Your Crypto Brew: Bitcoin Dips Back Under $30,000 Amid China Growth Fears

Key Takeaways

• After a positive weekend, cryptocurrency markets are giving back some gains on Monday, with BTC/USD back under $30,000. 
• Weak Chinese data over the weekend have put fears about slowing global growth in the limelight.
• US Retail Sales data and Fed Chair Powell’s speech, both Tuesday, will be key events for crypto markets this week.

State Of The Market

Cryptocurrency markets are seeing broad weakness at the start of the week following a weekend of stabilization. The total market capitalization of cryptocurrencies rallied to as much as $1.344 trillion on Sunday, up nearly 25% at the time from last Thursday’s multi-month lows under $1.1 trillion.

After closing out Sunday trade in the green for a third successive session, the longest positive run since March, the total market capitalization of cryptocurrencies has fallen a little more than 5.0% on Monday to around $1.26 trillion.

Data released out of China over the weekend showed steep declines in the YoY growth rates of both the nation’s Industrial Output and Retail Sales in April. Recent economic weakness in China comes as the country implements harsh lockdowns across major cities including financial hub Shanghai and the capital Beijing in order to contain the spread of Covid-19.

The latest data out of China, the world’s second-largest economy, highlights increased concerns investors have been having about slowing global growth as of late. These concerns, alongside concerns about central bank tightening, have weighed heavily on risk-sensitive assets such as equities and crypto in recent weeks.

Growth worries and central bank tightening fears will remain in focus this week with the release of April US Retail Sales figures followed by remarks from US Federal Reserve Chair Jerome Powell on Tuesday.

Markets expect the Fed to implement further 50 bps rate hikes at its next few meetings as it seeks to bring rates to a more neutral level amid persistently elevated US inflation. Against the backdrop of concerns about growth and tighter monetary policy, rallies in cryptocurrency markets may remain subject to being sold.

Bitcoin, Ethereum, Altcoins

In tandem with the recent swing in cryptocurrency market sentiment, bitcoin is back to trading just below $30,000 on Monday, down nearly 5.0% on the day, having rallied as high as $31,400 on Sunday. At current levels of around $29,000 per token, bitcoin’s market cap is around $570 billion, and its crypto market dominance is around 44.5%.

Similarly, ethereum is back to trading near the $2,000 per token level having gone as high as the upper $2,100s over the weekend. At current levels, its market cap is around $245 billion, and its crypto market dominance is around 19.3%.

Price action across most of the rest of the other non-stable coin cryptocurrencies in the top ten has been similar to that of bitcoin and ethereum over the past few days. On Monday, Ripple’s XRP was last trading lower by about 6.0% around $0.40 per token, and Binance’s BNB was last down around 5% and back to just below $300 per token.

Cardano’s ADA was last down about 4.5% to around $0.57 per token and Solana’s SOL was down just under 8.0% to around $54 per token. Popular meme coin DOGE was last down about 6.0% to just under $0.09 per token.

DeFi, NFTs

After last week’s LUNA-led rout that saw the market of major DeFi tokens collapse from near $100 billion to lows around $50 billion, sentiment has stabilized since the weekend. The market cap of major DeFi tokens is currently around $56 billion, little changed since Sunday.

In terms of the latest news regarding Terra’s LUNA, the market cap of the token native to Terra’s blockchain went as high as $3.0 billion over the weekend but has since dropped back to around $1.4 billion.

Ethereum founder Vitalik Buterin said he strongly supports a plan that would deliver “coordinated sympathy and relief for the average UST smallholder who got told something dumb about “20% interest rates on the US dollar” by an influencer, personal responsibility and SFYL for the wealthy”.

Meanwhile, questions have been rising about what happened to the Luna Foundation Guard’s (LFG) bitcoin reserves, with $1.2 billion reportedly still unaccounted for. The LFG is a non-profit set up to support the development of the Terra ecosystem and had been building a large bitcoin reserve to help back UST.

Separately, over the weekend a Bored Ape Yacht Club non-fungible token (NFT) worth over $200,000 was mistakenly sold for $200. Some speculated the sale could actually have been for tax evasion/avoidance.

Exchange Flows

According to Glassnode data, last week saw $19.4 billion worth of bitcoin flow into cryptocurrency exchange wallets versus $17.9 billion flow out. The net inflow to exchanges was thus around $1.5 billion worth of bitcoin, which isn’t too surprising given last week’s volatile/bearish conditions.

In times of crypto market stress, it’s not unusual to see investors moving their crypto into their exchange wallets so they can sell.

Last week also saw a net inflow of around $979.5 million ethereum and $3.8 billion USDT (Tether USD) into exchange wallets.

In terms of exchange flows on Sunday, bitcoin saw a net outflow of just under $70 million, ethereum saw a net inflow of just under $50 million and USDT saw a net inflow of just over $70 million.

Crypto Adoption

Major global investment banks Goldman Sachs and Barclays invested in a $70 million funding round for Elwood Technologies, a crypto trading/portfolio management software company, marking a new bet on the longevity of the crypto space.

Meanwhile, reports over the weekend suggest that Japanese bank SIB Holdings will buy a 51% stake in crypto trading platform BITpoint Japan.

Grayscale Investments just listed its first exchange-traded fund (ETF) in Europe. The Future of Finance UCITS ETF will list on the London Stock Exchange, German Börse, and Italian Borsa Italiana and will offer investors exposure to companies including PayPal, Coinbase Global, Block, Robinhood Markets, and Argo Blockchain.

Finally, the CEO of major crypto exchange FTX Sam Bankman-Fried said that he doesn’t think bitcoin has a future as a payments system, but that it does have potential as a store of value.

Regulatory Landscape

The UK government on Monday confirmed that they will regulate stablecoins following the LUNA and UST collapse. They reportedly do not have any problem with stablecoins, so long as they aren’t algorithmic (like UST was).

Reports over the weekend suggest that South Korea is to launch an emergency review of cryptocurrencies in wake of the LUNA and UST crashes.

“32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the #Bitcoin rollout and its benefits in our country”, El Salvador President Nayib Bukele tweeted on Monday. The meeting will take place on Tuesday.

Officials at India’s central bank warned a key parliamentary finance panel that the adoption of crypto in the country could result in the “dollarization” of the Indian economy and reiterated their recommendation for a complete ban. India may also soon ban crypto celebrity endorsements.

Finally, the Securities and Exchange Commission of Nigeria said in a new rulebook published over the weekend that all digital assets represent either an asset such as a debt or equity claim on the issuer, thus by default fall under their regulatory purview.