Bitcoin fell 1.40% between May 19 and May 26, trading at $26,451 in Hong Kong at 7:00 PM on Friday. The world’s largest cryptocurrency by market capitalization has been trading below $30,000 since April 19. Ether rose 0.34% for the week to $1,813, having returned to $1,800 on Thursday.
The lack of progress in talks on the US debt ceiling continued to erode risk appetite as the June 1 deadline approached. Fitch Ratings on Wednesday downgraded the U.S.’s AAA rating to negative, saying debt ceiling talks raise the risk of missing payments on some of the government’s obligations.
“Bitcoin and Ether Drop Out of US Debt Ceiling Talks and Potential Ripple Effects for Crypto. President Biden has already announced that the country will default on its debt,” said Lucas Keeley, chief investment officer at digital asset platform Yield App.. With limited liquidity, the crypto market is not overly concerned with these macro events. It will take something much more substantial to move these markets.”
Johnny Luey, a crypto research analyst at trading platform LiquidityTech Protocol, disagreed, saying that the debt ceiling talks are the main factors behind the decline in bitcoin’s price.
“Although the debt ceiling has been raised and revised 78 times since 1960, investors are aware of the risk of default if negotiations fail. This is the first time that Bitcoin has faced such an economic incident, and it is reasonable to assume that a de-risking approach will be appropriate,” said Louie..
The global crypto market capitalization was $1.11 trillion at 7:00 p.m. in Hong Kong on Friday, down 0.89% from $1.12 trillion a week ago, according to data from CoinMarketCap. With a market cap of US$512 billion, Bitcoin represented 46.1% of the market, while Ether, valued at US$218 billion, accounted for 19.6%.
“The entire market capitalization of cryptocurrencies has remained essentially flat over the year,” Keely said. “Tether’s plan to expand its Bitcoin reserves may boost prices temporarily, but overall is unlikely to have much of an impact. Bitcoin’s halving in 2024 could lead to price increases, but we haven’t started to see the effects yet.”
On May 17, Tether, the company behind the world’s largest USDT stablecoin, revealed plans to “regularly allocate” up to 15% of its net operating profit to buy bitcoin in an effort to increase its reserve portfolio. At the time of the announcement, Tether had approximately $1.5 billion in bitcoin reserves.
Dormant Bitcoin has reached an all-time high
Bitcoin, which has been dormant for at least a year, hit an all-time high of 68.46% on Wednesday, according to data aggregator MacroMicro.
“This could mean that short-term selling pressure will ease if bitcoin holdings in short-term holdings are shifted to longer-term holders. However, we will not be able to tell whether the addresses belong to institutional investors or not,” said Tom Wan, research analyst at 21.co, the parent company of crypto exchange 21Shares.
According to Yield App’s Kiely, this indicates that more and more investors around the world are looking to hold their bitcoin for the long term.
“This trend is likely to continue and even accelerate, even potentially to the point of hyperbitcoinization, given the uncertainty associated with the evolving regulatory landscape and the growing recognition of Bitcoin as a store of value,” Keeley said.
“Hyperbitcoinization” is a concept that speculates on the eventual rise of Bitcoin to become the world’s most ubiquitous form of money.
Notable movers: RNDR & KAVA
Render Network’s native cryptocurrency was the biggest gainer this week among the top 100 coins by market capitalization listed on CoinMarketCap, gaining 16.55% to $2.83. The sign began to gain momentum last Saturday, after statement From the new Render Foundation website. This is Render’s second week in a row as the biggest gainer among the top 100 cryptos.
Render Network uses passive graphics processing units for digital rendering purposes, serving industries such as 3D modeling, game rendering, and virtual reality.
Kava, the management token for the eponymous layer-1 blockchain, was the second biggest gainer this week, rising 10.70% to $1.09. The coin started gaining momentum on the following Monday the start Last week on the Kawa mainland.
Next week. Could Debt Ceiling Deal Break Bitcoin’s Crab Move?
US President Joe Biden and House Speaker Kevin McCarthy have reportedly reached a deal that would raise the government’s debt ceiling for two years while limiting spending on most goods. However, the June 1 deadline is fast approaching, raising investor fears of a possible default.
According to WuuTrade’s Kenjaev, uncertainty surrounding the debt ceiling negotiations will continue to weigh on the crypto market until a deal is reached.
“From the side [movement] Bitcoin is very much associated with current market risks and fear. The activity of investors during any negotiations regarding economic risk is quite cautious. Therefore, the sides: 26,000 USD – 30,000 USD,” Kenjaev wrote, adding that positive news about the US economy will break the crab walk..
Investors await the release of May’s US jobs report, which includes key nonfarm payrolls data. This information often serves as a barometer to predict the Federal Reserve’s next steps in adjusting interest rates. ING Economics forecast a 195,000 increase in nonfarm payrolls for May. In addition, they expect the unemployment rate to rise slightly to 3.5% in May, compared to 3.4% the previous month.
In the crypto space, Optimism, the Ethereum layer-2 network, plans to increase the circulating supply of its control token (OP) next Wednesday, one year after the coin’s launch. The expansion is part of Optimism’s strategy to increase Token House’s pool of voting tokens, the OP group of owners responsible for proposing and voting on governance matters.
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