SWIFT Network To Begin Exploring Cross-Border CBDC Payments

Key Insights:

  • SWIFT, in collaboration with Capgemini, is testing interlinking domestic CBDC networks.
  • CBDCs are currently being explored by economies that account for 90% of the global GDP.
  • China’s Chongqing municipality recorded $43 million worth of CBDC transactions as of this month.

Central Bank Digital Currencies have become a government favorite tool to usher the advancement of web3 and digital currencies.

Whether or not the countries looking into CBDCs legalize crypto has no impact on the rapid growth of the newest form of currency.

SWIFT To Connect CBDCs

With most countries now beginning to understand the demand and applications of digital currencies, CBDCs have been added to most of the countries’ agendas.

As per a report from the Bank of International Settlements (BIS), nine out of 10 central banks are actively looking into bringing CBDCs to the general public and into circulation.

Thus since the number of countries participating in digital currencies has increased significantly, SWIFT is seeking a way to bring them all together to create an interconnected network of CBDCs.

The Chief Innovation Officer at SWIFT, Thomas Zschach, said,

“Facilitating interoperability and interlinking between different CBDCs being developed around the world will be critical if we are to fully realise their potential. Today, the global CBDC ecosystem risks becoming fragmented with numerous central banks developing their own digital currencies based on different technologies, standards and protocols.”

SWIFT is a core part of global transactions, and it believes that fragmentation of CBDCs could hamper the ability of businesses and consumers to make cross-border payments using digital currencies.

Therefore, in collaboration with IT services company Capgemini, SWIFT will begin solving the interoperability issue.

By testing the network for its capability of interlinking, SWIFT intends to explore whether a highly scalable and easily integrated solution to make CBDC networks’ cross-border payments ready’ is achievable or not.

Use of CBDCs

While about nine countries have already brought CBDC into use, China’s digital yuan (e-CNY) has been one of the most widely experimented with digital currency.

By debuting it during the Winter Olympics in Beijing, China noted high volumes of usage among citizens and foreigners alike.

Recently China’s southwestern municipality Chongqing observed a total e-CNY trading volume of  288 million yuan or about $43 million from its 1.576 million transactions.

China’s central bank remarked that the usage of the CBDC in the Chongqing region was starkly higher than that of other regions.

This is because Chongqing is the host of 1.1 million e-CNY wallets, with over 96% of these wallets belonging to individual holders.

So if in a country such as China, where freedom of choice is questionable, CBDCs can flourish significantly, it leaves no room for doubt that the same could happen in other countries as well.

OpenSea Disables Trading of BAYC NFT Due to Singapore Court Action

Key Insights:

  • OpenSea was back in the news this week, with the NFT marketplace disabling the trading of BAYC NFT #2162.
  • According to a court filing, Janesh Rajkumar secured an injunction from the high court to block the sale.
  • In December, OpenSea stepped in and froze stolen NFTs raising questions over decentralization.

Trading activity in the NFT space has been buoyant since the start of the year. In January, OpenSea saw trading volumes hit a record high before falling back.

The increase in trading activity and upward trend in NFT prices also fueled a rise in illicit activity. Governments responded to rising illegal activity, with the UK calling for greater regulatory oversight, not just of cryptos, but also NFTs. US lawmakers also responded, by clamping down on illegal activity.

With a global regulatory framework yet to be in place, however, illegal activity remains a bugbear for NFT collectors and lawmakers.

This week, the Singapore Courts delivered a message to those thinking NFTs are beyond the realms of the law.

Singapore Court Blocks BAYC #2162 NFT Sale over Loan Dispute

This week, OpenSea froze the trading of Bored Ape Yacht Club NFT #2162.

The NFT owner, Janesh Rajkumar, managed to get a Singapore High Court worldwide injunction to freeze the sale and the ownership transfer of the Ethereum (ETH) based Bored Ape Yacht Club NFT.

According to an insight piece from lawfirm Withers KhattarWong,

“The Singapore High Court’s injunction to protect an NFT is the first in Singapore and Asia, and the first globally in a purely commercial dispute. The injunction recognizes NFTs as an asset.”

Withers KhattarWong Partner and international arbitration and litigation specialist, Shaun Leong, said,

“We are the first law firm in Singapore, and one of the first few in the world, that is successful in obtaining a worldwide proprietary injunction to freeze a Bored Ape Yacht Club NFT sale on the blockchain against a Metaverse personality.”

Leong went on further by saying,

“The landmark ruling is also significant because it recognizes that Singapore courts can take jurisdiction over assets sited in the decentralized blockchain.”

By way of background, claimant Janesh Rajkumar used BAYC #2162 as collateral to borrow Ethereum (ETH) on NFTfi.

On March 19, 2022, the claimant entered into an agreement with a public persona, “chefpierre,” with a refinance option on April 20, 2022.

According to Withers KhattarWong, the claimant transferred BAYC #2162 to NFTfi’s escrow account as part of the refinancing agreement. The NFT would be held under escrow until full repayment of the loan, with the agreement of a loan extension.

In response to the claimant not repaying the loan, “chefpierre” foreclosed for breach of agreement. The defendant transferred the NFT to his personal Ethereum wallet and then listed the NFT for sale on OpenSea.

OpenSea Acts in Response to Items Obtained Fraudulently

It is not the first time OpenSea has intervened in NFT marketplace activity. In April, OpenSea delisted Sands Vegas Casino Club Gambler NFTs in response to cease & desist orders from the US states of Alabama and Texas.

In December, OpenSea froze 16 stolen Bored Ape and Mutant Ape NFTs worth $2.2 million. Unlike the case in Singapore and the US, OpenSea froze the NFTs at the request of famous gallery owner Todd Kramer. The intervention caused some to question OpenSea’s decentralized ethos.

Despite any clamor, OpenSea has clear and transparent policies and terms & conditions. These allowed and will continue to permit OpenSea to protect the rights of NFT holders.

According to the OpenSea Help Center,

“When OpenSea receives a credible report or learns that an item is stolen, we lock the item so that it cannot be bought, sold, or transferred using OpenSea. Items that have been locked will feature a red banner on the item page, indicating they are locked.”

The Help Center goes on to say,

“Locking the item on OpenSea does not prevent sellers from using other platforms not controlled by OpenSea or interacting directly with the blockchain to transfer or sell the items.

We are a peer-to-peer platform for buyers and sellers to connect with one another and we do not have custody of the NFTs on our platform.”

Daily Crypto Brew: Buoyant Global Equities, Buck Weakness Boosts Crypto Sentiment

Key Points

  • The macro backdrop of stronger global equities and a weakening US dollar is boosting crypto sentiment on Friday.
  • Bitcoin recovered $30,000 on Thursday and is now consolidating just above this key level.
  • The events to note next week are Fed minutes, US Q1 GDP (2nd estimate) and US Core PCE.

State Of The Market

Global macro risk appetite is on a better footing on Friday, with global equities rising across the board in wake of a surprise cut by China’s PBoC to one of its key lending rates. The bank cut its 5-year Loan Prime Rate (LPR) to 4.45% from 4.6%, and move analysts said should support the country’s struggling property sector.

Upside in global equity markets combined with a sharp, potentially positioning-related drop in the US dollar against most of its G10 peers on Thursday and continued subdued moves in US bond yields is helping to support cryptocurrency prices as the weekend approaches.

Nasdaq 100 index futures were last trading with pre-market gains of around 1.5%. Crypto has developed a strong positive correlation to US equities (tech stocks in particular) in recent months.

Meanwhile, the DXY fell back below the 103.00 level on Thursday, taking its losses since printed multi-decade highs above 105.00 last Friday to more than 2.0%. A weaker US dollar makes USD-denominated cryptocurrencies and other commodities cheaper for international buyers, thus boosting demand.

Elsewhere, longer-term US yields are down on the week, with the 10-year last down about 6 bps in the mid-2.80s% area. Lower yields reduce the “opportunity cost” of holding non-yielding assets like crypto (or precious metals and other commodities).

The total market capitalization of cryptocurrencies was last around $1.277 trillion according to TradingView, a bounce of around 6.0% from Thursday’s lows near $1.20 trillion. On the week, total crypto market cap is still down by about 4.3% or just under $60 billion, reflecting the fact that, on the week, US equities are also headed for losses.

But crypto bulls will take heart from the fact that the recent $1.20 trillion to $1.35 trillion (ish) range established over the last eight days continues to be respected. But broader macro conditions look set to remain difficult next week.

The release of the minutes of the Fed’s last policy meeting (where it hiked rates by 50 bps and signaled more 50 bps moves ahead) will be out on Wednesday ahead of the release of the second estimate of US GDP growth in Q1 on Thursday and then the release of US Core PCE inflation data on Friday (the Fed’s favored gauge of underlying inflation).

This will keep focus on the themes bearish themes of central bank tightening amid scorching hot inflation, despite a slowing economy. Traders will recall the first estimate of US Q1 GDP growth showed a surprise contraction, hence why the second estimate will be closely scrutinized.

If global equities can end this week on a strong footing and the moderation back from recent highs in the US dollar and US yields continue, total crypto market cap stands a good chance of recovering back into the $1.30s trillion area.

