Week Ahead: Cryptocurrencies rebound from higher US inflation impact

Crypto assets showed resilience once again, with BTC above the $20K and ETH regaining traction despite a strong US dollar hitting 20-year highs last week. The greenback rose after higher than expected US inflation to keep pressure on the Fed to hike interest rates later this month. Fed members tempered market sentiment of a 100 basis points interest rate lift, with most economists forecasting a 75 bp hike. Cryptocurrencies showed a lower correlation to US stocks and held their ground against the USD compared to other major currencies.

BTC declined below $19K after US inflation but recovered as the week progressed. BTC remained range bound with the resistance at $22K for BTC continuing to hold. ETH had a breakout week after a tentative date of September was suggested for the Merge to Proof-of-Stake that lifted the currency with a final test run in the next few weeks.

Investor mood has improved, evidenced in stronger volume as prices rebounded from midweek lows. VC investments fell 26% in the first half of 2022, with investment reported at $9.3B, down from the record hit last year of $12.5B, but the number of deals rose to 534 from 456. June was the lowest investment since August 2021. Multicoin Capital announced another $430M in crypto startup funds. Lightspeed launched three new US Funds and a $500M fund to focus on Indian early-stage startups.

Celsius filed for bankruptcy this week, disclosing a $1.19B deficit on its balance sheet. The company disclosed a $40M claim against 3AC, whose principals have not been located. Another counterpart, EquitiesFirst, owes $439M to Celsius and is also a 3AC creditor. Traders are keeping tabs on Celsius mining subsidiary that could unload 80K rigs to raise capital that could put further downward pressure on rig prices that have fallen to pandemic lows. Miners continue to liquidate their inventories with reports of nearly 400% of production sold in June and BTC transfers from miner wallets in focus.

OpenSea announced it cut 20% of its workforce due to the crypto winter and macro instability. In regulatory news, a Bank of International Settlements committee said stablecoins must include the same safeguards as traditional payments. A Russian bill banning the use of cryptocurrencies as payments was signed last week by President Putin.

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