Bitcoin fell 1.40% from May 19 to May 26 to trade at US$26,451 as of 7:00 p.m. Friday in Hong Kong. The world’s largest cryptocurrency by market capitalization has been trading below $30,000 since April 19. Ether rose 0.34% over the week to hit $1,813, recovering to $1,800 on Thursday.
The lack of progress in the US debt ceiling negotiations continued to erode risk appetite as the June 1 deadline approaches. On Wednesday, Fitch Ratings put the U.S. AAA rating on negative watch, saying debt ceiling talks raised the risks that the government won’t pay some of its obligations.
“Bitcoin and Ether ignored US debt ceiling negotiations and potential ripple effects for crypto. President Biden has already said the country will not default on its debt,” said Lucas Kiely, chief investment officer of digital asset platform Yield App.. “With tight liquidity, the crypto market doesn’t seem too concerned about these macro events. It will take something much more substantial to move these markets.
Johnny Louey, a crypto research analyst at trading platform LiquidityTech Protocol, disagreed, saying the debt ceiling negotiations are the main factors weighing on 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 Bitcoin has encountered such an economic incident and it is reasonable to assume that a risk-free approach would be appropriate,” Louey said..
The global crypto market capitalization stood at US$1.11 trillion as of 7:00 p.m. Hong Kong on Friday, down 0.89% from US$1.12 trillion a week ago, according to the data from CoinMarketCap. With a market capitalization of US$512 billion, Bitcoin accounted for 46.1% of the market, while Ether, valued at US$218 billion, accounted for 19.6%.
“Total cryptocurrency market capitalization was essentially flat for a year,” Kiely said. “Tether’s plan to expand its Bitcoin holdings could temporarily boost prices, but is unlikely to have a large impact. Bitcoin’s 2024 halving could lead to price increases, however, we have yet to begin to see the effects.
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 profits towards the purchase of Bitcoin, with the aim of to increase its reserve portfolio. Tether held around US$1.5 billion in Bitcoin reserves, at the time of the announcement.
Dormant Bitcoin Hits All-Time High
The amount of Bitcoin that has been idle 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 decreases if Bitcoin holdings in short-term holdings shift to longer-term holders. However, we will not be able to tell whether or not the addresses belong to institutional investors,” said Tom Wan, research analyst at 21.co, the parent company of 21Shares, an issuer of exchange-traded crypto products.
According to Yield App’s Kiely, this suggests that more and more investors around the world intend 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 an evolving regulatory landscape and the growing recognition of Bitcoin as a store of value,” Kiely said.
“Hyperbitcoinization” is a concept speculating on Bitcoin’s eventual rise to become the world’s ubiquitous form of currency.
Notable movers: RNDR and KAVA
The Render Network native cryptocurrency was this week’s biggest gainer among the top 100 coins by market capitalization listed on CoinMarketCap, surging 16.55% to US$2.83. The token started gaining momentum last Saturday, after the announcement of the new Render Foundation website. This is Render’s second consecutive week as the biggest gainer in the crypto top 100.
The Render Network leverages idle graphics processing units for digital rendering purposes, addressing areas such as 3D modeling, game imaging, and virtual reality.
Kava, the governance token of a layer-1 blockchain of the same name, was the second biggest gainer this week, rising 10.70% to US$1.09. The coin started gaining momentum on Monday, after the launch from the Kava mainnet last week.
Next Week: Could a Debt Ceiling Deal Shatter Bitcoin’s Crab March?
US President Joe Biden and House Speaker Kevin McCarthy are reportedly in the process of reaching a deal that would raise the government’s debt ceiling for two years while capping spending on most items. Still, the June 1 deadline is fast approaching, causing investors to worry about a potential default.
According to WuuTrade’s Kenjaev, the uncertainty surrounding the debt ceiling negotiations will continue to weigh on the crypto market until an agreement is reached.
” The side [movement] of Bitcoin is very much related to current market risks and fear. Investor activity in any discussion of economic risks is rather cautious. Hence the discrepancy between US$26,000 and US$30,000,” Kenjaev wrote, adding that positive news about the US economy will break the crab march..
Investors are awaiting the release next week of the US jobs report for May, which includes crucial nonfarm payrolls data. This information is often used as a barometer to predict the Federal Reserve’s next steps regarding interest rate adjustments. ING Economics has forecast a 195,000 increase in non-farm payrolls for May. Moreover, they anticipate a slight increase in the unemployment rate to 3.5% in May, against 3.4% the previous month.
In the crypto space, Optimism, an Ethereum layer 2 network, plans to increase the circulating supply of its governance (OP) token next Wednesday, a year after the coin’s launch. The expansion is part of Optimism’s strategy to increase the voting token pool within the Token House, its group of OP holders responsible for proposing and voting on governance issues.
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