Price Action

Bitcoin is fairly stable in the $30,300 area on Friday, having bounced nearly 6.0% from Thursday’s lows in the mid-$28,000s. The world’s largest cryptocurrency by market cap still trades about 3.0% lower on the week, however, though also trades nearly 20% above last week’s lows in the $25,000s.

At current levels, bitcoin’s market cap is around $577 billion and its cryptocurrency market dominance is just above 45%, near its highest levels since last October. Analysts say that rising bitcoin market dominance is a sign of risk aversion in the crypto space, with investors allocating money out of riskier currencies/projects into the tried and tested bitcoin.

Ethereum, meanwhile, was last trading about 1.3% higher near the $2,050 per token mark on Friday, taking its gains since Thursday’s lows around $1,900 to about 7.5%. That means ethereum’s market cap is back to close to $250 billion once again.

In terms of notable ethereum news, one of the ethereum blockchain’s core developers on Thursday said that the merge to proof of stake (i.e. transitions to ethereum 2.0) could happen as early as August this year.

Out of the top 20 non-stablecoin cryptocurrencies, the top performers over the past two days include Avalanche’s AVAX (up 14% from Thursday’s lows), Solana’s SOL (up 10% from Thursday’s lows) and Ripple’s XRP (also up around 10% from Thursday’s lows).

Ripple on Friday announced a $100 million investment in climate-focused financial and carbon-reduction technology.

DeFi Update

The market cap of Decentralised Finance (DeFi) tokens remains broadly stable within recent $50-55 billion ranges, data on CoinGecko showed on Friday. Meanwhile, the trade value locked in DeFi smart contracts remains close to the $100 billion mark, around half of what it was at the start of April.

The collapse of the Terra, which had become one of the leading DeFi ecosystems in the space, has delt a severe blow to confidence across DeFi markets. Popular DeFi app Stablegains is reportedly being sued by its investors after it allegedly lost $42 million by investing in Terra’s UST without their knowledge.

Crypto Flows

Exchange wallets saw an inflow of bitcoin worth $470.7 million on Thursday, according to data from on-chain analytics firm Glassnode. Net flows between private and exchange wallets in ethereum, meanwhile, were near 0, whilst Tether’s stablecoin USDT continued to see flows into exchanges, this time of just above $200 million on Thursday.

When private wallets are moving a cryptocurrency to exchanges, this is often a bearish signal as it suggests intent to sell. USDT currently has a market cap of about $74 billion, according to CoinMarketCap data, down around $9 billion in the last two weeks, amid fears that it could be the next major stablecoin to collapse.

But according to the latest assurance report provided by accounting firm MHA Cayman, Tether’s USDT is fully backed. Nonetheless, many of the flows leaving USDT are going into Circle’s US dollar stablecoin USDC. According to CoinMarketCap, USDC now has a market cap of $52.78 billion, up from just under $48.50 billion just over two weeks ago.

Where there have been concerns in the past about whether or not Tether’s USDT is fully backed, USDC has never faced such worries.

Regulatory Landscape

G7 finance ministers and central bankers on Thursday called for the swift and comprehensive regulation of cryptocurrencies in wake of last week’s collapse of Terra’s UST stablecoin, according to a draft communique. “In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB (Financial Stability Board)…to advance the swift development and implementation of consistent and comprehensive regulation,” the draft document read.

US President Joe Biden’s pick for the role of Vice Chair for Supervision at the Federal Reserve Michael Barr on Thursday called for US lawmakers to regulate stablecoins amid rising risks to financial stability. In his confirmation hearing before the Senate Banking Committee on Thursday, Barr said that crypto poses “potential for upside in terms of economic benefit”, but also “significant risks”.

Former Fed Chair Ben Bernanke was critical of bitcoin in a recent interview on CNBC. He highlighted the risk that bitcoin might be subject to a lot more regulation in the future, and lambasted the cryptocurrency for its volatility, which makes it difficult to use as a medium of exchange. In that regard, Bernanke said he thinks bitcoin is unlikely to replace fiat currencies as a form of money, though he did add that “it will be around as long as people are believers and they want to speculate in it”.

Commonwealth Bank of Australia (CBA) announced on Friday that it had put on pause its plans to offer cryptocurrency services to clients, with the bank citing uncertainty regarding market conditions and uncertainty regarding regulation. The bank’s CEO Matt Comyn said plans to offer crypto-related services would be picked back up at a later date.

Here’s Why Warren Buffett Is Going All-In On The Commodities Supercycle

Commodity Markets Fundamental Analysis

That’s one of the most exciting hallmarks of the current Commodities Supercycle, that we find ourselves in right now!

This week, the energy markets took centre stage with Natural Gas prices surging back to all-time highs. Natural Gas price have now tripled since January – rallying from just under $3.50 to a current high of $8.54 – notching up a whopping gain of over 144%, so far this year.

Elsewhere in the energy markets, Crude Oil prices also started the week on a tear, surging to their highest level since March – in anticipation of higher demand as China – the world’s largest importer of crude began easing coronavirus-related restrictions.

Expectations are now running high, that the Oil market may see an identical V-shape recovery in demand as seen in 2020 when China ended lockdown. That event triggered an historic bull run taking Oil prices from sub $40 a barrel in April 2020 to a decade high of almost $140 a barrel in April 2022. That’s a record-breaking gain of more than 450%, in the last two years.

The bullish momentum has also split over into other commodities with Aluminium, Copper, Nickel, Gold, Silver, Palladium and Zinc prices soaring to fresh monthly and multi-year highs.

Over the past few years, the world has experienced an escalating series of disruptions from the U.S-China trade war, the Covid-19 pandemic, global lockdowns, Russia’s war with Ukraine to dueling economic sanctions and export controls.

The cumulative effects of these crises is fuelling an unstoppable Commodity Supercycle sending everything from the metals, energies to agriculture markets skyrocketing and positioning the entire sector as one of the most lucrative asset classes of this year, if not this decade.

As Commodity prices continue to surge, so has Wall Street’s interest.

Throughout this year, a long list of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have described commodities as their “preferred asset class over the next decade”.

This month, Warren Buffett, who is arguably the world’s most successful investor also joined that list.

Speaking at Berkshire Hathaway’s annual shareholders meeting, Buffett revealed that his biggest investment ever with a market value of over $51 billion is riding on the Commodities Supercycle.

In the words of Buffett, “the Commodity and Energy markets right now, represent one of the greatest generational opportunities of our lifetime, not to be missed.”

Commodity Price Forecast for 20.05.22

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Entrenched at $30K

Bitcoin and ALTs Latest Price Action

Bitcoin fluctuates around $30K and has crossed that line daily in one way or another over the past 12 days. A 3.5% increase in the day’s results on Thursday turned into another pullback on Friday morning. Ethereum has strengthened by 3.5% in the past 24 hours, finding itself pegged at $2000.

Other altcoins in the top 10 gained between 0.4% (Solana) and 5.5% (XRP). Total cryptocurrency market capitalisation, according to CoinGecko, rose 3.1% overnight to $1.28 trillion. The Bitcoin Dominance Index rose 0.1% to 44.8%. By Friday, the cryptocurrency fear and greed index is unchanged at 13 points (“extreme fear”).

BTC Forecast

Bitcoin and the entire cryptocurrency market’s protracted tug-of-war promises to resolve with a strong move in one direction. However, there is hope for both bulls and bears. The latter has a minor advantage, as we saw this area touch down from above in January and June-July 2021. But now, all the fighting is concentrated below.

Crypto News

Among the crypto news that caught our eye: MicroStrategy CEO Michael Saylor said his company would buy bitcoin at any price until it reached a million dollars.

Chart, line chart Description automatically generated

Bitcoin’s drop below $30,000 last week came after a large volume of the cryptocurrency entered exchanges. According to IntoTheBlock, traders have sent around 40,000 BTC to exchanges since May 11. According to an audit report by accounting firm MHA Cayman, USDT stable coin issuer Tether Holdings Limited reduced its reserves in the commercial papers by 17%, improving the quality of its funds.

The Ethereum development team said it would migrate the Ropsten test network to the Proof-of-Stake (PoS) consensus algorithm on June 8 2022. According to the legislation, SEC chief Gary Gensler has warned that the regulator is ready to take new measures against unregistered cryptocurrency companies.

The US Commodity Futures Trading Commission (CFTC) believes that amid a rise in cryptocurrency crime, the watchdog must strengthen regulation of digital assets to crack down on fraud and manipulation.

by FxPro’s Senior Market Analyst Alex Kuptsikevich

The Why and How of Investing In a Crypto Bear Market

Key Insights:

  • When the markets are experiencing sustained declines they’re called bear markets.
  • With Bitcoin and the global crypto market cap down by over 50% from its all-time high. 
  • This article looks at the art of investing in a bear market. 

Bear markets might be stressful for investors but they can be seen as good investment opportunities to buy in at lower prices.

In this article, you will learn what exactly defines a bear market, how you can prepare for it, and how you can profit from it.

While traders and investors dread the long and cold bear markets as though they’re the grim reaper, bear markets aren’t as bad. Sometimes, a bear market could provide decent opportunities to enter the market with lower risks, higher returns, and ‘dip-buying’ opportunities.

Nonetheless, bear markets give rise to notoriously volatile price actions and extreme losses in some cases, so without proper research, one could easily get Rekt during these times. This article will deep dive into the what, how, when, and why of crypto bear markets.

