Weekly Recap: Bitcoin – Beaten, but Not Broken
It was a week of mega selloffs for cryptocurrencies, as the fallout from regulatory indecisiveness and an apparent cash-out of ICOs dragged the market to its lowest level of the year. The total value of crypto assets bottomed near $189 billion on Monday, possibly signaling the death knell for a large segment of tokens listed on CoinMarketCap.
Despite the latest string of dramatic moves, bitcoin has managed to defend – on multiple occasions, we might add – a key support level commonly associated with the bottom threshold of mining profitability. By the end of the week, the bitcoin price was back above the 50-day moving average and looking poised to break-out of its latest rut.
For altcoins, the picture is less clear. Investors are becoming increasingly risk-averse to this asset class, which now represents less than 48% of the total market.
Crypto Investors Seek Refuge in Bitcoin
A non-decision by the U.S. Securities and Exchange Commission (SEC) earlier this month regarding a highly-touted bitcoin ETF triggered a massive selloff of cryptocurrencies. By Monday of this week, the panic sale had morphed into a widespread cash-out of initial coin offerings (ICOs), with altcoins and tokens registering double-digit declines across the board.
Although bitcoin was affected by the market-wide selloff, the leading digital currency emerged with as much as 54.5% of the total capitalization, a sign investors were seeking refuge from more speculative altcoins. The bitcoin price came within $100 of yearly lows, but quickly returned above $6,000 and now sits just below $6,500 on Bitfinex.
Bitcoin’s bullish bias has only strengthened in recent days, a sign that a return to $7,000 is likely in the short-term. Whereas $6,000 has offered a sturdy floor for the bitcoin price, $7,000 has emerged as a psychological barrier amid the recent downturn.
Astonishingly, the bitcoin price is at break-even for the week, with CoinMarketCap even reporting a slight gain compared with seven days ago.
Ethereum, which was down by as much as 36% week-over-week, has trimmed its seven-day loss to 16%. The developer’s cryptocurrency was at the center of the recent selloff, possibly signaling a large-scale exodus from ICOs.
Lira Recovers from Record Lows
The Turkish lira rebounded from record lows this week after Qatar announced an emergency loan package to shore up the country’s struggling financial sector. The lira collapsed earlier this month after the United States doubled down on commodity tariffs against Ankara and imposed fresh sanctions targeting key members of its government.
Turkey was back in Washington’s crosshairs on Friday after the Trump administration threatened to impose more economic sanctions if it does not release a detained American pastor being held on suspicion of espionage.
Turkey’s crisis has triggered widespread selling in other emerging markets amid fears of contagion. Emerging-market stocks and currencies suffered swift blows as a result.
Oil Hits Two-Month Lows
Crude oil is coming off one of its worst weeks in recent memory after U.S. government data showed an unexpectedly large build-up in commercial crude inventories resulting from higher than expected imports. Meanwhile, Saudi Arabia confirmed that it raised crude output in July by an average 200,000 barrels per day.
U.S. West Texas Intermediate (WTI) futures settled at $65.01 a barrel on Wednesday, the lowest since June 6.
Surging Dollar Rattles Gold Price
The price of gold plunged this week to its lowest level in 19 months, as investors parked assets in the U.S. dollar and Treasuries.
Gold futures fell below $1,180 a troy ounce on Friday, marking a 14% reversal from this year’s peak. Silver suffered a similar fate, falling more than 4% this week to its lowest since January 2017.
Precious metals crumbled as the dollar rose to 13-month highs against a basket of its peers. Assets like gold and silver are priced in greenbacks, which makes them less attractive for foreign buyers when the dollar rises.
The Week Ahead
Despite the recent correction in cryptocurrencies, the bulls aren’t out of the woods yet. Although bitcoin has managed to hold key support, the broader altcoin universe faces an uphill battle regaining lost market share. Against this backdrop, investors should be keeping close tabs on Ethereum to gauge the market’s outlook on tokens emanating from the recent ICO boom.
In conventional markets, concerns surrounding Turkey and China will be on the front burner next week. Volatility on both of these fault lines has triggered renewed interest in the U.S. dollar, which is currently trading near one-year highs.
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.
Featured image courtesy of Shutterstock.