Weekly Crypto Analysis: BTC at a Breaking Point; ETH Gas Fees Reach a 2-Year Low

2022/07/04 13:09:22

The cryptocurrency market is currently at a crossroads, with most of the top cryptocurrencies stagnating on the daily chart, and waiting for Bitcoin to make a move. The sector is currently riddled with positive sentiment from the whale buyers, as well as negative sentiment coming from the retail sector and overleveraged institutions. With that said, the global market capitalization dropped to $865 billion, down from $1 trillion from the past week. As we reported in our previous weekly analysis, the market failed to maintain its bullish momentum, and is now waiting for Bitcoin to ignite the next move.

The overall market is still largely pushing towards stablecoins, with USDT vouching to decrease its commercial paper positions. At the same time, Bitcoin whales have continuously increased their positions below the $20,000 mark, while institutions have approached currently illiquid and overleveraged companies in order to bail them “in” by purchasing their debt.

Considering the bearish tone in the crypto market, checkout KuCoin’s guide on Top 5 Moves to Make in a Crypto Bear Market. Let's go deeper and take a look at the most recent crypto market news and Bitcoin's technical outlook.

Crypto Market Overview

Even though Bitcoin’s price is currently green on the day, its weekly price has managed to dip as much as 6.04%, currently sitting at just under $19,800. When it comes to market dominance, Bitcoin has dropped from 42.47% to 42.20% this week. This is mostly due to the increased dominance of stablecoins - mainly USDT and USDC. On Monday, the leading cryptocurrency pair, BTC/USD, is trading at $19,215.75, while Ethereum, the second-largest cryptocurrency by market capitalization, has dropped to $1,056.68, down 11.91% in the last seven days.

TerraClassicUSD (USTC) has rocketed in the past week, recording gains of 134.03%, followed by Arweave’s (AR) 9.57% and Curve DAO Token’s (CRV) 2.38% gains.

Cryptocurrency Market Heatmap | Source: Coin360

Last week's worst performers ended up being Stacks (STX), KuCoin Token (KCS), and Polygon (MATIC). STX is down 26.95% to $0.37, and KCS fell more than 25.21% to $8.17. Lastly, MATIC is down 21.73% in the last seven days.

The cryptocurrency market remains risk-off due to a series of events we will explore below.

Top Altcoin Gainers and Losers

Top Altcoin Gainers:

➢ TerraClassicUSD (USTC) ➠ 134.03%

➢ Arweave’s (AR) ➠ 9.57%

➢ Curve DAO Token’s (CRV) ➠2.38%

Top Altcoin Losers:

➢ Stacks (STX) ➠ 26.95%

➢ KuCoin Token (KCS) ➠ 25.21%

➢ Polygon (MATIC) ➠ 21.73%

News Highlights

Here are some of the events that made the previous week's crypto news section stand out:

BTC Facing Huge Decision that Will Likely Affect the Upcoming Week

The Bitcoin price is consolidating slightly below $19,800 as the tug of war between bulls and bears continues on Monday, while altcoins ended up more in the red than in the great.

Bitcoin closed another red candle during the previous week, but started out relatively strong on Monday.

The technical analysis for BTC/USDT is down the road, but the weekly outlook is currently leaning more towards the pessimistic side.

Ethereum Average Gas Fees Drop to its Lowest Levels Since 2020

The average transaction fee on Ethereum’s blockchain fell down to 0.0015 ETH ($1.57). This price was a number previously seen back in December 2020. Starting in January 2021, Ethereum’s gas fees surged exponentially as the hype around nonfungible tokens (NFT), decentralized finance (DeFi), and a promising bull market pushed the prices up.

For nearly two years, between January 2021 and May 2022, the average gas fee on the Ethereum network was roughly $40, with the highest gas cost recorded coming up to $196.63 on May 1, 2022.

Tether Reduces Commercial Paper Holdings by Almost 60%

Stablecoin issuer Tether has decreased its commercial paper holdings by 58%, with the total amount now coming up to $8.5 billion. On top of that, in order to tackle the quality of support for its dollar-pegged USDT token, Tether decided to reduce its commercial paper holdings by $3.5 billion more by the end of the month. This is a massive reduction in commercial paper holdings, as Tether held $20.1 billion in May.

