challenges for stablecoins,” said Abraham, most notably a ban on the paying of interest by stablecoin issuers.

Such a prohibition would “deprive European citizens of an attractive investment option, particularly considering that financial stimuli instruments adopted to limit the economic impact of lockdowns are expected to result in historically high inflation rates,” noted Firat Cenzig, a senior lecturer in law at the University of Liverpool. Meanwhile, Nicolaes Tollenaar, partner at the Dutch law firm Resor, suggested in a Financial Times opinion piece in early August that such a ban “would force issuers to adopt a business model that is only sustainable with near-zero interest rates,” which are unlikely in the near future.

Wherefore China?

Elsewhere, China’s e-CNY has already been used by an estimated 250 million, and it remains a key part of any global CBDC discussion. What would a digital yuan mean for not only stablecoins but also the U.S. dollar?

In March, a Hoover Institution study noted that “over time, the spread of the e-CNY might diminish the role of the dollar as the world’s reserve currency and undermine the ability of the United States to deploy financial sanctions against rogue international actors.”

DiPippo, for one, doesn’t see much threat from an e-CNY on the international stage, however. “The e-CNY is unlikely to resolve the broader problems with renminbi internationalization, including China’s capital controls and geopolitical concerns.” The primary use of the e-CNY is for domestic retail transactions, though “experiments are underway to make the e-CNY usable across borders and interoperable with some regional CBDCs,” he added.

It is unlikely to do much to dent the USD’s standing as a reserve currency per se, primarily because it is designed as a digital cash substitute that does not pay interest. “Central banks would not move a substantial share of their international reserves into a cash substitute with no yield; they’ll continue to hold bonds. The e-CNY will not change that,” DiPippo told Cointelegraph.

What about financial inclusion?

All in all, there are good reasons why CBDCs and stablecoins might be seen to be locked in a zero-sum game. They have the same design purpose, i.e., moving money more effectively, and a large-economy CBDC is not likely to be blockchain-based either because that would make it too slow, according to Cowan.

Elsewhere, Eswar Prasad, professor of economics at Cornell University and author of the book, The Future of Money, told Cointelegraph earlier this year: “A widely and easily accessible digital dollar would undercut the case for privately issued stablecoins,” though stablecoins issued by major corporations “could still have traction, particularly within those corporations’ own commercial or financial ecosystems.”

Related: Decentralized finance faces multiple barriers to mainstream adoption

In the end, consumers may determine which instrument carries the day. In terms of market adoption, “the user experience will be key,” added DiPippo. “So in that regard, I do not see stablecoins having an inherent advantage over CBDCs.”

There is the matter, too, of financial inclusion, a goal to which both CBDC designers and stablecoin issuers pay lip service. “Everyday people like you and me are unlikely to go to the Fed to get our CBDCs to transact with on a daily basis,” wrote Cowan. That is, customers will still get their digital dollars from commercial banks, just as they get cash today from local banks. That might not help those who don’t have bank accounts. According to Cowan:

“Regulated stablecoins could be better positioned to improve financial inclusion. This is because stablecoins are on numerous public chains and can be stored and moved easily without the need for a central party–just like cash today.”

Cowan sees room for both financial instruments: “However value is stored and exchanged in the future, both stablecoins and CBDCs are likely to have a leading role in the upcoming transformation of finance.”

Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

Web3 helps Taiwan secure information against cyberattacks

In an effort against Chinese cyberattacks, Taiwan employs Web3 technology for decentralized file sharing post-Pelosi visit.

The Taiwanese Ministry of Digital Affairs (MODA) plans to implement decentralized technology into its web portal in an effort against cyberattacks. InterPlanetary File System (IPFS) is a Web3 technology that government officials will employ for decentralized file sharing.

IPFS identifies content through file hashes, which allows files stored by multiple parties to be found anywhere and can be accessed by simple HTTP.

This development comes after the controversial visit of United States House Speaker Nancy Pelosi to Taiwan, despite warnings from mainland China.

