Week in Review: Crypto Recovery Runs Into Hurdles as Market Plummets Friday
Friday marked another down week for cryptocurrencies after a series of technical hurdles failed to spur the bullish revival many had hoped would materialize. Surprisingly, the market exhibited relative calm following yet another hack of a high-profile digital currency exchange.
Meanwhile, traditional markets were consumed by trade-war fears and a key production meeting of the Organization of the Petroleum Exporting Countries (OPEC). Monetary policy was also on the radar as the European Central Bank (ECB) hosted a forum in Portugal while the Bank of England (BOE) signaled that an interest rate hike could be on the way this summer.
Crypto Rally Fizzes
Cryptocurrencies lost $22 billion in combined market cap this week, though all the declines were concentrated in Friday trading.
Although there was no immediate catalyst for the Friday selloff, which wiped as much as $29 billion from the market, the declines reflect a continuation of a bearish cycle that re-emerged last month.
EOS, Ethereum and bitcoin cash were the majors’ biggest decliners after recording double-digit losses over a 24-hour period.
Bitcoin also fell sharply after the bulls failed to rally past the technically significant $6,800 level.
The biggest development of the week came out of South Korea after Bithumb confirmed it fell victim to a cyber breach costing $30 million in cryptocurrency. The attack compromised roughly 6% of the exchange’s capital.
It is not yet clear how the perpetrators pulled off the heist. Bithumb has fallen prey to multiple attacks over the past 12 months, prompting management to invest millions more in cyber security and IT staff.
OPEC Agrees to Raise Crude Production
The Organization of the Petroleum Exporting Countries (OPEC) reached a tentative agreement Friday to raise crude-oil production by around 600,000 barrels per day following high-level talks in Vienna, Austria.
The Wall Street Journal confirmed that the deal is only in principle and involves so-called effective barrels, which refers to “real” barrels that will actually reach the market. Saudi Arabia, the group’s de facto head, entered the meeting with the stated goal of boosting output by one million barrels per day.
In 2016, the cartel agreed to limit output by about 2% of global production, which at the time amounted to roughly 1.8 million barrels per day.
After a prolonged bear market for crude, OPEC’s production rollback supported a global recovery in oil prices, with Brent briefly trading above $80 a barrel last month. U.S. President Donald Trump has blamed OPEC for inflating oil prices through its production policies, adding pressure on the cartel to raise outputs.
Monetary Policy in Focus
Central-bank meetings have carried more significance as of late as policymakers in the United States and Europe seek to clarify their positions on monetary policy. This week, the Bank of England held interest rates in check at 0.5% but sent a strong signal that changes could be looming over the horizon.
Andrew Haldane, the Bank’s chief economist, joined two other Monetary Policy Committee members in voting to raise interest rates by 25 basis points following the meeting on Thursday. Although they were offset by six votes in favor of keeping rates unchanged, the split suggests that a shift in policy could be coming.
Meanwhile, European Central Bank (ECB) President Mario Draghi told a central-bank summit in Sintra, Portugal that he will take a gradual approach in raising interest rates once officials wind down crisis-era policies later this year. Last week, the ECB’s Governing Council said it would put an end to bond purchases by the end of 2018.
The Week Ahead
The crypto markets appear to have found a bottom but the near-term outlook remains shaky. This is partly owed to abnormally low trading volumes. Last weekend, daily turnover plunged to its lowest level in over two months. Daily volumes fluctuated between $11 billion and $13 billion for most of the week.
On the economic calendar, investors can expect a steady stream of market-moving data, including revised U.S. GDP, durable goods orders and core personal consumption expenditures.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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