MARKET MOVES

Whatever gains bitcoin was able to eke out by the end of New York’s trading hours Monday were steadily erased during Asia’s early Tuesday trading.

After peaking at $55,053.91 just after U.S. equity markets closed, the world’s oldest cryptocurrency found itself sliding on a downslope to $44,964.49 just before 11:37 UTC (6:37 a.m. ET) Tuesday morning.

Bitcoin prices, Feb. 22 to Feb. 23, 2021. (CoinDesk)

The trading range was $10,877 Monday. To put that in perspective, bitcoin was trading around $10,877 as recently as early October. Thus far in 2021, bitcoin's average daily trading range has been $3,765, reports CoinDesk's Zack Voell.

Monday was a particularly active day for bitcoin and other cryptocurrencies. Total bitcoin volume spiked on the eight exchanges tracked on the CoinDesk 20, hitting close to $10.5 billion. That’s the second highest for the year and more than twice as much as the average of the previous seven days.

Monday’s late price action mirrored what happened earlier in the day. The euphoria that took bitcoin to record highs of $58,332.36 on Sunday gave way to crushing despair in short order as the world’s oldest cryptocurrency changed hands for as cheap as $47,780.75 just as New York stock traders were waiting the opening bell. However, that drop was merely a quick spike down; bitcoin was able to recover quickly. The latter decline Monday afternoon, though, was a steady tumble.

Ether prices, Feb. 22 to Feb. 23, 2021.

Investors in ether were also punished. After changing hands as high as $1,805.40 late Monday, the second-largest cryptocurrency by market cap hitched its wagon to a submarine, falling as low as $1,361.59 by Tuesday by around 9:00 UTC (4:00 a.m. ET).

Ether also had a record high weekend only to get crushed by sellers Monday. After trading at an all-time high of $2,036.55, ether was down as low as $1,546.53 several hours later, according to CoinDesk 20 data. As reported by CoinDesk’s Muyao Shen, it was even worse on some exchanges, with Kraken seeing ether trading as low as $700. Yes, you read that correctly: Ether fell by more than half albeit for a few seconds on Kraken.

Ether’s trade volume was also remarkable. On the eight CoinDesk 20 exchanges, it came in at $4.16 billion, nearly twice the previous seven days’ average as it was for bitcoin.

--Lawrence Lewitinn

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OMKAR GODBOLE

Fed's Powell Offers Bitcoin Bulls Glimmer of Hope as Price Drops to $45K

Jerome Powell is likely to reiterate the Fed's pro-stimulus stance later today, possibly putting a floor under bitcoin and stocks.

Bitcoin prices slumped to a 12-day low on Tuesday, extending Monday's double-digit fall from record highs.

The biggest cryptocurrency by market value reached as low as $45,047 at 09:10 UTC – the lowest level since Feb. 11 – having dropped from the record high of $58,332 to below $48,000 on Monday, according to CoinDesk 20 data.

Bitcoin looked overbought at record highs and due for correction – more so, as the cryptocurrency's appeal as an inflation hedge was somewhat diluted by the recent rise in the inflation-adjusted U.S. treasury yields.

The macro picture, however, might bring the return of bullish pressure, as analysts expect Federal Reserve Chair Jerome Powell to tell Congress later today that the central bank is committed to keeping interest rates low.

The U.S. central bank is also likely to continue with its liquidity-boosting bond purchase program, despite a recent rise in inflation expectations and an improving growth outlook. That will likely push bond yields lower and put a floor under both equities and bitcoin.

Bitcoin prices, Nov. 1, 2020 to Feb. 23, 2021, via TradingView.

"The recent spike in yields suppressed some of the risk-on sentiment, which is inevitable so, but I suspect Powell will err to the side of caution, and yields will be lower after his semiannual testimony." Denis Vinokourov, head of research at the London-based prime brokerage Bequant, told CoinDesk. "In turn, [we're] expecting risk flows to resume and support upside in BTC and with it the rest of the market."

Stock markets came under pressure on Monday, as the U.S. 10-year bond yield reached a 10-month high of 1.39%, extending the year-to-date gain to over 35 basis points. The risk aversion likely helped drag bitcoin lower. According to CNBC, rising yields could be signaling reflation – an expansion in the level of output of an economy by using either fiscal or monetary policy or both. The Fed has been trying to reflate the economy since the March 2020 crash and has pumped trillions of dollars into the system to achieve that goal.

As such, one might now expect the Fed to raise rates earlier-than-expected. However, Powell made it clear last August that the central bank will hold interest rates low for some time after inflation has risen above its 2% target. Further, according to Margaret Yang, a strategist at DailyFX, investors are anticipating a large U.S. fiscal stimulus bill worth $1.9 trillion, which could boost the reflation theme and inflation outlook.

Put simply, the inflation-boosting stimulus is unlikely to be scaled back anytime soon and bitcoin's long-term bullish case remains intact. At press time, bitcoin is trading near $48,700, representing a 10.3% drop on the day.

BOLO

Be on the lookout for these events today:

15:00 UTC (10:00 a.m. ET): Federal Reserve Chairman Jerome Powell gives his semiannual monetary policy report to Congress. What to look for: The market expects Powell will indicate his still more concerned about the economy than about inflation. Therefore, rates are expected to remain low for the foreseeable future. For those who see bitcoin as an inflation hedge, that’s a positive sign for crypto.

22:00 UTC (5:00 p.m. ET): Square’s (NASDAQ: SQ) Q4 earnings call. What to look for: Revenue is expected to be at $3.11 billion while the consensus forecast for EPS is $0.24. Traders are also hoping to hear about CEO Jack Dorsey’s company’s investment in bitcoin; its $50 million purchase in October is now worth five four times as much.

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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