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Overview
Earnings season is now upon us. The key question is will the stock market gyrations carry over into the world of crypto this week?
Tech bellwethers Netflix and Tesla are set to report earnings in the coming days. Netflix will report results on Tuesday after market close and Tesla will report results on Wednesday after market close.
According to bitcoin broker NYDIG, the rolling 90-day correlation between Bitcoin and the Nasdaq has recently broken out above 0.6 (the closer to 1, the stronger the correlation). We’ll just have to wait and see if there’s a strong linkage between tech stocks and cryptocurrencies, but the odds seem better than average.
Crypto
Last week, we learned that The Luna Foundation Guard, the Terra-focused nonprofit, stacked an additional $100M worth of Bitcoin, bringing their total cache to around 42,500 BTC. However, it now appears that the market has digested the LFG’s ongoing purchases since the Bitcoin price failed to respond to the recent purchases - similar to Microstrategy’s ongoing purchases.
Sentiment in the crypto market according to the Crypto Fear & Greed Index has dropped to the “extreme fear” zone whereas it was in the “fear” zone this time last week.
Bitcoin’s failure to break away from the $40K area last week (albeit a holiday week with light volume) certainly does not strengthen the bullish outlook.
Already, this Monday, BTC fell to a $38K handle, but as of this post is treading water around $39K. Getting back above the $40K level will be crucial for any noteworthy rally to happen. On the downside, support exists at the $37K area.
Altcoin leader Ethereum is following big brother Bitcoin’s lead and has fallen below the pivotal $3K level as of this post. Support exists around $2,500, but the battle for $3K will affect ETH’s direction going forward.
Not helping ETH’s case though is The Merge postponement.
As we befittingly highlighted in last week’s Crypto Weekly Lookout, betting markets were indicating that the upgrade to Proof-of-Stake would occur closer to September. However, the then market consensus was for the upgrade to happen in late June.
The betting markets were right after all as leading Ethereum developer Tim Beiko tweeted last week that “The Merge” would occur “in the few months after [June].”
According to Polygon-based betting platform Polymarket, the current odds for “The Merge” date are:
14% chance of the merge taking place by August 1st
34% chance of the merge taking place by September 1st
57% chance of the merge taking place by October 1st
With the upgrade continuously being postponed, it could take some wind out of the sails of the Ethereum story.
NEAR Protocol (NEAR) should be watched this week as well as their stablecoin, named USN, is expected to launch this Wednesday April 20th. The market has known about the news for over a week now, but the launch could still cause some movement.
USN is said to be modeled after Terra’s UST stablecoin and the offering is anticipated to have an extremely attractive APR (annual percentage rate) which could quickly ignite a sizable capital shift into the NEAR ecosystem.
Another crypto event to be aware of is today’s “Monerun.”
The Monero (XMR) community is today, April 18th, withdrawing XMR in a coordinated fashion from centralized exchanges to test the suspicion that certain CEXs are overstating their XMR reserves by selling paper XMRs knowing that traders likely won’t withdraw from the exchanges.
The community believes exchanges Binance, Huobi, Poloniex, and others are getting away with this due to the privacy-focused token’s unique features that hide real on-chain balances. If certain exchanges suspend XMR withdrawals, maybe there really is fire to go along with the smoke.
Additionally, investors should take note of Decentral Games (DG).
The governance token for the Decentral Games treasury has today, April 18th, experienced a sizable jump in positive social chatter as measured by Crowdsense’s Social Sentiment Score as seen below. Will the price follow the rising sentiment in the coming days?
Macro
On the macro landscape, investors should be prepared for Fed Chair Powell’s final public appearance ahead of the Fed’s May meeting.
On Thursday April 21st at 1pm ET, Powell will give remarks at an IMF event focused on the global economy. Later that day, he will also participate in a panel alongside ECB President Christine Lagarde and others.
Traders will be watching for any statements relating to the expected pace and scale of interest rate hikes and balance sheet tightening. The market currently is expecting a 50 basis point rate hike for the next three meetings.
Lastly, investors should still be keeping tabs on China and its growing Covid lockdown as around 400M people are believed to be in lockdown, equating to 40% of China’s GDP. This will have very significant effects on global supply chains and global demand going forward.
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Nothing contained in this post should be construed as investment advice. All investment strategies and investments involve risk of loss. Any reference to past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.