What is a bear market?

In simple terms, a bear market is when the prices of the prime assets of a sector or multiple sectors continue to decline for a considerable amount of time. For traditional as well as cryptocurrency markets, bear markets occur when the market as a whole experiences at least a 20% drop from recent highs.

A bear market can be identified by looking at the fall of the S&P 500 or Nasdaq Composite or bitcoin price for cryptos. Owing to the fall in the price of the top assets, small-cap and mid-cap assets also experience bearish price losses due to generally high price correlation.

During bear markets, supply is greater than demand, confidence is low, and prices are on a downtrend. Bear markets can be tricky for inexperienced or new traders. Additionally, it’s relatively difficult to predict when the end of a bear market or to find the exact price bottom to ‘buy the dip.’

Now comes the crucial question, are we in a bear market?

Are bears leading the market?

The global crypto market capitalization was down by almost 60% from its all-time high of $3 trillion as it stood at $1.25 trillion at press time. The top cryptocurrency by market cap, bitcoin (BTC), was down by 56% from its all-time high made in November last year.

FXempire, BTC, Crypto
BTC price ATH | Source: FXEmpire

While ether (ETH), the top altcoin, was down by 58% from its all-time high price of $4,847. Thus, it seemed like cryptocurrency holders were, in fact, in a full-blown bear market. Additionally, the rangebound movement of the larger crypto market cap and most top coins’ prices confirmed the bear market doubts.

Notably, the global crypto market was experiencing double-digit percentage losses, with BTC dipping to as low as $25,000 briefly on 12 May for the first time since July 2021. The bearish market sentiment, lower social volumes, and the fall of the Terra ecosystem have many investors understandably worried.

This, however, doesn’t mean that you cannot function in a bear market. After all, the crypto market never stops or sleeps. So, how and why should you invest in a crypto bear market?

Why invest in bear markets?

Bear markets can undoubtedly be scary times for newcomers and even older market players, as nobody enjoys watching the value of their portfolios go down. On the other hand, bear markets can provide opportunities to put money to work for the long run while assets are trading at a discount.

Usually, newcomers enter the market on social hype or out of FOMO (fear of missing out); however, bear markets are actually good opportunities for investors to enter the market as most assets trade at a discount.

Additionally, bear markets provide a good opportunity for shorting assets as prices see large price drops. However, since the crypto markets are highly volatile, shorting assets is something experienced traders take up. While shorting coins could be profitable, it comes with its set of risks.

How to invest in a crypto bear market?

While there are no instant tips or quick strategies for surviving in a crypto bear market, analysts and traders often recommend some strategies. For instance, portfolio diversification can help reduce investment risk by spreading your capital among different assets during a bearish wave.

That said, thinking long-term would always help navigate through bear markets. Many new investors make the mistake of exiting early due to short-term losses, which could be a bad way to go about bearish market swings.

Lastly, trying to always catch the bottom could be futile in a market as volatile as the crypto space. Sometimes, a bear market ends as soon as the bottom has been reached. In an aim to catch the bottom or buy the final dip, one may end up investing at a higher price when assets start to recover.

That said, in the end, it is undeniable that bear markets are slow and unpredictable and are usually influenced by many external factors such as economic growth, investor psychology, and world news or events.

While advice and recommendation about how to invest in bear markets are aplenty, it’s always crucial to DYOR (do your own research).

GBP/USD Price Forecast – The British Pound Continues Noisy Consolidation

British Pound vs US Dollar Technical Analysis

The British pound has rallied just a bit against the greenback during the trading session on Thursday, as the market continues its consolidation against resistance. The 1.25 level is an area where I would expect to see a lot of resistance, and therefore it is not a huge surprise to see that we have been banging around just below it. When you look at the chart over the last several weeks, you can see that a bearish flag had set up in this general vicinity, so it should contain a lot of noise. That noise will be difficult to overcome, especially in the macroenvironment that we find ourselves in.

The yields in America have come down just a bit during the trading session, and you may be seeing that reflected in the US dollar, but that is a temporary phenomenon. Furthermore, as there is more risk out there, yields will drop as people buy US bonds. Those US bonds need to be purchased in US dollars, and it is worth noting that the Eurodollar system has a major liquidity issue in certain parts of the world, and therefore demand for US dollars continues to rise.

At this point, the resistance barrier extends all the way to at least the 1.26 handle, but you also have the 50 day EMA above that could cause a bit of resistance. It would take a massive effort to turn things around, but I suppose anything is possible. Currently, I am looking for signs of exhaustion to sell into, as it offers cheap US dollars. The market will continue to be noisy, but that is probably going to be the case with almost anything in the Forex markets.

GBP/USD Price Forecast Video 20.05.22

For a look at all of today’s economic events, check out our economic calendar.

Here is Why I’m Still Bullish on Gold Miners

Precious metals declined yesterday, and so did the general stock market. Is the rally already over?

When I wrote about this rally on May 12, which took place at the same time when I took profits from the short positions and entered the long ones, I mentioned that I planned to hold these long positions for a week or two. Since that was exactly a week ago, the question is: is the top already in?

In short, it probably isn’t. As always, it’s useful to check what happened in the past in similar situations to verify whether what we see is normal or some kind of an outlier that cannot be explained by something that has already happened.

Let’s start with a quote from yesterday’s analysis:

Of course, there will be some back-and-forth movement on an intraday basis, but it doesn’t change anything. Junior miners are likely to rally this week nonetheless. And perhaps not longer than that, as the next triangle-vertex-based reversal is just around the corner – on Friday/Monday.

The previous few days were the “forth” and yesterday was the “back” movement – so far, my comments remain up-to-date. However, comparing the market action with what I wrote previously isn’t what I meant by analogies to past situations. I meant this:

ChartDescription automatically generated

The areas marked with green rectangles are the starting moments of the previous short-term rallies. Some were bigger than others, and yet they all had one thing in common. They all included a corrective downswing after the initial post-bottom rally.

Consequently, what we saw yesterday couldn’t be more normal during a short-term rally. This means that yesterday’s decline is not bearish at all and the profits from our long positions are likely to increase in the following days.

Besides, the general stock market declined by over 4%, while the GDXJ (normally moving more than stocks) ETF – a proxy for junior mining stocks – declined by only about 2%.

ChartDescription automatically generated

If the general stock market continues to decline, junior miners could get a bearish push even if gold prices don’t decline.

However, let’s keep in mind the fact that miners tend to bottom before stocks do – in fact, we saw that in early 2020. This means that even if the S&P 500 moves to new yearly lows shortly and then bounces back up, the downside for miners could be limited, and the stocks’ rebound could trigger a profound immediate-term rally.

If stocks decline, then they have quite strong support at about 3815 – at their 38.2% Fibonacci retracement level.

Let’s keep in mind that junior miners have triangle-vertex-based reversal over the weekend, so they might form some kind of reversal on Friday or Monday.

Ideally, miners would be after a quick rally that is accompanied by huge volume on Friday. This would serve as a perfect confirmation that the top is in or at hand.

However, we can’t tell the market what it should do – we can only respond to what it does and position ourselves accordingly. Consequently, if stocks take miners lower, it could be the case that Friday or Monday will be the time when they bottom. This seems less likely to me than the previous (short-term bullish) scenario, but I’m prepared for it as well. In this case, we’ll simply… wait. Unless we see some major bearish indications, we will wait for the rally to end, perhaps sometime next week.

Again, a nearby top appears more likely than another bottom, in particular in light of what I wrote about the common post-bottom patterns in the GDXJ.

Having said that, let’s take a look at the markets from a fundamental point of view.

The Chorus Continues

While investors still struggle with the notion that the Fed can’t bail them out amid soaring inflation, the S&P 500 and the NASDAQ Composite suffered another reality check on May 18. Moreover, with Fed officials continuing to spread their hawkish gospel, I warned on Apr. 6 that demand destruction does not support higher asset prices. I wrote:

Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message.

Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. And as that occurs, investors should suffer a severe crisis of confidence.

To that point, while the S&P 500 and the NASDAQ Composite plunged on May 18, Fed officials didn’t soften their tones. For example, Philadelphia Fed President Patrick Harker said:

“Going forward, if there are no significant changes in the data in the coming weeks, I expect two additional 50 basis point rate hikes in June and July. After that, I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”

For context, “measured” rate hikes imply quarter-point increments thereafter.

Please see below:

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Likewise, Chicago Fed President Charles Evans delivered a similar message on May 17. He said that by December, “we will have completed any 50 [basis point rate hikes] and have put in place at least a few 25 [basis point rate hikes].”

Moreover, “given the current strength in aggregate demand, strong demand for workers, and the supply-side improvements that I expect to be coming,” he added that “I believe a modestly restrictive stance will still be consistent with a growing economy.”

Therefore, while their recent rhetoric had Fed officials “expeditiously” marching toward neutral, now the prospect of a “restrictive stance” has entered the equation. For context, a neutral rate neither stimulates nor suffocates the U.S. economy. However, when the federal funds rate rises above neutral (restrictive), the goal is to materially slow economic activity and consumer spending. As such, the medium-term liquidity drain is profoundly bearish for the S&P 500 and the PMs.

