Markets feeling supremely nervous
As we edge closer to the FOMC meeting with a potential 100 bps rate hike on the table, global markets lost their cool and aggressively sold off last night. Now we assess the key levels and plan ahead.
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Here comes trouble
Nothing exemplifies the extreme fear in the markets better than a completely inverted yield curve from the 1yr right through to the 10yr. This signals a strong and deep recession being called by the bond market, completely contradicting the White House narrative of a “strong and vibrant economy”.
With the FOMC interest rate announcement set to occur in 18hrs time (4am AEST), there is a very real possibility of seeing a 100bps rate hike and this would further steepen the inversion and be disastrous (in the short term) for risk assets. Betting on a dovish FED pivot anytime soon would be inappropriate considering the extremely sticky inflation being experienced in the US and around the globe. Crypto asset investors don’t need to worry about these short term fluctuations, simply be aware of the potential path forward to avoid panic selling.
SEC claims ETH transactions falls under US law
On Monday the SEC filed a federal lawsuit against crypto influencer Ian Balina for his alleged failure to register a cryptocurrency as a security before launching a 2018 initial coin offering (ICO). At first glance, the lawsuit seems pretty ordinary, as one of the SEC’s mandates is to hunt individuals and organisations for rolling out unregistered ICOs. Astute observers then read a little further into the fine print. In an egregious and potentially unprecedented move buried in the lawsuit’s 69th paragraph, the SEC claimed it had the right to sue Balina not only because his case concerns transactions made in the United States, but also because they claim the ETH network is a US money transmitter. In its complaint, the regulator noted that the ETH sent to Balina was “validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country.” The SEC then concludes: “As a result, those transactions took place in the United States”.
There has yet to be any material price impact from this development, we will be watching nonetheless to see how this story develops.
BTC/USD key levels
Our levels are playing out quite nicely at the moment. We lost the key support level of $19,560 USD and it’s now turning into resistance. $18,549 provided support as highlighted in our previous Morning Note, if we lose this level post FOMC meet, look for a quick retest of the June lows around $17,647, which is only 7% away from current market prices. Below the local lows, it will be up the bulls to show a strong bid and print some fresh support levels in the order books. The upside scenario is quite clear, break and close above $19,560 and we can then have a clear run up to $20,554.
ETH/USD key levels
Our levels remain largely unchanged from the previous update. We have moved sideways and $1,333 USD remains the key decision point. For a sustained sell-off, we would need to see $1,241 get broken by a strong close below this level, we can then expect $1,004, approx. 20% away from that $1,241 key level. For a move to the upside to occur, we need to see a strong close above $1,500 and this setup could lead us for a continuation towards $1,620.
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