Furthermore, the company announced that it will try to reduce this position down to zero as it tries to diversify its holdings into US treasury bonds.

Last month, Tether denied its exposure to overleveraged and currently struggling Three Arrows Capital, the hedge fund that was reported to be insolvent. In May, Tether published an attestation of holdings by independent accountants MHA Cayman, with the report showing that Tether held $39.2 billion, namely:

⧫ $4.1 billion in bank deposits,

⧫ $6.7 billion in money market funds,

⧫ $3.1 billion in secured loans.

Goldman Sachs Downgrades Coinbase Stock to “Sell”

After an extremely promising debut on the Nasdaq stock exchange in April 2021, Coinbase stock has seen almost nothing but red days. The company that once had a fully diluted market capitalization of close to $100 billion, has been caught in a downward spiral amid crypto winter. As a response to an 80% drop in stock’s price, analysts at Goldman Sachs downgraded the company to “sell,” which is recognized by the market as a recommendation that investors liquidate their positions as soon as possible.

However, Goldman isn’t the only firm turning bearish on Coinbase, and isn’t considered an outlier at all. Earlier this month, credit rating agency Moody’s also downgraded the company to a Ba3 rating, which is considered a non-investment grade.

Crypto Calendar: Events to Watch This Week

➺ 04/07/2022 - FIL-Toronto Summit (BNB)

➺ 06/07/2022 - BTC & CELO Twitter Space (CELO)

➺ 06/07/2022 - ZEC & DASH in NOW Wallet (NOW)

➺ 06/07/2022 - AMA w/ ATTA Protocol (KLY)

➺ 08/07/2022 - 5-Year Aniversary Meetup (BNB)

USDT and USDC Maintaining Market Dominance

Despite Tether's reduction in circulating supply, two top Stablecoins by market capitalization, USDT, and USDC, saw their dominance reach and maintain an all-time high (ATH). During the bearish crypto sessions, investors tend to convert their Bitcoin and altcoin holdings to stablecoins in order to protect their funds from downwards-trending market conditions. As a result, USDT and USDC dominance has never been stronger, with the two cryptocurrencies taking the 3rd and 4th spot in the cryptocurrency market cap ranking, respectively.

On the other hand, the USDT/USDC bridge has recently been added to Bitgert's (BRISE) network. This event is regarded as one of the most significant ones in the past month, as it has already piqued the interest of the wider cryptocurrency community. Adding stable currency to the Bitgert blockchain makes the project more competitive with projects such as Safemoon.

Fear and Greed Index Continues to Report "Extreme Fear"

The cryptocurrency market has remained bearish, which is certainly reflected in the Fear and Greed Index's "extreme fear" signal. While it is true that the whales continued to increase their positions, the retail sector remained heavily bearish.

The Fear and Greed Index is currently at 14, a slight uptick from the previous week’s 12.

Fear & Greed Index | Source: Alternative

Bitcoin (BTC/USDT) Analysis on KuCoin Chart

The leading cryptocurrency dropped below the $20,000 market in the past week, with it currently bouncing from the $19,200 mark, and pushing towards $20,000 yet again. On a daily timeframe, the BTC/USD pair has closed a series of Doji and Shooting star candles, showing investors are still unsure what to do, and most people are waiting for the initial push to happen before extending it.

The price of Bitcoin has started to come out of the oversold zone as the RSI (relative strength index) crosses 30 points from the lower side on the daily chart. Typically, it indicates that the oversold crypto asset is getting ready for a bullish retracement.

BTC/USDT Chart on the Daily Timeframe | Source: KuCoin

Bitcoin seems to have found support near the $19,200 level, with strong resistance waiting at the $20,000 level, as well as at the daily 21-period Moving Average.

On the hourly timeframe, Bitcoin has bounced up from a triangle pattern and ended up in the heavy resistance zone that sits between $19,800 and $20,000.

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