Please see below:

Source: Reuters

Making three of a kind, Minneapolis Fed President Neel Kashkari (a reformed dove) said on May 17 that “My colleagues and I are going to do what we need to do to bring the economy back into balance…”

“What a lot of economists are scratching their heads and wondering about is: if we really have to bring demand down to get inflation in check, is that going to put the economy into recession? And we don’t know.”

For context, Fed officials initially thought inflation was “transitory,” so don’t hold your breath waiting for that “soft landing.” However, while Kashkari is ~16 months too late to the inflation party, he acknowledged the reality on May 17:

Text, chat or text messageDescription automatically generatedSource: Bloomberg

As a result, while the S&P 500 and the NASDAQ Composite sell-off in their search for medium-term support, Fed officials haven’t flinched in their hawkish crusade. As such, I’ve long warned that Americans’ living standards take precedence over market multiples.

To that point, the U.K. headline Consumer Price Index (CPI) hit 9% year-over-year (YoY) on May 18. For the sake of objectivity, the results underperformed economists’ consensus estimates (the middle column below).

Source: Investing.com

However, while investors may take solace in the miss, they should focus on the fact that the U.K. output Producer Price Index (PPI) materially outperformed expectations and often leads the headline CPI. As a result, the inflation story is much more troublesome than it seems on the surface.

Please see below:

Source: Investing.com

In addition, British Finance Minister Rishi Sunak warned of a cost of living crisis on May 18, saying that “as the situation evolves our response will evolve” and “we stand ready to do more.”

Please see below:

TextDescription automatically generatedSource: Reuters

Even more revealing, I’ve noted on numerous occasions that Canada is the best comparison to the U.S. due to its geographical proximity and its reliance on the U.S. to purchase Canadian exports. Therefore, with Canadian inflation outperforming across the board on May 18, the data paints an ominous portrait of the challenges confronting North American central banks.

Please see below:

Graphical user interface, text, applicationDescription automatically generated Source: Investing.com

To that point, the official report stated:

“Canadians paid 9.7% more in April for food purchased from stores compared with April 2021. This increase, which exceeded 5% for the fifth month in a row, was the largest increase since September 1981. For comparison, from 2010 to 2020, there were five months when prices for food purchased from stores increased at a rate of 5% or higher….

“Basics, such as fresh fruit (+10.0%), fresh vegetables (+8.2%) and meat (+10.1%), were all more expensive in April compared with a year earlier. Prices for starchy foods such as bread (+12.2%), pasta (+19.6%), rice (+7.4%) and cereal products (+13.9%) also increased. Additionally, a cup of coffee (+13.7%) cost more in April 2022 than in April 2021.”

Moreover, “in April, shelter costs rose 7.4% year over year, the fastest pace since June 1983, following a 6.8% increase in March.” Therefore, the data is nearly synonymous with the U.S., and I’ve been warning for months that rent inflation would prove much stickier than investors expected.

Please see below:

Source: Statistics Canada

Finally, the investors awaiting a dovish pivot from the Fed assume that growth will overpower inflation. In a nutshell: the U.S. economy will sink into a deep recession in the next couple of months (some believe that we are already in one), and the Fed will resume QE. Moreover, they assume that the inflationary backdrop has left consumers destitute and that we’re a quarter away from famine.

However, I couldn’t disagree more. With Home Depot – which primarily sells discretionary items – noting that consumers are showing no signs of slowing down, I warned on May 18 that investors don’t realize that the Fed’s war with inflation would be one of attrition.

Please see below:

ApplicationDescription automatically generated with medium confidenceSource: Home Depot/The Motley Fool

For context, the National Retail Federation (NRF) listed Home Depot as the fourth-largest retailer in the U.S. in its 2021 report. As a result, the company’s performance is a reliable indicator of U.S. consumer spending.

Graphical user interface, text, applicationDescription automatically generatedSource: NRF

To that point, The Confidence Board released its U.S. CEO Confidence survey on May 18. The report revealed:

CEO confidence “declined for the fourth consecutive quarter in Q2 2022. The measure now stands at 42, down from 57 in Q1. The measure has fallen into negative territory and is at levels not seen since the onset of the pandemic. (A reading below 50 points reflects more negative than positive responses.)”

Please see below:

Chart, line chartDescription automatically generated

However, the devil is in the details and the details are what matter to the Fed. For example:

“More than half (54%) of CEOs said they were effectively managing rising input costs by passing along costs to customers, while 13% said they had no major issues with input costs.”

ChartDescription automatically generatedSource: The Confidence Board

Second:

“More than two-thirds of CEOs said they are increasing wages across the board in response to labor market conditions and managing rising labor costs through different means.”

ChartDescription automatically generated with medium confidence Source: The Confidence Board

More importantly, though:

Graphical user interface, text, application, emailDescription automatically generated Source: The Confidence Board

Therefore, while consolidated CEO confidence has crashed to “levels not seen since the onset of the pandemic,” nearly two-thirds of CEOs plan to increase their workforce and more than nine out of 10 plan to increase wages. As a result, would major U.S. corporations be adding employees and paying them more if demand has fallen off a cliff? Of course not. Moreover, when considering the 15-point drop in consolidated CEO confidence, the three-point decline in employment expectations is largely immaterial.

Bottom Line

While investors keep using the post-GFC script as their roadmap for when the Fed turns dovish, they don’t realize that 1970s/1980s-like inflation is a completely different animal. Thus, what I wrote on May 18 should prove prescient in the coming months:

While Powell keeps warning investors of what’s to come, a decade of dovish pivots has a generation of investors believing that the central bank is all talk and no action. However, with inflation at levels unseen in 40+ years, Powell is not out of ammunition, and the Fed followers should suffer profound disappointment as the drama unfolds.

In conclusion, the PMs declined on May 18, as risk-off sentiment returned to the financial markets. However, since fits and starts are always expected along the way, the GDXJ ETF should have more upside in the coming days, and profits from our long position should increase. The medium-term outlook for the mining stocks remains bearish, though.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Binance Coin (BNB) Finds Support in a Testy Morning Session

Key Insights:

  • Binance Coin (BNB) was up 4.15% to lead the crypto top ten majors in a choppy morning session.
  • Native coin to the Binance exchange, BNB has found strong support since falling to a May 12 current-year low of $206.62.
  • Technical indicators are still bearish for BNB, with BNB sitting below the 50-day.

On Wednesday, Binance Coin (BNB) slid by 6.06%. Reversing a 3.04% gain from Tuesday, BNB ended the day at $287.

Fed Chair Powell’s comments on monetary policy left BNB and the broader crypto market in the red.

Since the Wednesday pullback, crypto appetite has improved. Despite risk aversion plaguing the global equity markets for a second consecutive day, BNB found strong support through this morning’s session.

Binance Stays Ahead of Terra Collapse with Expansion Plans Unaffected

Last week, Binance was decisive in delisting TerraUSD (UST) and Terra LUNA. Unlike several other exchanges, Binance pre-warned users of a delisting should certain events prevail. The delisting took place shortly after a LUNA drop to below 0.005Tether (USDT).

Since the delisting, Binance moved on with its expansion plans that include a strategic move into Germany.

The Binance team was in Hamburg on Wednesday, networking with the crypto community attending Finance Forward.

Following the crypto events of last week, investors will be looking to draw a line in the sand. With the global equity markets at the mercy of the Fed, some will be hoping that today’s early breakout signals a decoupling from more traditional asset classes.

Binance Coin (BNB) Price Action

At the time of writing, BNB was up 4.15% to $299. A bullish start to the day saw BNB strike an early morning high of $302 before easing back.

The First Major Resistance Level at $302 pegged back BNB.

BNB on the move with an eye on $320.
BNBUSD 190522 Daily Chart

Technical Indicators

BNB will need to avoid the day’s $294 pivot to target the First Major Resistance Level at $302 for a second time. BNB would need broader crypto market support for a return to $300.

An extended rally would test the Second Major Resistance Level at $316 and resistance at $320. The Third Major Resistance Level sits at $337.

A fall through the pivot would bring the First Major Support Level at $280 into play. Barring another extended sell-off, BNB should avoid sub-$275. The Second Major Support Level sits at $272.

Avoiding the pivot will be key this afternoon.
BNBUSD 190522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (above), it is a bearish signal. BNB sits below the 50-day EMA, currently at $304. This morning, the 50-day EMA flattened on the 100-day EMA, providing support. The 100-day EMA fell back from the 200-day EMA; BNB price negative.

A move through the 50-day EMA would support a run at $320.

A move through the 50-day EMA would bring $320 into play.
BNBUSD 190522 4-Hourly Chart

South Africa Mulls Digital Rand, Expects Crypto Regulation in 2023

Key Insights:

  • South African Reserve Bank deputy governor says digital rand is a few years away.
  • The South African CBDC could cut the high cost of cross-border payments for banks.
  • The central bank readies for crypto regulations in 2023.

Cryptocurrency is gaining traction in South Africa after the government made it clear that it is taking cryptos very seriously. The South African Treasury announced further crypto regulations in the Budget Review 2022.

Last month, the South African Reserve Bank (SARB) concluded technical proof-of-concept for a wholesale central bank digital currency (CBDC) settlement system. Dubbed Project Khokha 2 (PK2), this marks the second phase of CBDC launched in 2018.

