Can Bitcoin and Ether Break Overhead Resistance? Cryptoasset Weekly Update (July 13 2024)

Bitcoin, Ether Key Points

• The German government has essentially sold all of its seized Bitcoin, depleting a big source of overhead supply in recent weeks.
• Presumptive US Republican Presidential nominee Donald Trump will speak at the annual Bitcoin conference later this month.
• The technical outlook for both Bitcoin and Ether would improve with rallies above the key $60K and $3300 levels respectively.

Cryptoasset Market News

Last week, the big narrative for Bitcoin remained the same as it has for the last couple weeks: Aggressive selling by the German government. After seizing nearly 50K Bitcoin ($3B) from an illegal streaming site earlier this year, traders knew the German government would be looking to offload the digital asset at some point, but not when or how.

As it turns out, the when turned out to be “early July” and the how turned out to be “aggressively.” As we go to press, suggest that the Saxony government has sold more than 90% of its Bitcoin holdings, leaving it with “just” $220 million worth to liquidate. In other words, the large, seemingly price-insensitive supply that weighed on Bitcoin over the last two weeks will not be a meaningful story moving forward:

Source: CoinDesk

It remains to be seen if additional selling from the distribution of the long-ago seized Mt. Gox cache of Bitcoin will lead to additional selling pressure as supply unlocks.

In other crypto-specific news on the week was the filing of amended S1 registration documents by hopeful ETH ETF issuers ahead of the expected launch of spot Ether ETFs later this month. Unlike its bigger brother Bitcoin, Ether has not seen a substantial pre-ETF rally, so it will be worth watching the direct flows once those ETFs start trading officially.

Finally, former President Trump has announced that he will be speaking at the annual Bitcoin conference in Nashville later this month. According to CoinDesk, “Trump has leaned into Bitcoin and crypto rhetoric since coming out in favor of the industry at his NFT gala this spring. He’s since baked pro-Bitcoin policies into the core Republican Party platform, casting a strong contrast with the Biden administration.” While I doubt Mr. Trump is particularly passionate about the ideals of Bitcoin and cryptoasset more broadly, he has clearly seized on the opportunity to capture the “crypto vote” in what may be another closely-contested election. A win for the presumptive Republican nominee in November could therefore support cryptoassets for the next four years.

Macroeconomic Backdrop

From a macroeconomic perspective, the biggest development last week was the release of the cooler-than-expected US CPI report. The release showed inflation falling to 3.0% on a headline basis, with the “core” reading also missing expectations at 3.4%. Even Friday’s hotter-than-anticipated PPI report was not enough to unwind the expectation that the Fed will start cutting interest rates in September now that inflation is nearing the central bank’s 2% target.

Indeed, markets are now pricing in a 50/50 chance that the central bank will cut interest rates by 25bps at each of its last three meetings this year, a development that would ease monetary policy and potentially serve as a bullish catalyst for cryptoassets more broadly.

Source: CME FedWatch

Sentiment

The sentiment gauge we watch most closely, the “Crypto Fear and Greed Index” fell further last week, signaling the most extreme level of fear in the market since early 2023. From a contrarian perspective, this extreme fear could signal a medium- to longer-term buying opportunity, though some traders may prefer to wait for price action to confirm a bullish reversal before buying.

Source: Alternative.me

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

As the chart above shows, Bitcoin edged higher in choppy, low-volatility trade last week. The cryptocurrency remains below previous-support-turned-resistance at $60K and its 200-day MA, so bulls will want to see if it can recapture those thresholds before growing more constructive on the longer-term outlook for Bitcoin.

Ethereum Technical Analysis: ETH/USD Daily Chart

Source: StoneX, TradingView

Ether is similarly trading near its lowest level in four months but has rallied off last week’s lows. ETH/USD is currently trading almost exactly on its 200-day MA, with a near-term range established between $2875 support and resistance at $3300. The near-term outlook remains neutral until that range resolves one-way or another.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos and be sure to follow Matt on Twitter: @MWellerFX