First Mover Americas: Bitcoin Back Below $30K as Target’s Earnings Miss Shows Effects of Inflation

The latest moves in crypto markets in context for May 18, 2022.

Good morning, and welcome to First Mover. I’m Brad Keoun, here to take you through the latest in crypto markets, news and insights. (Lyllah Ledesma is off this week.)

  • Price point: Bitcoin slid back below $30,000, in sync with U.S. stock futures after the giant retailer Target’s latest earnings report provided a fresh glimpse of consumers adjusting spending habits because of inflation.
  • Market Moves: A day after the U.S. Federal Reserve chairman pledged to keep tightening monetary conditions until inflation comes down, analysts and traders from crypto to stocks and futures were assessing the economic impact – from higher mortgage rates to lower company earnings, Shaurya Malwa reports.
  • Feature: It’s been a couple months since the $625 million Ronin Network exploit. Blockchain data shows the cryptocurrency haul moving onto Tornado, an on-chain privacy exchange that ostensibly would help to obscure the provenance.

Price Point

Bitcoin dipped to under $30,000 in European trading hours on Wednesday amid a retreat across traditional markets, as traders and analysts assessed the potential economic ramifications of U.S. Federal Reserve Chairman Jerome Powell’s pledge Tuesday to keep tightening pressure on financial conditions until inflation shows signs of weakening.

Bitcoin’s slide over the past few days is setting it up to extend a seven-week losing streak, which is the longest ever in a trading history that dates back to the early 2010s. The cryptocurrency has suffered from a downturn in broader markets, stricter crypto regulationswaning retail interest and systemic risks in the crypto sector.

Major cryptocurrencies followed bitcoin’s slide in the past 24 hours. Polkadot’s DOT lost as much as 6%, while avalanche (AVAX), bnb tokens (BNB), XRP and ether were all down. Tron (TRX) was among the few in the green buoyed by positive sentiment around its ecosystem stablecoin USDD.

In traditional markets, U.S. stocks were poised for declines on Wednesday based on the direction of futures trading, with weakness appearing as a disappointing earnings report from Target sent the giant retailer’s shares plunging more than 22%.

Inflation is forcing consumers to spend more on food and less on discretionary items, MarketWatch reported.

Market Moves

By Shaurya Malwa

With bitcoin now regularly trading in sync with U.S. stocks, what happens in traditional markets and the bricks-and-mortar economy bleeds over to crypto.

Higher interest rates tend to hit the earnings of companies that borrow money to run their businesses. With rates on consumer loans such as mortgages also on the rise, households are left with lower disposable incomes, which in turn causes a ripple effect in the broader economy.

Although such scenarios could take months to play out, stock traders are already pricing in anticipated lower earnings, which lead to a drop in equity valuations. On Wednesday, S&P 500 futures dropped 0.4% while technology-heavy Nasdaq futures fell 0.6%. European markets showed nominal movement as Germany’s DAX rose less than 0.1% and the Stoxx 600 slid 0.1%.

Such market moves come after the Fed’s Powell said Tuesday that the central bank remains committed to reducing inflation and could use “aggressive” measures to ensure a strong economy.

“What we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that,” Powell said at a Wall Street Journal event. “Achieving price stability, restoring price stability, is an unconditional need. Something we have to do because really the economy doesn’t work for workers or for businesses or for anybody without price stability.”

Bitcoin has traded similarly to a risky technology stock in the past months, with correlations reaching almost 1:1 with the S&P 500. Some market observers suggest a further correction could take place if current market conditions continue.

“Markets have been expecting the hikes for some time now, and it looks like the expectations are already on the charts,” Anton Gulin, regional director at crypto exchange AAX, said in a Telegram message. “The movement of bitcoin and Nasdaq is rather correlated as well for a couple of months.”