Additionally, SA is also a part of Project Dunbar, a CBDC initiative for international settlements, along with the central banks of Australia, Malaysia, and Singapore.

Digital rand is a few years away

In March, the central bank said that a digital rand is being explored as a way to improve international banking. The SARB deputy governor Kuben Naidoo has now given a possible timeline for a roll-out.

In his interview with Reuters Wednesday, Naidoo said that a digital rand or a CBDC would turn up in a few years. He noted that the digital rand would work to reduce the high cost of cross-border payments for banks.

It remains a nightmare for South Africans who initiate money remittance from SA to other countries. This is because, according to a World Bank report in 2021, South Africa remains the costliest G20 country to send remittances from. Naidoo said,

“We’re still learning, we’re still experimenting [CBDCs].”

However, he did not mention how long it would take for the central bank to fully implement a digital rand.

Crypto regulations coming to South Africa

The deputy governor further said that regulation of crypto assets is soon coming into force. He suggested that the government regulation of cryptos such as bitcoin (BTC), and ether (ETH), might come to light in the next nine to fifteen months or in 2023.

The South African Reserve Bank is concerned about the possibility of criminal activities associated with cryptos. The bank believes that a proper crypto regulation would prevent theft, money laundering, and undermining of monetary policy. Naidoo noted,

“If crypto assets were to become a very ubiquitous currency, you could undermine the authority of the central bank.”

Additionally, South Africa’s Financial Sector Conduct Authority (FSCA) said in December 2021 that it is preparing a regulatory framework for cryptos to protect vulnerable members of its society.

The regulator said that it is exploring ways to establish rules on how the trading of crypto assets should be conducted. The watchdog said that it would unveil the regulations this year.

The role of cryptocurrencies is rapidly increasing in the African continent. Notably, Chainalysis ranks Kenya, South Africa, and Nigeria among the top-10 countries for cryptocurrency use.

Last October, Nigeria debuted Africa’s first central bank digital currency, dubbed eNaira. The digital naira promised to make financial transactions “easier and seamless” for the entire population.

21Shares Enters the US with new Crypto Product Launches

Key Insights:

  • 21Shares entered the US market this week, with the launch of two cryptocurrency exchange-traded products (ETPs).
  • Last week, the firm launched the first Bitcoin (BTC) and Ethereum (ETH) ETFs in Australia.
  • 21Shares built the first crypto ETP on the Six Swiss Exchange in 2018.

21Shares has enjoyed a strong European presence in recent years as the acceptance and adoption of digital assets gather momentum. ETP and ETF products have drawn plenty of investor interest.

In 2018, 21Shares rolled out the first crypto exchange-traded product on the Six Swiss Exchange.

Since then, 21Shares has evolved and currently offers 35 exchange-traded products available in CHF, EUR, GBP, and USD.

33 crypto exchange products are on offer to European investors, including The Sandbox ETP, Decentraland ETP, Crypto Basket Index ETP, and DeFi 10 Infrastructure ETP.

Among the 33 ETPs is also the Terra ETP, down 92% over the past 24-hours.

Despite the market angst from the TerraUSD (UST) de-pegging and the collapse of Terra LUNA, 21Shares continues to expand its product suite.

21Shares Launches Two US Crypto Index Funds Amidst Choppy Conditions

On Wednesday, 21Shares announced its entry into the US with the launch of two Crypto Index Funds.

The first fund offerings in the US will give accredited investors easy access to crypto. Accredited investors can invest into the Crypto Basket 10 Index Fund and the Crypto Mid-Cap Index Fund.

The Crypto Basket 10 Index Fund provides accredited investors with,

“An easy and efficient way to gain diversified exposure to bitcoin and other leading cryptocurrencies in a traditional private placement vehicle, which allows subscriptions and redemptions weekly and monthly, respectively.

The Fund seeks to track an index comprised of the top 10 largest cryptocurrencies based on market capitalization and available on US exchanges.”

At the time of writing, underlying assets included Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Solana (SOL), Polkadot (DOT), Avalanche (AVAX), Polygon (MATIC), Litecoin (LTC), Bitcoin Cash (BCH), and Cosmos (ATOM).

The Crypto Mid-Cap Index Fund,

“seeks to track an index comprised of the mid-cap portion of the cryptocurrency market based on market capitalization.”

At the time of writing, the underlying assets included Cardano (ADA), Solana (SOL), Polkadot (DOT), Avalanche (AVAX), Polygon (MATIC), Litecoin (LTC), Bitcoin Cash (BCH), and Cosmos (ATOM).

Both of the Funds have an expense ratio of 2.5%.

The latest product launch offering follows last week’s launch of two crypto exchange-traded funds in Australia and heightened volatility across the crypto market.

The Bearish Crypto Market Gives 21Shares and Investors an Entry Point

21Shares launched its Australian and US crypto products at a difficult time for the crypto market.

For May, bitcoin has tumbled 23.9% and by 38% year-to-date. From May 9 to May 18, bitcoin was down 15.8%, reflecting the impact of the TerraUSD (UST) de-peg and the Terra LUNA collapse.

21Shares CEO and co-founder Hany Rashwan said in an interview,

“We’ve been working on products in the US since we started, so we couldn’t be more excited to finally bring them.”

On the US debut, Hany has also said,

“Bear markets are wonderful times to consolidate, to build and to innovate, and we see this as a long-term investment.”

 

At the time of writing, bitcoin was up 1.04% to $28,965. A move through to $29,500 would support a breakout day ahead.

BTC finds support after early pullback.
BTCUSD 190522 Daily Chart

Daily Crypto Brew: Crypto Markets Reeling After Wall Street’s Worst Day Since 2020

Key Points

  • Crypto markets fell sharply on Wednesday as Wall Street experienced its worst day since June 2020.
  • Crypto sentiment has since stabilized, despite further downside in global equities on Thursday.
  • Bitcoin is currently around $29,000, having fallen back from the upper $30,000s on Wednesday.

State Of The Market

A series of grim earnings reports from US retailers, which most recently saw Target (TGT) drop over 20% on Wednesday, have put fears about US (and global) growth and inflation back in the limelight. As a result, Wednesday was the worst day for the US stock market since June 2020, with the S&P 500 dropping over 4.0% and the Nasdaq 100 dropping over 5.0%.

Given the close correlation to US stocks, Wednesday was also an ugly day for crypto, with the total market capitalization falling about 6.5% to around $1.21 trillion from above $1.30 trillion.

Stagflationary signals coming from major US retailers (Walmart and Home Depot also reported earnings this week) have negated this week’s stronger than anticipated US Retail Sales report for April and come against the backdrop of a Fed (and other major global central banks) that remains intent on continuing to tighten monetary policy aggressively.

Traders will recall remarks from Fed Chair Jerome Powell on Tuesday where he emphasized that the Fed’s top priority is inflation-fighting, even if that means slower growth, and, as a result, the Fed “will not hesitate” to take rates above the so-called “neutral” level (of around 2.5%) if required. Other Fed policymakers speaking that week have largely signaled the same message.

Expectations for slower growth (meaning weaker earnings) coupled with expectations for higher interest rates (meaning a higher discount rate) squeeze equity valuations from both directions. Many analysts are unsurprised that the bounce in US stocks earlier in the week proved to be short-lived.

In Thursday pre-market trade, US equity index futures are extending on Wednesday’s losses and look likely to break out to fresh annual lows before the week is out. Crypto is holding up a little better for now, with the total market cap for now consolidating around the $1.225 trillion mark and slightly in the green on the day.

Tier two US data in the form of the May Philadelphia Manufacturing survey, the weekly initial jobless claims report, and April Existing Home Sales probably won’t move markets much, with focus set to remain on the overarching themes of slowing growth, inflation, and central bank tightening.

Expect cryptocurrencies to continue taking their cue from stocks and, if that is the case, be prepared for further downside. A break below support at $1.20 trillion could see the crypto market cap drop back towards annual lows under $1.1 trillion.

Crypto Price Action

Bitcoin fell nearly 6.0% on Wednesday in tandem with the downside in equities, dropping from the upper $30,000s to the mid-$28,000s. However, despite continued US equity downside in pre-market trade, bitcoin has stabilized in the $29,000 area and remains a good 14% above last week’s sub-$26,000 lows (unlike S&P 500 futures, which are only a whisker above last week’s lows).

If bitcoin can continue to consolidate around the $30,000 level as has been the case over the past six or so sessions despite a breakout to fresh annual lows in US equities, that would be impressive. But the aforementioned negative themes of growth and central bank tightening fears suggest that it remains too soon to bet on a substantial bitcoin rebound.

At current levels, bitcoin has a market cap of around $550 billion, giving it a market dominance of around 45% (up from under 44.5% on Wednesday). In times of market turmoil, bitcoin’s market dominance tends to expand given its status as the largest/most durable cryptocurrency (many think).

Ethereum, meanwhile, dropped closer to 9.0% on Wednesday from around $2,100 per token to around $1,900. At present, the second-largest cryptocurrency by market cap is trading a tad higher on the day in the low $1900s but also remains vulnerable to further US equity market downside.

At current levels, ethereum has a market cap of around $230 billion, giving it a crypto market dominance of around 19% (down from 19.4% on Wednesday).

Non-stablecoin altcoins unsurprisingly underperformed versus bitcoin on Wednesday.

