Bitcoin's Next Move? Look at AUD/JPY

Everything you need to make sense of the crypto markets and beyond

By the CoinDesk Markets Team

Edited by Lawrence Lewitinn, Managing Editor, Global Capital Markets

July 9, 2021

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Bitcoin (BTC)

+1.1% $32,902

Ether (ETH)

-3.3% $2,097

(Price data as of July 9 @11:00 UTC)

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Good morning, and welcome to First Mover. Here's what's happening this morning:

Reflation bets are those that benefit from a pick up in economic growth and inflation.

And check out the CoinDesk TV show "First Mover," hosted by Michael Casey, Emily Parker and me at 9:00 a.m. U.S. Eastern time. Today the show will feature guests:

– Lawrence Lewitinn

Biggest Movers

These are the biggest movers in the CoinDesk 20 over the past 24 hours:

Gainers:

Aave (AAVE): +3.1%

The Graph (GRT): +3.1%

Losers:

Chainlink (LINK): -3.9%

The CoinDesk 20 are 20 digital assets filtered from the larger universe of thousands of cryptocurrencies and constitute roughly 99% of the market by volume at eight of the largest and most trustworthy exchanges.

Market Moves

by Omkar Godbole

‘Reflation’ Rethink Keeps Bitcoin Under Pressure

While bitcoin (BTC)‘s blockchain data shows signs of green shoots, the macro environment does not appear conducive to a bullish revival.

In particular, the unwinding of the reflation trade – or bets that benefit from a pick up in growth and inflation – might be keeping bitcoin under pressure, analysts say. Evidence for the unwinding comes from a recent slide in bond yields and weak commodity-linked currencies.

“The unwinding of the reflation trade is impacting bitcoin,” Noelle Acheson, head of markets insights at Genesis Trading, told CoinDesk, adding that many investors allocated the cryptocurrency to their portfolio as an “inflation hedge”.

Reflation refers to an increase in economic activity and inflation after depression or recession. When anticipating reflation, investors typically buy industrial commodities, currencies linked to commodities such as the Australian dollar, shares of economically sensitive companies and perceived inflation hedges like bitcoin, gold. They tend to sell bonds, driving yields higher.

The so-called reflation trade became popular after March 2020, when policymakers worldwide pledged unprecedented monetary and fiscal stimulus and raised hopes for a V-shaped recovery in economic activity and inflation.

The trade picked up steam in November after the U.S. election, as evident from AUD/JPY currency pair’s rally from 72 to 84 in the five months to March 2021 and the uptick in bond yields (bond prices and yields move in opposite directions).

Bitcoin also charted a six-fold rally to near $60,000 during that period, moving in lockstep with AUD/JPY. The currency pair might be a better indicator of reflation sentiment than most traditional assets, as the Australian dollar is sensitive to commodity prices and the yen is seen as a haven. Australia is one of the top exporters of copper, iron ore.

The positive correlation suggests that the reflation theme played a big role in bringing money into the bitcoin market.

BTCUSD vs AUD/JPY and US 10-year treasury yield (Source: TradingView)

Both bitcoin and AUD/JPY peaked in March-April. Bitcoin tanked in May on renewed concerns of tighter regulation and Tesla’s decision to delist the cryptocurrency as a payments alternative, and AUD/JPY has begun losing altitude in recent days, hinting at an unwinding of the reflation trade and flight to safety.

The bond market is signaling the same thing, with longer duration yields falling sharply in recent days. The 10-year U.S. Treasury yield fell to a 4 1/2-month low of 1.25% on Thursday. “The bond market is telling us that inflation could be transitory,” Acheson said.

For now, there is less incentive for investors to pour money into inflation hedges, including bitcoin. The cryptocurrency may face selling pressure if markets continue to unwind reflation trades, leading to a full-blown risk-off sentiment.

“The reflation rethink is beginning to take a toll on equities, and if risk aversion worsens, bitcoin may see a deeper decline,” said Pankaj Balani, CEO of Delta Exchange.

U.S. stock benchmarks dropped on Thursday, with the Dow Jones Industrial Average losing more than 250 points and futures down almost 500 points at one point earlier in the day. Bitcoin also fell by nearly 5% to $32,100.

Read the original story here:

‘Reflation’ Rethink Keeps Bitcoin Under Pressure

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Technician's Take

by Damanick Dantes, CMT

Bitcoin Struggles Within Choppy Range; Could Stabilize at $30K

Bitcoin (BTC) remains in a tight range after buyers took profits near $34,000 resistance. The cryptocurrency registered a series of lower price highs over the past few days, which suggests sellers are in control. The price decline could stabilize into the weekend around $30,000 support.

Bitcoin was trading around $32,000 at press time and is down about 2% over the past week.

Daily bitcoin chart shows support and resistance levels with RSI (Source: TradingView)

Read the original story here:

Bitcoin Struggles Within Choppy Range; Could Stabilize at $30K

A message from Unique.One

Unique.One, a non-profit, next-generation, purely decentralized NFT Art Marketplace, supports artists rather than profiting from them. In celebration of the successful launch of its new auction platform, Unique One is sponsoring artists to mint gas-free. Any artist can mint one NFT on the Unique One Etherum v2 platform to enter. Winners will receive ETH for gas to mint 5 additional NFTs sponsored by the Unique One Community. Visit Unique.One Gas Free July for more details.

BOLO

Be on the look out for some of these upcoming events:

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The cryptocurrency movement has never been so sprawling, reaching every corner of the planet.

Crypto State by CoinDesk aims to connect with local communities to explore this movement of financial disruption and how it trickles down to every corner of the globe, from DeFi investment opportunities to alternative ways to transact and store wealth.

We're making virtual stops with audiences in Nigeria, the Middle East and Southeast Asia this year. Register for the Crypto State virtual tour.

ICYMI

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

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"First Mover" dives into today's top crypto markets and industry news, including USDC backer Circle announcing its plans to go public in a SPAC deal that values the firm at $4.5 billion. Also, China takes aim at stablecoins in its latest anti-crypto rhetoric. Guests include Michele Schneider of MarketGauge, George Kaloudis of CoinDesk Research with the just-released Crypto Q2 report, and Hong Kong-based singer-songwriter Hanjin Tan on the importance of NFTs in Asia.

The Investor’s Perspective on the Bitcoin Taproot Upgrade

Taproot is a bundle of three upgrades to Bitcoin aimed at improving network security, privacy and scalability. At the same time, it poses some potential drawbacks to Bitcoin including risks of low adoption, unintended privacy shortcomings and Bitcoin community disappointment and fracturing.

CoinDesk Research's newest report dives into the economic impact and investment implications of the Taproot upgrade.

Download the full report.

Latest Headlines

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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