Since the visit, government websites have faced multiple attacks sourced from the mainland. This includes a distributed denial-of-service (DDoS) attack rendering the sites inaccessible.

Pelosi’s visit to Taiwan not only rocked the boat geopolitically speaking but also made waves in the crypto market. Bitcoin rose to its daily resistance of $23,500 on Aug. 3, the following day.

Related: ‘Nobody is holding them back’ — North Korean cyber-attack threat rises

However, the new MODA site is getting a makeover through the implementation of Web3 technology and currently has files and the original site index available on IPFS.

Taiwan’s Digital Minister Audrey Tang told official state media that until now, the MODA site has not been attacked since it debuted on the same day the Chinese military began its drills.

Tang said the site uses a combination of Web3 and Web2 tools.

“It uses a Web3 structure, which is tied to the global blockchain community and the global Web2 backbone network. So if it can be taken down, everything from Ethereum to NFTs will be taken down, which is unlikely.”

According to officials in Taipei, Taiwan saw nearly 5 million daily cyberattacks or at least scans for system vulnerabilities last year.

The implementation of Web3 technology is a positive step toward emerging technology implementation. Though Tang did highlight the risks of other Web3 assets like crypto in activities such as money laundering.

Related: Decentralized finance faces multiple barriers to mainstream adoption

Taiwan’s relationship with crypto ebbs and flows. Recently, the country indirectly banned buying cryptocurrencies with credit cards after the chief financial regulator compared cryptocurrencies to online gambling.

Nonetheless, the country, like many others around the world, is piloting its own central bank digital currency (CBDC). Currently, it's distributing its digital currency to five Taiwanese banks for distribution.

Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

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Fear of War, Monkeypox Causes Stock and Crypto Markets to Churn While Precious Metal Spike Higher

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Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

Chinese municipal bank issues first-ever digital yuan loan using intellectual property as collateral

The unnamed recipient of the loan said the e-CNY transaction was fast and efficient; they received an equivalent of 500,000 CNY, which was $74,020 at the time of publication.

As reported by local news outlet Sohu, on Wednesday, the Agricultural Commerce Bank of Zhangjiagang, located in China's Suzhou province, announced that it had issued a 500,000 digital yuan (e-CNY) loan with intellectual property backing it as collateral. The loan was issued via unanimous approval by the city's consumer markets regulator, financial markets regulator and municipal officials. 

Unnamed in the report, the recipient of the loan is an entity manufacturing environmental protection equipment for steel factories in Suzhou province. As told by the entity, due to an uptick in the number of client invoices, it decided to experiment with the new borrowing method, where the loan was directly released into its e-CNY digital wallet. Meanwhile, the Agricultural Commerce Bank of Zhangjiagang said this was yet another experiment in the country's e-CNY trial program.

Two days prior, the People's Bank of China said it wants to expand further the number of e-CNY testing sites, which are currently in 15 provinces. In its most recent data update on May 31, the central bank tallied 264 million e-CNY transactions totaling 83 billion CNY ($12.29 billion) since inception. Over 4.567 million merchant terminals across China accept e-CNY as payment.

Related: More than 2.6 million users signed up for the City of Shenzhen's digital yuan airdrop

Additionally, 64 companies with a total market cap of 560 billion CNY ($82.9 billion) listed on the Shanghai and Shenzhen stock exchanges are exploring blockchain technology. In recent months, China has seemingly increased its focus on developing its central bank digital currency, citing the benefits of stimulating consumer spending after COVID-19 lockdowns had hampered the economy. Various e-CNY airdrops are currently ongoing for participants to claim rewards and use them at various merchant platforms.

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Reports Say Beijing Attacking Taiwan Could Lead to ‘Far-Reaching Economic Consequences’

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Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

Bitcoin price clips $23K on Pelosi Taiwan visit as trading range persists

The status quo sees a challenge from U.S.-China tensions as key levels remain in play for bulls.

Bitcoin (BTC) saw volatility after the Aug. 2 Wall Street open amid ongoing market reactions to tensions between the United States and China.