Of the majors, Ripple’s XRP dropped around 7.5% on Wednesday and is a further more than 1.0% lower on Thursday. Solana’s SOL dropped 12.5% on Wednesday and is down nearly 2.0% more on Thursday.

Binance’s BNB was down 6.0% on Wednesday, though has since bounced about 2.5% on Thursday. Cardano’s ADA lost about 12.5% on Wednesday and is flat on Thursday.

DeFi

The total value locked (TVL) of the entire Decentralised Finance space dropped by about $4.0 billion on Wednesday to around $98 billion, which is unsurprising really given the resoundingly risk-off broader market conditions.

Even though various DeFi protocols offer attractive yields on various stablecoins which are supposed to be immune to broader market conditions, investing in DeFi is still seen as highly speculative. This is even more so the case in wake of last week’s UST (and LUNA) crash.

At the start of 2022, the TVL of the total DeFi space was well above $200 billion. Amid the broader risk-off conditions in crypto and financial markets, it is difficult to imagine flows returning anytime soon.

In other notable DeFi news, early voting indicates majority support within the Terra community/validators for founder Do Kwon’s proposed fork. The fork, which could happen as soon as 27 May, would see the creation of a new Terra blockchain alongside the original one.

The new blockchain will scrap the UST stablecoin. The old Terra blockchain will be called Terra Classic and governed by the native token LUNA classic. LUNA’s market cap has fallen back under $1.0 billion as voting proceeds. UST/USD, meanwhile, continues to trade below the $0.10 level.

Crypto Flows

Exchange wallets saw net inflows of about $223 million worth of bitcoin on Wednesday, data from Glassnode showed, in fitting with the bearish market conditions. Crypto investors tend to move their investments back to exchange wallets where they can then be sold during difficult market conditions. During the same time period, ethereum exchange wallets saw a net inflow of just $7.1 million.

Elsewhere, there has been some hype across the crypto media landscape about the recent accumulation of more bitcoin by the richest non-exchange bitcoin wallet. The wallet has seemingly been using the recent downturn as an opportunity to buy the dip, having bought about 3,015 bitcoins over the last three weeks on net. That means the wallet now holds 127,067 bitcoins, worth about $3.685 billion based on Thursday prices.

Regulatory Landscape

US Securities and Exchange Commission (SEC) Chair Gary Gensler said in a Congressional hearing on Wednesday that a majority of initial coin offerings come under the SEC’s securities law, and that these tokens will be brought into the regulatory framework with the deployment of the SEC’s existing securities laws. A very small number of tokens, including bitcoin, are considered commodity tokens, he added, and would therefore fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Russian Industry and Trade Minister Denis Manturov said on Thursday that, “sooner or later”, Russia will legalize cryptocurrencies as a means of payment. Speaking at a forum, Manturov was questioned on the matter of crypto legalization as a means of payment. “The question is, when this occurs, how it will be regulated, given that the central bank and government are actively working on it,” he stated. “The general consensus is that… sooner or later, this will be implemented in some form,” he said.

Gold Price Futures (GC) Technical Analysis – Trading on Weakside of Major Fibonacci Level at $1844.00

Gold futures are trading lower on Wednesday, pressured by firm U.S. Treasury yields and a stronger U.S. Dollar. After a promising start to the week on Monday the market appears to be poised to resume its short-term and long-term downtrends.

Fundamentally, gold is being underpinned by worries about inflation. However, the fear of higher interest rates is working to keep the major buyers on the sidelines.

At 12:07 GMT, August Comex gold is trading $1815.40, down $10.00 or -0.55%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $169.38, down $1.02 or -0.60%.

US Dollar Bounces Back

The U.S. Dollar is rebounding on Wednesday, a day after its biggest daily loss in more than two months, as U.S. Federal Reserve chief Jerome Powell struck a more hawkish tone as the central bank battles to rein in surging inflation.

Powell pledged that the U.S. central bank would ratchet up interest rates as high as needed, including taking rates above neutral, to kill a surge in inflation that he threatened the foundation of the economy, Reuters reported.

Investors Bailing Out of Popular ETF

In other news, investor flows into SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued to decline, reflecting a bearish sentiment in the market.

Fed’s Commitment to Higher Rates Puts Traders in “Sell the Rally” Mode

Gold is losing its appeal as an investment because investors can get a much higher yield in Treasurys. With the Fed’s commitment to control inflation through tighter monetary policies, the benchmark 10-year Treasury note is hovering about 3%. Another surge through this level could trigger a new leg down in gold prices.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift higher with the formation of the closing price reversal bottom on May 16.

A trade through $1792.00 will negate the closing price reversal bottom and signal a resumption of the downtrend. A move through $1917.60 will change the main trend to up.

The minor trend is also down. A trade through $1840.90 will change the minor trend to up. This will confirm the shift in momentum.

The minor range is $1792.00 to $1840.90. Gold is currently trading on the weak side of its pivot at $1816.50, making it resistance.

The main resistance is the long-term retracement zone at $1844.00 to $1890.00.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at $1816.50 is likely to control the direction of the August Comex gold futures contract on Wednesday.

Bearish Scenario

A sustained move under $1816.50 will indicate the presence of sellers. If this move attract more seller then look for a drive into the minor bottom at $1792.00, followed by the January 28 main bottom at $1787.80. The latter is the trigger point for an acceleration into the January 7 bottom at $1764.10.

Bullish Scenario

A sustained move over $1816.50 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the minor top at $1840.90, followed closely by the Fibonacci level at $1844.00.

The short-covering rally will get stronger if buyers can take out $1844.00 with conviction.

For a look at all of today’s economic events, check out our economic calendar.

Crypto Update – Markets Wobbled Could Tether (USDT) Collapse Next

Terra Luna‘s collapse was a stunning right hook to crypto; markets are staggered. Tether’s market cap plunged 10% in May – Will horrified investors continue to cash out? Tether accounts for nearly 25% of ALL trading volume, as I understand it. What happens if prices de-peg like UST?

Stablecoin Collapse (Terra Luna)

Highly leveraged assets, like crypto, retreat quickly when liquidity vanishes from the market. Something like $200 billion in “paper gains” evaporated last week, according to Bloomberg. Terra Luna’s market cap plunged $40-billion from the April peak.

Graphical user interface, chart Description automatically generated

Source: Coinmarketcap

Tether (USDT) Risk

I’ve heard ample evidence supporting possible fraud in stable coin USDT (Tether).

By some, Tether has been described as a massive Ponzi scheme, bigger than Madoff.

As with all Ponzi schemes, they work great as prices rise, and only fail when customers ask for their money back. Is a meltdown in Tether (USDT) next?

Tether Peg

Tether lost its peg as redemptions spiked (see below). Was that a one-time event or just the beginning salvo?

On May 12th, Tether lost its peg (dipped to .95) briefly as $3-billion of redemptions slammed dealers.

Source: CoinmarketcapGraphical user interface, application Description automatically generated

Source: Coinmarketcap

Tether Market Cap

The market cap of USDT plunged $10 billion during the month of May. If redemptions continue at this pace and Tether can’t meet them, we could see a nuclear winter in crypto.  Graphical user interface, chart, line chart Description automatically generated

Source: Coinmarketcap

BTC/USD Price Forecast

Bitcoin may be producing a bear flag just above the $28,000 level. Breaking below $28,000 this week could trigger a second down leg. To support a rebound, prices need to close above $32,000. Otherwise, this looks like a pause before heading lower.

Chart Description automatically generated

Note- Sometime this year I see bitcoin dropping to $12,500, possibly soon if Tether de-pegs.

Takeaway

Crypto investors need to watch Tether’s like a hawk. I see much more downside ahead.

Longer-term I’m bullish blockchain technology and in particular Cardano (ADA).

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.

After the $623M Hack, Axie Infinity’s Discord Bot Gets Compromised

Key Insights:

  • The hack was confirmed by Axie Infinity earlier today.
  • MEE6 official channels denied allegations of being exploited.
  • Axie Infinity is still recovering from the $625 million hack.

As it appears to be, social media hacks and exploits seem to have become the new meta in cybercrime, with more and more crypto blockchains and DeFi protocols facing this issue this year. Axie Infinity became the latest target of the same.

Axie Infinity Blames MEE6

In a tweet today, Axie Infinity stated that the MEE6 bot which was installed on their main Axie server was compromised.

According to the investigation, the hacker used the MEE6 and added fake permissions to a fake Jiho account, after which fake announcements regarding a mint were posted on the channels.

Soon after, the MEE6 bot was removed, and the fake messages were deleted. Still, as per one user, their NFT and domain were already stolen.

Although the MEE6 team stated that the allegations being directed towards MEE6 were “fake news”, as neither did they spot any unusual activity nor were they were contacted by any real community owners.

The MEE6 support server although stated that the admin accounts of Axie Infinity’s Discord server were compromised, which enabled the hacker to use the MEE6 bot to post phishing messages and links in the channels.

Regardless of what the case may be, Axie Infinity investors’ community is losing their patience since this is the second attack on the platform, the last being the $625 million hack.

Known to be the biggest hack in the history of crypto, Axie Infinity’s Ronin Bridge exploit accounted for half of all the crypto attacks that took place throughout the first quarter of 2022.

Going forward, Axie Infinity needs to make itself more secure before investors start exiting to protect their funds.

