Weekly Forecast: Cryptocurrencies Aim Higher Following Weekend Bounce as India Mulls New Market Regulations
After two months of contraction, the cryptocurrency market appears to have finally formed a new bottom. The downward consolidation, and subsequent bounce, has sparked renewed optimism that the worst may be over.
On the regulatory front,India’s government will receive a draft version of a new cryptocurrency bill that proponents say could reverse the central bank’s clampdown on digital currency exchanges.
Cryptocurrencies Show Positive Momentum
Whether cryptocurrencies have actually regained momentum or merely bounced off oversold levels remains subject to debate. What is clear is the fact that the market attracted more buying interest this weekend. Bitcoin is showing the most potential, with prices approaching $6,400 for the first time in about nine days.
Rebounding trade volumes have investors feeling more optimistic about the latest price bounce. Total market turnover approached $15 billion on Sunday after falling near two-and-a-half-month lows just a few days earlier.
It remains to be seen whether retail buying interest is strong enough to sustain the next leg of the great crypto-market recovery. Although organizations such as Coinbase are betting on institutional capital, the banks and hedge funds remain a long ways away from controlling the market.
From the retail perspective, the biggest challenge appears to be attracting new buyers. Google search trends for terms such as “bitcoin” and “cryptocurrency” have improved as of late, but remain well below levels seen in December and January. Google trends are seen as an important proxy for retail demand.
Draft Cryptocurrency Bill to Be Received by India
Department of Economic Affairs secretary Subash Chandra Garg confirmed last month that an Indian sub-committee will present a new framework for regulating cryptocurrencies. The draft bill is expected for the first week of July, Garg said in an interview with one of India’s largest business networks.
In April, the Reserve Bank of India (RBI) barred regulated financial institutions from serving digital currency exchanges and their users, but failed to provide convincing rationale for their actions. The Bank’s lack of direction was later confirmed by an information request showing no clear strategy or reasoning behind the ban.
Although India remains a relatively small hub for digital currency activity, the central bank’s decision cast a dark shadow over the nation’s ability to one day embrace the digital asset market. The committee tasked with reviewing the RBI’s actions appears to be against the ban, which means more favorable regulations could be on the way.
From the perspective of stocks, bonds, commodities and currencies, the following items will drive investor sentiment this week.
A flood of PMI data will make headlines on Monday, with reports covering Germany, Italy, France and the broader Eurozone. The Institute for Supply Management will also unveil the latest in U.S. manufacturing PMI.
Separately, the European Commission’s statistical agency will release its May employment and producer inflation reports.
The Reserve Bank of Australia (RBA) will deliver its latest interest-rate verdict on Tuesday. No change in monetary policy is expected.
In the United States, the Commerce Department will release the May factory orders report.
U.S. markets are closed Wednesday for Independence Day. In terms of economic data, Caixin China will release services PMI during the Asian session. IHS Markit will also unveil final Eurozone PMI.
The minutes of the Federal Reserve’s June policy meetings are scheduled for release on Thursday. The Fed’s policy-setting board voted last month to raise interest rates.
In terms of economic data, German factory orders, U.S. private sector job creation and U.S. non-manufacturing PMI are the major market-moving events.
On Friday, the U.S. Labor Department will release what’s arguably the most closely-watched data series of the month: nonfarm payrolls. The monthly employment report provides the latest breakdown of job creation, unemployment and wage inflation.
North of the border, the Canadian government will also report on June employment levels.
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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