BTC price U-turns as Pelosi lands in Taipei

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD spiking above $23,000 on the day as news came in that Nancy Pelosi, speaker of the U.S. House of Representatives, had landed in Taipei, Taiwan after warnings of retaliation from Beijing.

The visit, which had raised concerns of a major incident occurring, appeared to go without a hitch — something an analyst at major banking giant JPMorgan had previously said would spark a market rally.

Both the S&P 500 and Nasdaq Composite Index were slightly higher at the time of writing, reversing initial losses. Previously, Asian markets had fared worse on the uncertainty, with both the Shanghai Composite Index and Hong Kong's Hang Seng losing around 2.3% on the day.

As traders eyed an end to the recent few days' calm on BTC, it remained to be seen whether important trendlines nearby would continue to hold after seeing retests overnight.

"The next few weeks / months in the Cryptocurrecny space are going to be volatile due to macro events playing a bigger part than ever," popular trader Crypto Tony forecast.

Crypto Tony added that he would add to his allocation should BTC/USD quit the range between $22,000 and $24,000 for lower levels.

That range was shared by fellow trader Credible Crypto, who nonetheless acknowledged the potential for a trip to $25,000 as well.

In a potential headwind for Bitcoin and risk assets, the U.S. dollar index (DXY) capitalized on daily strength as events unfolded to aim for the 106 mark once more.

The Bloomberg dollar index likewise saw gains as Pelosi became the first U.S. speaker to visit Taiwan in 25 years.

U.S. dollar index (DXY) 1-hour candle chart. Source: TradingView

Fib levels cap gains and losses for Bitcoin in Q3

Discussing the broader picture, meanwhile, trading firm QCP Capital confirmed that it did not expect Bitcoin to retest the 2022 lows of $17,600.

Related: Best monthly gains since October 2021 — 5 things to know in Bitcoin this week

"We expect BTC price to drift higher from here for most of Q3, with upside rallies capped, but also dips on choppy price action," analysts wrote in its market summary released Aug. 1.

Beyond that timeframe, however, QCP did not rule out a move to "break the lows" to officially end the current bear market. In "extreme" circumstances, it said, this could involve prices as low as $10,000.

An interim pivot point, it added, could be a Fibonacci retracement level at $28,700.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

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Tether says it holds zero Chinese commercial paper, denies 85% exposure

Tether reports that its total commercial paper exposure has been cut to $3.7 billion from $30 billion just one year ago.

Major stablecoin issuer Tether has reiterated that the company plans to completely rid itself of commercial paper backing for its U.S.-dollar stablecoin USDT.

In a blog post on Wednesday, Tether said it “holds no Chinese commercial paper as of today,” while its total commercial paper exposure has been cut to $3.7 billion from $30 billion one year ago.

By late August 2022, Tether said it plans to decrease commercial paper exposure to as low as $200 million, targeting zero commercial paper holdings by the end of October, the statement reads.

“Tether continues to ensure that it has a diversified portfolio with limits to exposure on individual issuers or assets. Its reduction in commercial paper is a commitment to its community,” the firm said.

The post came in response to the ongoing FUD around Tether, with some reports alleging that Tether’s commercial paper portfolio is 85% backed by Chinese or Asian commercial papers. Tether previously denied the reports in mid-June, stating that such allegations were “completely false.

Related: Tether continues to reduce commercial paper in sharp reduction since March

In the latest blog post, Tether pointed out that false reports pose the “biggest threat to the cryptocurrency industry that currently exists,” adding:

“It is a threat of the same concern as scams, hacks or cyberattacks because the spreading of false information risks not only the reputation of the industry but also each and every member of the community.”

In June, Tether chief technology officer Paolo Ardoino claimed that the USDT has been the subject of a “coordinated attack” by hedge funds looking to short-sell the stablecoin. Ardoino said that Tether has been collaborating with regulators to increase transparency efforts and phase out its commercial paper exposure.

Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode