First Mover Asia: Bitcoin steady near $27K as investors weigh debt ceiling developments

Good morning. Here’s what happens:

the prices: Bitcoin at $26.8K maintains debt ceiling holding pattern.

ideas: Crypto as a hedge? Citizens in two large emerging countries and other major economies appear to be turning to digital assets as their currencies struggle.

Boring Bitcoin sleeps near $27K

Bitcoin settled comfortably in its latest range on Monday as investors weighed recent developments in the US debt ceiling impasse.

The largest cryptocurrency by market cap was recently trading at around $26,866, up 0.4%. BTC has been hovering between $26,500 and $27,500 for about two weeks, according to CoinDesk data, amid macro uncertainty, including concerns that US President Joe Biden and the House leadership will be unable to reach an agreement on raising the country’s debt limit. .

“Cryptocurrency traders are unsure how Bitcoin will behave over the next several days of debt ceiling negotiations,” Edward Moya, senior market analyst at Oanda, wrote in a note.

Moya added: The risk of default is very small, but if it does happen, it could look like a huge increase in risk appetite, which could lead to a sharp decline in the cryptocurrency. Bitcoin appears to be trading near the lower bounds of its recent trading range between $26,500 and $30,000.”

Since 1960, the government has increased the debt limit 78 times, but the current fraught political environment has raised concern about lawmakers’ willingness to work together.

In a letter to House Speaker Kevin McCarthy (R-Calif.), US Treasury Secretary Janet Yellen reiterated her warning on May 15 that without a deal, “the Treasury Department will not be able to meet all of the government’s commitments by early June, and potentially as early as June 1.”

“We have learned from previous debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively affect the credit rating of the United States,” Yellen added. “We’ve already seen Treasury borrowing boats increase exponentially for securities due in June.”

Ether was recently trading around $1,820, up 0.8%. The second largest cryptocurrency by market cap has been similarly limited between $1,750 and $1,850 over the past two weeks. Other major cryptocurrencies have been largely in the green, albeit pale shades, with TRX and AVAX, smart contract platform tokens Tron and Avalanche, recently up 3.8% and 2.3% respectively. The CoinDesk Market Index, a measure of the performance of crypto markets, recently rose 0.4%.

Among major stock indices, the technology-focused Nasdaq Composite rose 0.5% to reach a 2023 high, while the S&P 500, which has a vital technology component, and the Dow Jones Industrial Average (DJIA) rose 0.2%. and 0.4%, respectively. Yields on Treasurys rose, and the price of gold fell slightly to $1,990, well below its record high early this month when investors were turning more to safe-haven assets.

Meanwhile, in an interview with CoinDesk TV’s “First Mover” on Monday, Ahmed Ismail, CEO of quantitative liquidity pool Fluid, said that market makers Jane Street and Jump Trading’s retreat from trading cryptocurrencies in the US has spooked investors, An already dwindling supply of market liquidity was reduced.

“One of the biggest problems with cryptocurrency is massive liquidity fragmentation, and events like this exacerbate the problem,” Ismail said. So what we’re seeing now is that there isn’t much activity because the liquidity is more fragmented, and the markets are very inefficient. As a result, you’ll see I think we’re seeing a resurgence of some narratives.

Ismail pointed to the increase in buying options on cryptocurrency exchange Bybit, a sign of unrest over the debt ceiling and other macro-level uncertainties. “The narrative that people are withdrawing cash because they’re afraid of what’s going to happen and the uncertainty around the debt ceiling, that’s definitely a big problem keeping the cryptocurrency crisis so tight right now.”

As the United States is mired in a political recession while other regions build cryptocurrency frameworks, it is worth considering the evolution and outlook of demand for crypto assets. This is becoming more important as many large countries grapple with soaring inflation, fragile currencies and authoritarian control of financial access, and as populations become increasingly aware of cryptocurrencies and mistrust of centralized institutions grows.

Noelle Acheson is the former Head of Research at CoinDesk and Genesis Trading. This article is an excerpt from it Encryption is a macro now newsletter, focusing on the overlap between the changing cryptocurrency and macro landscapes. These are her opinions, and nothing she writes should be taken as investment advice.

On the surface, this might seem like an overreaction to the FATF’s stance on encryption — the organization’s president last Thursday published a letter titled “The End of the Lawless Crypto Space” urging regulation of cryptography rather than outright bans.

Then again, Pakistan has a somewhat strained relationship with the Financial Action Task Force, and last October was removed from the “grey list” (which classifies certain countries as having “deficiencies” in anti-money laundering controls, which in turn can lead to To a limited participation in the world. Financing).

Nor is it difficult to see the hand of the International Monetary Fund. Pakistan is currently in talks with the organization over a bailout package, although negotiations appear to be stalled and concern over political and economic issues in the country is beginning to affect neighboring countries. The International Monetary Fund has not been shy about its unease with the cryptocurrency markets, and a few months ago, reports surfaced that it had applied crypto suppression clauses to negotiations with Argentina.

Read the full story here:

Glassnode data revealed that bitcoin (BTC) is settling in the narrowest price range it has seen in months, despite looming concerns about the stability of US regional banks and the country’s debt ceiling. FLUID CEO Ahmed Ismail shared an analysis of the cryptocurrency markets. In addition, Polygon co-founder Sandeep Nailwal discussed the launch of the Web3 Fellowship Program. And Litecoin Foundation managing director Alan Austin gave his take on the recent surge in Litecoin activity amid the frenzy surrounding the Ordinals.

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