Social Media – The New Target

As reported by FXEmpire, multiple official servers and accounts fell victim to these hackers, who used the platforms to execute phishing attacks on the users throughout April and May.

In the second quarter, the first to witness this was the NFT collection Bored Ape Yacht Club (BAYC) after its Discord was compromised and hackers managed to steal $69k worth of NFT.

The same month, BAYC’s Instagram account was hacked, which was used to promote a fake airdrop to lure investors into signing away their NFTs. As confirmed by the founder of BAYC, about 4 Apes, 6 Mutants, 3 Kennels, and some other NFTs were stolen.

Similarly, Opensea’s Discord was hacked as well, with hackers promoting fake YouTube-based NFTs to steal their private keys. Although no loss occurred in this instance, it made platforms reinforce their social media security.

Algorand (ALGO) Sees Red Despite a Recent Flurry of Bullish Activity

Key Insights:

  • It was a bearish morning session, with ALGO joining the broader crypto market in the red.
  • While bullish news updates have limited the losses, ALGO has been at the mercy of the broader market and sentiment toward Fed monetary policy.
  • ALGO’s technical indicators are bearish, with ALGO sitting below the 50-day EMA.

On Tuesday, Algorand (ALGO) rallied by 7.48%, supported by news of a LimeWire-Universal Music Group Partnership. Reversing a 6.20% loss from Monday, ALGO ended the day at $0.4945.

Bullish sentiment from across the broader market supported the Tuesday breakout session, with resistance at $0.50 limiting the upside on the day.

Sentiment towards inflation, the threat of a recession, and Fed monetary policy are market negatives, however.

Overnight, Fed Chair Powell delivered a hawkish stance on monetary policy that has pressured the crypto market this morning. Powell’s comments have also overshadowed bullish Algorand-related news updates.

Universal Music Group Goes NFT on Algorand Marketplace

On Tuesday, LimeWire signed a deal with Universal Music Group (UMG) to open the LimeWire collectibles marketplace to Universal Music Group Artists.

According to the announcement,

“UMG artists can now offer audio recordings, audiovisual content, backstage footage, and any artwork and images as NFTs on the LimeWire marketplace and sell them directly to fans and collectors.”

LimeWire will collaborate with UMG on making “digital music collectibles accessible to a wider audience.”

The announcement went on to say,

“As part of this partnership, UMG will provide licenses that will allow LimeWire to partner with UMG artists to launch innovative music-based NFT projects utilizing the LimeWire marketplace.”

LimeWire will launch the NFT marketplace on Algorand.

Last week, Hivemind Capital and Algorand announced the acquisition of the music platform, Napster.

The latest music industry news follows FIFA announcing Algorand as an official partner ahead of this year’s FIFA World Cup in Qatar.

ALGO struck a May high of $0.7842 in response to the FIFA news before tumbling to a May 12 and current year low of $0.3412.

Last week, the collapse of TerraUSD (UST) and Terra LUNA sank the crypto market to 2022 lows.

ALGO Price Action

At the time of writing, ALGO was down by 3.88% to $0.4753. A mixed start to the day saw ALGO rise to a morning high of $0.5038 before falling to a low of $0.4717.

ALGO sees early losses.
ALGOUSD 180522 Daily Chart

Technical Indicators

ALGO will need to move through the day’s $0.4870 pivot to target the First Major Resistance Level at $0.5154. ALGO would need broader market support to breakout from this morning’s high of $0.5038.

In the event of an extended rally, ALGO could test the Second Major Resistance Level at $0.5362 and resistance at $0.54. The Third Major Resistance Level sits at $0.5854.

Failure to move through the pivot would bring the First Major Support Level at $0.4662 into play. Barring an extended sell-off, ALGO should avoid sub-$0.46. The Second Major Support Level sits at $0.4379.

A return to $0.50 would support an ALGO breakout.
ALGOUSD 180522 Hourly Chart.

Looking at the EMAs and the 4-hourly candlestick chart (below), the signal is bearish. ALGO sits below the 50-day EMA, currently at $0.4986. This morning, the 50-day EMA pulled back from the 100-day EMA. The 100-day EMA eased back from the 200-day EMA; ALGO price negative.

A move through the 50-day EMA to $0.51 would support a run at $0.54.

UMG - LimeWire deal supports a run at $0.54.
ALGOUSD 180522 4 Hourly Chart.

Crypto Winter Ending Says Veteran Trader

Key Points

  • After calling the top last November, Yves Lamoureux sees the “crypto winter” ending.
  • “I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” he said.
  • At current levels just under $30,000, bitcoin is down over 56% from last year’s record peaks.

Bear Market

Just over six months ago, and just days after bitcoin had hit its highest levels on record around the $69,000 mark, Yves Lamoureux made the now-famous call that cryptocurrencies were headed into a bear market.

Lamoureux, who is president of macroeconomic research company Lamoureux & Co and sometimes referred to as the “Canadian Whale”, got his call last November spot on. Since the record peaks in November, bitcoin has crumbled more than 56% to current levels just below the $30,000 mark.

Over the same time period, the broader market cap of cryptocurrencies has tanked from record highs just above $3.0 trillion to current levels around $1.28 trillion, a drawdown of around 58%.

Cryptocurrencies have been hit hard by a sharp rise in both short- and long-term US yields (which raises the opportunity cost of holding non-yielding assets like precious metals and crypto), as well as a sharp pullback in US tech stock valuations (crypto has become increasingly correlated to US tech in recent months).

Sparking these unfavorable macro trends has been a rapid hawkish shift from the US Federal Reserve. Where last November the central bank was holding onto the belief that inflation would prove “transitory” and no rate hikes would be needed into 2023, the bank has realized the error of its ways.

The bank kicked off a hiking cycle with a 25 bps move back in March followed by a 50 bps hike earlier this month and officials are vowing to press ahead with further rate hikes in order to tackle inflation that is currently running at an annual rate more than four times higher than the bank’s 2.0% target (according to last week’s CPI data for April).

Crypto Winter Set To End?

Despite the ongoing threat of further/faster monetary tightening from the Fed, which many strategists think could result in further pain in crypto and equity markets and further moves higher in US yields, Lamoureux this week called for an end to the so-called “crypto winter”, Yahoo Finance reported on Wednesday.

“I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” Lamoureux reportedly said, adding that the 80% drawdowns seen in bitcoin’s past are no longer now required to shake out weak hands.

Describing the stages of the recent bear market, Lamoureux said “instead of one big swoon down, bitcoin broke that in two parts — creating less downside than a traditional drawdown”.

Much of bitcoin’s drawdown since last November had taken place by mid/late January, with the cryptocurrency only recently breaking below these lows and under $30,000 in wake of the collapse of TerraUST and LUNA.

“It looks complete in terms of a bear market,” Lamoureux stated.

Given the tight correlation between the beleaguered US tech sector and cryptocurrencies, some respite in the Nasdaq 100 index will likely be needed if bitcoin and other cryptocurrencies are to mount a meaningful recovery.

But Lamoureux is bullish on US tech. “It’s not often I am fully invested… (but) I am now,” he said, before adding that “as inflation drops, techs will reflate hard… Watch the FOMO”.

Lamoureux recently called for a three-year equity bull market.

Daily Crypto Brew: Bitcoin Consolidates, Pivots $30K As Traders Digest Hawkish Powell Commentary

Key Points

  • Crypto markets are a tad weaker on Wednesday but within recent ranges, as markets digest Fed Chair Powell’s hawkish commentary.
  • The Fed won’t hesitate to take rates above neutral, said Powell, deterring crypto bulls from chasing prices higher.
  • Total crypto market cap was last around $1.27 trillion with bitcoin last trading just under $30,000.

State Of The Market

While constructive updates out of China regarding a potential easing of Shanghai lockdowns and of the ongoing big tech crackdown got a rally in US and global equities started on Tuesday, the gains accelerated in US trade following robust US Retail Sales and Industrial Production data. In the end, the S&P 500 and Nasdaq 100 indices ended the day higher by 2.0% and 2.6% respectively, with traders shrugging off the hawkish tone to US Federal Reserve Chair Jerome Powell’s remarks towards the end of the day.

This unsurprisingly helped give risk-sensitive cryptocurrency markets a boost at the time, with the total crypto market capitalization rising to close Tuesday trade higher by about 2.5% and back above the $1.3 trillion mark.

However, as US equity index futures hand back some gains in pre-market trade, crypto markets have also come under some modest pressure. Total market cap has now more or less already given up all of Tuesday’s gains and is back to trading just above $1.27 trillion.

The more time markets have had to digest Powell’s remarks, the more the crypto bulls seem deterred from chasing prices higher. To recap, the main message from the Fed Chair was that the central bank remains hyper-focused on tackling sky-high inflation and will not hesitate to move rates above so-called neutral (i.e. the 2.5% area) if required.

For now, markets do not seem to be betting on interest rates moving well beyond neutral, which has facilitated stabilization in equities and crypto, and explains why bonds are consolidating below recent highs (10-year yields are still below 3.0%). Hence, the total crypto market cap continues to trade within the $1.25-35 trillion range established over the past four sessions.

