Crypto newsletter: Cryptocurrencies defend a key zone

The cryptocurrency sector was put to the test before the weekend and defended key levels. Bitcoin's price finally managed to break the longest downward streak in its entire history. The 'King of Cryptocurrencies' is already trading at nearly 5% upside today. Can we expect a broader rebound from these levels?

• Bitcoin has defended the $29,000 level, Ethereum has not retreated below $1,700 despite many bearish attempts. The other smaller cryptocurrencies also failed to reach new local lows and we are now seeing their prices unwinding their declines;

• Cardano is up nearly 14% in anticipation of the Vasil hard fork and the Hydra update, which is expected to make the Cardano network the fastest blockchain in the world. There has been a recent surge in whale token buying activity on the Cardano network;

• Analysts working with Cointelegraph point to a still strong supply present at levels around $32,000. On the largest cryptocurrency exchange Binance, there is currently about $60 million on the sell side in this area alone. The bulls may find it difficult to cross this boundary, but on the other hand, if it is broken, it could provide the basis for a larger, dynamic move north;

Bitcoin sales by miners, while taking place have not even come close to the levels of 2021, when some miners started selling mined Bitcoins hoping to hit a 'price peak' and take record profits. At the same time, the amount of tokens miners sold, although it was relatively large compared to what we are seeing now, still cannot match the capitulation, from previous bear markets. Analysts, including Charles Edwards of Capriole, a digital asset firm point to declining returns from Bitcoin digging. That could help accelerate sales in the near future. The miners' sell-off has so far been one of the fundamental markers of the bottom of a bull market and capitulation. According to Edwards, we are approaching the point where shares will begin to be sold by miners on a large scale. It is worth noting rising energy prices and the resulting costs on the miner's side, which is impacting margins and may encourage exit from the market. Miners also face regulatory headwinds, such as the ban on mining in New York State. At the same time, such a moment may herald an upcoming price bottom, a broader rebound and a return of investors to the oversold market. Source: xStation5

"Liquidity is disappearing from the market, and that means it will have an impact on the equity markets," - Charu Chanana, market strategist at Saxo Capital Markets, told Bloomberg. The end of the 'easy money' era could still have a significant impact on stock market declines and, as a result, negative sentiment around risk. Cryptocurrencies have so far been a beneficiary of positive risk sentiment, so the reverse could still provide fuel for the bears.

• Bank of America analysts have indicated that they expect the S&P 500 to fall in the vicinity of 3200 points, which would potentially also end in a sell-off on the NASDAQ, with which the price of Bitcoin has been correlating recently;

• At the same time, a higher opening of the week on the indices could support short-term positive sentiment around cryptocurrencies. However, it is still too early for optimal circumstances capable of supporting a further rally.

The total supply of bitcoin at the addresses of long-term investors (not selling faster than after 1 year) has recently stabilized. Typically, long-term investors are willing to accumulate when the Bitcoin price consolidates. Bitcoin supply held by long-term recently returned to record levels near 13.48 million BTC. Despite bullish signs of generally positive sentiment among long-term investors, still some such addresses are realizing losses. At the end of May, the average loss realized by such addresses was about 27% against the moment of purchase. Such situations in the past occurred only during the lows and capitulations during the bear markets in 2018 or March 2020, among others, and confirm the extremely negative sentiment that is shared even by a part of long-term investors expecting price declines. This confirms that current levels may still be attractive for contrarian investors but further downward movement is still definitely in play. Source: Glassnode

Bitcoin chart, D1 interval. The largest cryptocurrency continues to hold in the consolidation zone between $33,000 and $27800. From a technical point of view, in the short term we can see an attempt to create higher lows over the last two weeks, and bulls managed to break out above the limit of the local downtrend (red, dashed line). On the other hand, analyzing the long-term trend, this one still remains under the domination of the supply side. Only the breakout from the previously mentioned consolidation zones may indicate a more precise picture of the distribution of bulls' and bears' forces. Source: xStation 5