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(Kitco News) – Financial markets fell under pressure on Wednesday after Fitch Ratings downgraded the United States of America’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA.’
“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA-rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” Fitch said in a press release.
The crypto market also faced additional downward pressure after reports emerged that the Department of Justice is considering charging Binance, the largest cryptocurrency exchange in the world, with fraud.
Stocks opened in the red and trended lower throughout the trading day amid renewed concerns about the state of the U.S. and global economies. At the market close, the S&P, Dow and Nasdaq all finished lower, down 1.38%, 0.98%, and 2.17%, respectively.
Bitcoin’s (BTC) price briefly peaked above $30,000 in the early hours on Wednesday, but reversed course as news of the downgrade spread, pulling back to support at $29,200, where it has traded since July 24.
BTC/USD Chart by TradingView
Tuesday’s price action led to “August Bitcoin futures prices [trading] higher in early U.S. trading Wednesday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“Today’s upside price action negated a price downtrend line on the daily bar chart, to give the bulls some fresh upside momentum,” Wyckoff said. “Bulls and bears are still on a level overall near-term technical playing field at present.”
MN Trading analyst Daan Foppen warned that while “BTC is clearly in an uptrend,” its price “can drop quite a bit and still make a higher low.”
Foppen said the pump in BTC price on Tuesday was due to a short squeeze, and it briefly succeeded in pushing Bitcoin back into the trading range it has been in since June 21.
BTC/USD 1-week chart. Source: MN Trading
Bitcoin has since fallen back out of that range, which led Foppen to consider two scenarios.
“The first is a clear reclaim of the range,” he said. “For this, you would want to see a gain above the level of 29.5K. If we continue to drop, the 4-hour [fair value gap] around 29.2K becomes a crucial level to watch as potential support. If it fails to hold, there is a high chance that we will make new lows.”
BTC/USD 4-hour chart. Source: MN Trading
While the U.S. credit downgrade and the Binance fraud news are putting negative pressure on cryptos, positive forces are also helping provide support for the market. This includes the recent filings of Ether (ETH) futures ETF applications by six separate asset managers and news that Bloomberg’s ETF analysts have increased the probability that the Securities and Exchange Commission (SEC) will approve a spot BTC ETF to 65%.
Bloomberg Intelligence (BI) ETF analyst James Seyffart posted an analysis he performed with BI Senior ETF analyst Eric Balchunas, which states, “The odds of a spot Bitcoin ETF launching this year are up to 65%, in our eyes, after a flurry of developments.”
“That’s from 50% a couple weeks ago and 1% a few months ago,” Seyffart tweeted.
Reasons for the improved odds include “Gary Gensler downplaying his role at the SEC, the commission’s tacit approval of Coinbase’s Bitcoin exchange, Grayscale’s attempt to minimize other findings, and the SEC’s loss in front of the same judges in the Grayscale case,” the analysts said. “Finally, pressure from BlackRock and possibly Democrats could make denying the ETFs politically untenable for Gensler.”
Altcoins in the red as traders move to de-risk
The majority of altcoins in the top 200 traded in the red on Wednesday as the ongoing threats against Binance led traders to de-risk until the latest FUD blows over.
Daily cryptocurrency market performance. Source: Coin360
XDC Network (XDC) was the one standout token as its price increased 15.79% to trade at $0.073, while Kyber Network Crystal v2 (KNC) climbed 9.2%. Unibot (UNIBOT) suffered the largest loss with a decline of 7.6%, followed by a 7.3% drop for Uniswap (UNI).
The overall cryptocurrency market cap now stands at $1.17 trillion, a decline of 0.6% on the 24-hour chart, and Bitcoin’s dominance rate is 48.6%.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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