5 Things to Know in Crypto Today

Key Points

• Cryptocurrency markets are trading in subdued fashion in tandem with broader markets ahead of US Consumer Price Index data.
• Trading just under $20,000, Bitcoin is probing a bearish flag to the downside and threatening a bearish breakout.
• Crypto lender Celsius is “deeply insolvent”, according to US State Vermont’s Department of Financial Regulation.

Crypto Markets Nervously Await US Inflation Data

Markets have entered their typical consolidation pattern that is often observed prior to an important macro event. US Consumer Price Index data for June is scheduled for release at 1230GMT and could shift markets if it impacts expectations for Fed tightening over the coming quarters. Currently, markets suspect the Fed will hike interest rates by 75 bps later this month and then 50 bps in September.

But an upside surprise could put a 75 bps hike in September on the table and upset risk assets like stocks and crypto that want to see a less aggressive tightening path. For more on how crypto might react to the upcoming US CPI report, read here.

Looking at individual asset classes, major US equity index futures are broadly flat in pre-market trade, as are US bond markets. In FX markets, the Dollar Index (DXY), a trade-weighted basket of USD-majors, is also flat but remains close to multi-decade highs. It has been supported in recent weeks as fears about a global recession rise at a time when the Fed is still expected to raise interest rates aggressively.

Given the subdued tone to broader macro trade, cryptocurrency markets are also seeing fairly limited action. The total market capitalization of the cryptocurrency market was last around $860 billion, up about 2.5% or $20 billion on the day but still within Tuesday’s intra-day ranges and still down about 4.5% or over $40 billion on the week.

Bitcoin was last changing hands just under $20,000, close to 3.0% up on the day after rebounding from Tuesday lows in the $19,200s. But the world’s largest cryptocurrency is still down close to 5.0% this week. In terms of the major altcoins, the likes of Ethereum, Binance’s BNB, Ripple’s XRP, Cardano’s ADA, Solana’s SOL and Dogecoin are all little changed in the last 24 hours, as per CoinMarketCap.

Bitcoin Threatening Bearish Flag Breakout

Ahead of the release of key US CPI data that could impact expectations for Fed tightening in the medium-term, Bitcoin is probing a key support level. Indeed, some technicians have pointed out that Bitcoin looks to be on the verge of breaking to the downside of a so-called “bearish flag” technical pattern.

As suggested in the name, a downside break of this pattern would mark a significant deterioration in Bitcoin’s near-term technical outlook. A test of late-June lows in the mid-$18,000s would be possible, as well as a potential test of sub-$18,000 annual lows.

Looking at the cryptocurrency over a longer time horizon, if macro headwinds and further capitulation send Bitcoin crashing below annual lows, it could fall all the way below $14,000. That’s because there aren’t any notable levels of long-term support all the way lower to the $13,800s (the highs from June 2019).

Crypto Winter: Celsius Network “Deeply Insolvent” Says Vermont’s DFR, California Investigates Crypto Lenders

According to a statement by US State Vermont’s Department of Financial Regulation (DFR), beleaguered crypto lender Celsius Network is “deeply insolvent”. Celsius, one of the largest crypto lending platforms by assets under management, halted customer withdrawals over one month ago, citing “extreme market conditions”.

Vermont’s DFR said that the firm lacks the liquidity and assets to honor its obligations to depositors. “Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities,” DFR said. “Celsius compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies”.

Read more: Celsius Reclaiming $440M Collateral Fails To Trigger a Recovery

Elsewhere, crypto lenders like Celsius Network and others who have limited/halted customer withdrawals and transfers might be in hot water with authorities in US State California. California’s Department of Financial Protection and Innovation (DFPI) announced on Tuesday that it is investigating several US-based crypto lending platforms.

California’s DFPI didn’t name any names but said that it is looking into companies that offered customers “interest-bearing crypto-asset accounts” and “may not have adequately disclosed risks customers face when they deposit crypto assets onto their platforms”. Aside from Celsius, major US-based lender Voyager Digital, which halted withdrawals earlier this month and quickly announced that it would file for Chapter 11 bankruptcy, is likely also in the firing line.

US Government Paper Finds CBDC Could Help Financial Stability

In a blow to the opponents of a Fed-issued digital USD and the advocates of private stablecoins like Circle’s USDC, a new Fed research paper has found that a US central bank digital dollar (CBDC) could help financial stability. According to a paper by the US Office of Financial Research, “observing the flow of funds into a CBDC can allow policymakers to infer when a run by a bank’s depositors is underway more quickly and to place troubled banks into resolution sooner”.

“We see (the report) as a tool that digital dollar advocates can use to justify proceeding with plans to prepare a central bank cryptocurrency for launch,” said Jaret Seiberg, an analyst at Cowen Group, as quoted by CoinDesk.

Institutional Investors Return to Ethereum as Merge Approaches, CoinShares Says

According to the latest weekly fund flows report from CoinShares, Ethereum-based financial products saw their third successive week of inflows of $7.6 million last week. According to CoinShares, “the inflows suggest a modest turnaround in sentiment, having endured 11 consecutive weeks of outflows that brought 2022 outflows to a peak of US$460 million”.

CoinShares said that the shift in sentiment could reflect the increasing probability that Ethereum successfully pulls off its transition from a Proof-of-Work consensus mechanism to Proof-of-Stake before by the start of Q4 this year.