Crypto bounce is minimal at best

This Daily Digest will cover:

• Crypto bounce is minimal at best
• Weekend slew of bad news still being digested
• CPI out of the US ahead of the FOMC tomorrow
• Stocks roaring as bull market returns for now

Back from a week in Amsterdam at Money 20/20 and thanks to everyone I met for a combination of useful/challenging/engaging conversations as usual. As with every conference these days I return to a broadly lower Crypto market. Obviously there is a lot to digest from Friday and the weekend as the SEC goes on a crusade against our industry. The actions against Binance and Coinbase have seen all the Alt coins named in the action slump horribly and have taken the majors with them despite some rotation into BTC and ETH. This is against the backdrop of a rallying broader risk market which makes it all the harder to watch as the environment was ripe for Crypto to have soared without the SEC.

So where from here? Well time is a great healer and the performance of XRP could be worth noting. It is much further down the line with the SEC and has ignored the sell off. We will recover, but sadly I suspect not yet. I have been musing for some time how there are other stories around with more momentum than Crypto right now (A.I for example) and this action puts a further nail in the coffin of fresh money flowing into the space in the short term. I suspect we drift around, with rallies finding overhang supply and gun to my head we are likely to see 22k before 30k again in BTC. Alts will underperform as the arguments in their favour wane quickly. What will heal this wound is a lack of follow through from other countries and agencies. The U.S feels like a lone wolf and frankly one man seems to be leading a crusade. If no one else joins in, this will become a dim and distant memory quicker than we expect.

Today we get the release of CPI from the states with an expected drop from 4.9% to 4.1. The market is clearly positioning for this result with stocks flying and the USD on the back foot. Anecdotal evidence suggests we will see inflation falling so I see no reason to fight the move yet, but beware a sharp reversal should the number beat expectations. The bigger risk to me comes from the FOMC tomorrow. The market expects a pause and whilst I can argue against it I will join the herd. However the risk is strong of a hawkish speech with more rate hikes likely needed down the road so enjoy the bull market for now…

As always, good luck.

Richard Usher
Head of OTC Trading