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Market Research Report:  Stronger USD Sinks Stocks and Crashes Oil While Only Causing Crypto to Consolidate

Early last week, crypto was mired in the news of 2 tranches of 5,000 BTC each being moved around. However, the BTCs did not end up in exchanges but went to other addresses, possibly meaning that those BTCs were sold via OTC to new hands. This was positive news in that the BTC not being traded at exchanges would not cause the market price of BTC to dip. 

Further to this relief, the persistent negative funding rate supported crypto prices, letting BTC catch some breather back above $20,000 and ETH above $1,500. 

New Whales Support BTC Price

New whale accumulation also helped prices, with BTC welcoming 103 new whale wallets containing at least 100 BTC compared to the week before, showing that new dip buyers are still plentiful, mopping up BTC whenever possible.

This string of new whale accumulation has been reinforced by a drop in the supply of BTCs on spot exchanges, confirming that buyers continue to use the dip to accumulate more BTC. 

The number of BTC on exchanges has fallen to levels last seen during November 2018, which was at the middle of that bear market cycle, in line with our current status quo.

Interestingly, while the end of the 2018 bear market was marked by an increase in BTC supply on exchanges, during this cycle, the supply on exchanges has been falling regardless of price. This shows a hodler trend that consistently reduces the circulating BTC supply available for trading. Will this trend cause BTC’s price to rise substantially in the next bull run? Only time will tell.

However, the price of BTC could not muster enough momentum to edge past $20,500 eventually, showing that bulls were lacking in strength amid a declining macro-economic environment for the crypto market as global central banks press on with tightening monetary policies. 

September 15 To Be Crypto Apocalypse?

Interestingly, the September 15 date is also the day of the ETH Merge. This coincidence has set off a series of conspiracy theories about what would happen to the crypto market that day. Thus far, most theorists are bearish and expecting the crypto market to crash that day. However, as most experienced traders are aware, what is most expected to happen often does not, and September 15 could be a non-event. That said, it may still be prudent for traders to mark this date on their calendars.

As traders prepare for the upcoming “apocalypse” in ETH as it undergoes the Merge, they have surged the futures’ basis and futures trading volume on ETH. This is possible because traders stay long in the spot market to qualify for the forked tokens while also hedging their bets against a price fall by shorting in the futures market.

The rush into this trade has gotten so intense that the futures trading volume for ETH has surpassed that of BTC for the first time in history. With this trade so crowded, do not be surprised that something unusual happens on September 15 that causes a squeeze. 

BTC NUPL Nearing 2018 Peak Loss

After mulling on conspiracy theories, let us come back to reality and examine facts.

The BTC net unrealized profit-loss indicator shows that long-term holder loss is nearing levels last seen during the worst drawdown in the 2018 bear market, which implies that BTC is nearing its cyclical bottom. While it is possible that BTC holders may not realize as bad a loss as the 2018 cycle, the current net unrealized loss needs to continue reducing for another couple of weeks before we can say with more confidence that the current downtrend could be over.

USD/JPY Thrusts Above 140, Highest in 24 Years

Coming off the heels of the hawkish Fed, US stocks dipped again since the beginning of last week, with the non-farm payrolls beat on Friday not giving any respite to the markets. This was the third consecutive week of declines for the US stock indices.

The Dow and S&P lost roughly 3% and 3.3%, respectively, while the Nasdaq fell 4.2%, losing for the sixth consecutive session. Investors displayed uncertainty ahead of the Labor Day long weekend after the non-farm payrolls showed that the US economy added 315,000 jobs for August, a tad above the consensus estimate of 295,000.

While the number was a beat, it was not significantly above consensus, which caused the USD to dip slightly as traders closed positions ahead of the long weekend. Yields dropped a tad, and the DXY fell from the week’s high of 110 to 109.60, although they are still much higher than at the beginning of the week.
The USD was still the king of the week, gaining against most of its peers. The USD/JPY pair broke the 139.60 previous high and was shooting towards 141 before profit-taking after the NFP release brought it back down to close the week at 140.20. Despite the slight pullback, this level is the highest since September 1998. It underpins the interest rate disparity between the USA and Japan, which is still adopting an accommodative stance towards interest rates, causing the yen to weaken against most of its other currency counterparts. 
This week, the EUR/USD could get a temporary respite from falling against the USD if the ECB hikes more than expected in its Thursday policy meeting. However, with the European economies almost coming to a halt due to the massive power crisis they are facing, any bounce in the EUR/USD could be short-lived.

Gold and Silver dipped as the USD rose. Gold lost 1.8%, and Silver dropped 5.55% after renewed lockdowns in China again sparked fears of a widespread slowdown in global economies. Both metals are a tad weaker in this new week, even as the USD remains on the softer side.

The China lockdowns did even more damage to Oil than Silver, which lost a whopping 7% average last week. Brent lost 6.5% and the WTI slid 7.5% even after factoring in their early week rises as the fear of a global slowdown brought oil prices back lower again. US Crude Oil inventories reporting a surprise increase in the middle of last week also did not help prices. This week, however, Oil’s direction could depend more on supply-side factors as OPEC+ meets on September 05 to decide on oil production quotas. Oil is slightly higher at the opening of Asian trading today in anticipation of possible production cutback news from the meeting, gaining around 1.6%.

This holiday-shortened week, economic figures out of the US are not as critical; however, the CPI numbers set for release on September 13 will be widely scrutinized as that is the last important set of numbers the Fed will be watching before its September 21-22 interest rate meeting. With the September 15 key date for the crypto market, traders may not need to wait long to experience the excitement. The calendar appears to be shaping up for a volatility-filled week of September 12 after this week ends.

With funding rates in crypto remaining slightly skewed to the positive side, there could be a chance that crypto prices will start dipping even ahead of next week as tense traders exit the market. However, clarity in the crypto market’s direction may only come after Tuesday when the US traditional markets return from Labor Day. 


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