Bitcoin (BTC) was in decline for much of the day, with prices contracting 1%. Should prices by the end of Tuesday in negative territory this would mark the fifth consecutive day of declines, with each coming on below average volume (based on the 20-day moving average).
The average true range (ATR) of BTC movement has been in decline over this period as well, indicating that bitcoin is trading fairly tightly.
Low trading volumes in conjunction with narrowing trading ranges can indicate a lack of conviction, whether bullish or bearish. At the very least they can signal that investors are taking a wait-and-see approach.
In traditional markets, the Dow Jones Industrial Average declined 0.9% on the day, while the Nasdaq Composite and S&P 500 indices decreased 0.5% and 0.7%, respectively.
Bitcoin-heavy company MicroStrategy (MSTR), which reports earnings after the close of U.S. stock markets on Tuesday, was up 3% during intraday trading.
Ether (ETH) increased 1.4% on the day, reversing its 3% decline from a day prior, and ending a streak of four consecutive down days.
Altcoins were also in decline on Tuesday, with Polkadot's DOT token falling 3% while Polygon’s MATIC and Chainlink’s LINK fell 1.62% and 3.25%, respectively.
●Bitcoin (BTC): $22,924 +0.1%
●Ether (ETH): $1,635 +1.0%
●S&P 500 daily close: 4,091.32 −0.7%
●Gold: $1,779 per troy ounce +0.6%
●Ten-year Treasury yield daily close: 2.74% +0.1
Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
Prices Decline on Lower Volume; Bond Markets Still Signal General Market Concern
Bitcoin prices fell again on Tuesday as markets appear to be taking a breather following the prior week’s move higher.
On a technical basis, bitcoin breached its 10-day exponential moving average (EMA), indicating short-term weakness. The 10-day EMA is a moving average of the most recent 10 days of bitcoin prices. A movement in price below an asset’s EMA can be interpreted as a bearish signal. Worth noting, however, is the downward moves have come on below average volume. Moves in either direction on low volume are often interpreted as showing a lack of conviction in the direction of the move.
Prices now sit between the 10- and the 20-day EMA, which could signal a buying window for traders holding a bullish outlook. Prices for BTC remain 28% below its 200-period EMA and less than 1% below its 50-day EMA of $23,211. For context, BTC last closed above its 50-day EMA in April.
The relative strength indicator (RSI) has retreated from the level of 69 reached on July 19, to a current level of 56.22. The RSI indicator is often used as an indicator of price momentum, and measures both the speed and magnitude of price movements. Levels above 70 indicate overbought conditions, while levels below 30 imply oversold conditions. Levels close to 50 (the current situation) are interpreted as “neutral.”
This often goes hand in hand with a “range-bound” environment, where prices trade relatively flat and the range of price movements compresses.
Fixed income markets continue to signal overall concern
As referenced in Monday’s edition of “First Mover,” the yield between the 10-year and two-year U.S. Treasury notes is at its most inverted level in over 20 years. The significance of the inversion is that historically within the U.S., yield curve inversions have often come 12-18 months prior to economic recession.
A counterpoint is that the flattening of the curve is a possible precursor to the U.S. Federal Reserve departing from its current schedule of tightening, while pivoting to more accommodative measures (i.e., lowering interest rates).
Another item of note is the potential inversion of the 10-year Treasury bond and the three-month Treasury. As evidenced below, the spread between the 10-year and three-month Treasurys has been in steep decline since May. While not currently inverted, the current spread of 0.04% is also at a 20-year low. The significance of this being that markets are essentially pricing the risk of loaning capital for three months higher than they are the risk of loaning capital for 10 years.
Bitcoin supply in profit gradually moving higher
While the spread between the 10-year and two-year relates to all risk assets, the BTC percentage supply in profit is connected to the cryptocurrency alone. Given the recent increase in BTC prices, it should come as no surprise that the Percent Supply in Profit indicator for BTC has moved higher as well. What also bears mentioning is the extent to which the metric has coincided with BTC market tops and bottoms in the past.
Historically, readings in excess of 95% have signaled market tops, while readings below 50% have signaled bottoms. As it stands, the BTC percent supply in profit is 61%, up from 50.3% on July 18. BTC prices are up 22% over the identical time frame.
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Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.