But should the inflation figures fail to moderate as much as hoped for in the next few months, recent trends (weaker equities and crypto plus higher yields) could return as markets up their Fed tightening bets. In this bearish scenario, a break lower to annual sub-$1.1 trillion lows and perhaps below $1.0 trillion would very likely be on the table.

Looking ahead, it should be a quiet day on the economic calendar with no notable US data aside from some US housing data, which shouldn’t impact crypto. Any further Fed speak would be notable, as ever.

Price Action

In fitting with the broader stabilization of crypto markets, bitcoin continues to pivot on either side of the $30,000 per token mark, with its market cap near $570 billion, giving it a market dominance of still close to 44.5%. BTC/USD was last down about 1.5% on Wednesday.

Ethereum, meanwhile, continues to consolidate just above the $2,000 per token mark, giving it a market cap of around $250 billion and a dominance of around 19.2%. ETH/USD was last down about 2.6% on Wednesday.

In terms of some of the other major altcoins, Ripple’s XRP was last down around 2.0% but remained within recent ranges in the low-$0.40s per token. Likewise, Binance’s BNB was down about 1.4% but stable within recent intra-day ranges in the $300 per token area.

Solana’s SOL was last down closer to 5.0% on the day, but also within recent ranges around the mid-$50s per token, while Cardano’s ADA was last down about 2.5% in the mid-$0.50s, also within recent ranges.

DeFi, NFT Update

The chilling impact of the collapse of Terra’s ecosystem remains apparent across the Decentralised Finance (DeFi) space. Trade value locked (TVL) across all major chains was around $170 billion at the start of the month, but is now at around $100 billion, where it has remained for the last few days.

Prior to that, attractive yields on many assets including stablecoins across the DeFi space had supported TVL despite a broader downturn in cryptocurrency prices since the start of the year. But UST’s woes have hit confidence badly. A sustained upturn in crypto prices is likely going to be required for TVL to recover back to $200 billion once again, a prospect that doesn’t seem likely any time soon.

In tandem with the recent stabilization of the TVL across DeFi, the market cap of major DeFi governance and stablecoin tokens has remained stable in the mid-$50 billions area on Wednesday, according to CoinGecko data.

In terms of DeFi news, the Terra community has rejected a proposal from founder Do Kwon to revive the ecosystem with a blockchain fork. The community instead seems to favor an aggressive burn mechanism to address the flood of LUNA supply. As of Wednesday, LUNA’s market cap was just above $1.1 billion, making it the 12th largest of the major DeFi tokens.

Meanwhile, the UST token was last trading just under 10 cents on the dollar and had a market cap of around $1.4 billion.

Turning to the non-fungible token (NFT) market, in fitting with the broader crypto theme this week, the price floor of major NFT collections have been stabilizing. The price floor to bag one of Yuga Labs’ Bored Ape Yacht Club NFTs, having reached above $400,000 in late April, has stabilized around the $200,000 mark in recent days.

Meanwhile, after trading around $200,000 for most of 2022 but then falling towards $100,000 in early May, the price floor to own a Crypto Punk NFT has stabilized near the $110,000 mark in recent days.

In terms of NFT news, Spotify is reportedly testing the addition of NFT galleries on artist profiles, as the company explores ways to “improve artist and fan experiences”. Meanwhile, Robinhood is reportedly on the cusp of launching a new self-custody crypto wallet that will support NFTs, a move hailed as a significant stride in the right direction by Web3 advocates.

Crypto Flows

Glassnode data showed that, as of Wednesday morning, there had been modest outflows of $38.7 million worth of bitcoin and $64.5 million worth of ethereum from exchange wallets to private wallets over the last 24 hours, in fitting with the broader theme of continued stabilization.

According to blockchain transaction tracker Whale Alerts, a massive 2,447 bitcoins worth over $70 million at the time were transferred into a private wallet from a Coinbase wallet on Wednesday, indicative of Whale dip-buying.

Data from Glassnode on Wednesday also highlighted a shift in flows in the stablecoin market, with money leaving USDT (USDT tokens being redeemed for their cash equivalent) and going into the likes of USDC and BUSD. Since the collapse of algorithmic stablecoin TerraUST, around $7.5 billion in USDT tokens have been redeemed, taking the coin’s market capitalization to around $74 billion.

Meanwhile, close to $4.0 billion in USDC has been issued, taking the second largest stablecoin to a market cap of around $52 billion, making it the fourth-largest cryptocurrency by market cap. Similarly, BUSD’s market cap has risen from under $17 billion to around $18.2 billion over the same time period.

“What we are potentially watching is a changing preference for which stablecoins the market prefers,” said James Check, an analyst at Glassnode. Check speculated that a large trader or group of traders attempted to utilize heightened concerns after UST’s collapse to exert pressure on the USDT and perhaps trigger a similar de-pegging event last week.

Traders will recall that USDT did briefly come under pressure, though has maintained its peg well. Nonetheless, amid the heightened focus on USDT losing its peg, investors have been redeeming their USDT tokens and allocating towards other potentially “safer” stablecoins.

Regulatory Landscape

South Korea has reportedly launched an emergency investigation into the collapse of the Terra ecosystem and the downfall of its native governance token LUNA and algorithmic stablecoin UST. The country is reportedly considering implementing a licensing system for coin issuers and crypto exchanges, which it thinks might be able to mitigate investor losses from bad actors.

Meanwhile, the South Korean government reportedly wants to summon Terra founder Do Kwon to a hearing before parliament over Terra’s recent crash. Yoon Chang-Hyeon, a representative of the ruling People Power Party, said that “we should bring related exchange officials, including CEO Do Kwon of Terra, which has become a recent problem, to the national assembly to hold a hearing on the cause of the situation and measures to protect investors”.

Ahead of the meeting of G7 finance ministers later this week, Bank of France head and European Central Bank governing council member Francois Villeroy de Galhau has issued fresh calls for more crypto regulation. “What happened in the recent past is a wake-up call for the urgent need for global regulation… Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably… discuss these issues among many others at the G7 meeting in Germany this week”, he said on Tuesday.

Meanwhile, over in the US, the Congressional Research Service, a legislative research agency that supports Congress, described the recent downfall of UST and the broader LUNA ecosystem as like a bank run.

GBP/USD Price Forecast – British Pound Slams Into a Large Round Number

British Pound vs US Dollar Technical Analysis

The British pound has rallied significantly during the course of the trading session on Tuesday to reach the 1.25 level, an area that obviously would cause a certain amount of interest, as it is a large, round, psychologically significant figure. Furthermore, it is worth noting that the market has a lot of noise all the way to the 1.26 handle, and therefore I think it is only a matter of time before the sellers come back in and push this market lower. After all, we are in a massive downtrend, and that should continue to be the case going forward.

When you look at the chart, you can see that the 50 Day EMA is near the 1.2750 level and dropping. The 1.30 level is the top of the overall downtrend from what I can see, so it is really not until we break above there that I would consider buying. Nonetheless, I would anticipate a certain amount of volatility as during the trading session on Tuesday there are five Federal Reserve members speaking. With so many people paying close attention to the Federal Reserve, it is difficult to imagine a scenario where we would not see a lot of noise.

Nonetheless, the market continues to look very shaky, so that typically does not end up being induced above a market that is going to be more “risk on.” In general, this is a market that continues to see more of a “fade the rally” type of attitude, and I think that will continue to be the case.

GBP/USD Price Forecast Video 18.05.22

For a look at all of today’s economic events, check out our economic calendar.

Tesla Is Up By 3%, Here Is Why

Key Insights

  • Elon Musk tweets that “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher”.
  • Traders wonder whether he tries to negotiate a better price or walk away from the deal. 
  • If the deal falls apart, Tesla stock could gain upside momentum.

Tesla Stock Rebounds After Musk Says He Needs Proof That Fake/Spam Accounts Are Less Than 5% Of Twitter Users

Shares of Tesla gained upside momentum in premarket trading after Elon Musk tweeted that his offer to buy Twitter was based on the assumption that Twitter‘s SEC filings on the number of fake/spam accounts were accurate.

He also noted that Twitter’s CEO refused to show proof that fake/spam accounts were less than 5% of the total account number. Musk added that the deal could not move forward until he sees proof of Twitter’s statements.

Traders are trying to guess whether Musk is trying to walk away from the deal without paying the breakup fee or trying to negotiate a better price.

Both scenarios are bearish for Twitter stock, so it’s not surprising to see that Twitter is losing ground in premarket trading.

For Tesla stock, the recent news is bullish. Traders are worried that Musk will have to sell more Tesla stock to finance the deal, so a lower priced deal or a full collapse of the deal would serve as bullish catalysts.

What’s Next For Tesla Stock?

There are two main catalysts for Tesla in the near term. The first catalyst is the fate of the Twitter deal. If the deal is scrapped, traders will have no worries about potential stock sales from Musk, which will provide more support to Tesla shares.

The second catalyst is the situation with coronavirus in China, which has already put pressure on both production and demand for Tesla cars. At this point, it looks that developments in China could serve as a bigger catalyst for the stock, so traders will need to keep a close eye on the country in the upcoming weeks.

It should be noted that Tesla’s valuation has recently declined to more attractive levels, so the stock may be sensitive to positive catalysts. In this light, Tesla will have a good chance to gain additional upside momentum in case Twitter deal continues to fall apart.

To keep up with the latest earnings updates, visit our earnings calendar.