Digital Assets Morning Call: April 11, 2022

Written by ALT 5 Sigma
on April 11, 2022

Crypto prices start the week on a down note

US yield and dollar gains continue to work against major crypto prices

LFG reported purchases more bitcoin over the weekends weigh on crypto

US equity earnings season and risk assets; potential crypto implications

Major crypto currency prices are weaker again on Monday, and the macro themes prevalent in broader financial markets—particularly higher US yields and a stronger US dollar–remain a driving force.

On the charts

The pullback in crypto assets has seen Bitcoin dip below $41,000 today and it has now retraced roughly two-thirds of its $37,625-$48,190 rally from the second half of March. Similarly, Ethereum is currently down over 6% on the session, having now retraced fully half of its $2,492-$3,581 rally from March 13. Solana is nearing the psychological $100 threshold after trading above $143 just nine days ago.

The pace and magnitude of these declines is significant and might normally suggest opportunity for at least some consolidation in the near-term. However, the macro developments described below—if they persist—suggest little immediate reprieve for major crypto prices.

More LFG purchases of bitcoin

Interestingly as well, bitcoin’s decline over the weekend and today has occurred despite additional reported purchases by the Luna Foundation Guard. Coindesk reports today that the LFG bought $173 mln worth of bitcoin over the weekend, continuing its broader purchase program which it has said will eventually amount to $10 bln worth of bitcoin.

US rates, the dollar and crypto

US 10-year Treasury yields have reached a new cycle high of 2.78% today, extending the accelerated upward trend in place since March, and the highest in two years. The combination of higher inflation and a more hawkish outlook for Federal Reserve policy remain driving forces behind the higher yield dynamic. And on the inflation front there is clear focus on the US CPI data due Tuesday.

Higher US yields are also supporting the US dollar, with the currency trading near two-year highs versus the euro and its highest in nearly seven years against the Japanese yen. Those gains undercut sentiment in and demand for US dollar alternatives, such as crypto currencies, and are contributing to the current crypto asset weakness.

US equity earnings season coming up

Risk assets generally are under some pressure today, with major US equity index futures trading lower ahead of the cash market open. Note that quarterly earnings season kicks off later this week, starting with the big US banks. Does this matter to crypto? It could if exceptionally strong/weak outcomes impact broader market sentiment bullishly/bearishly, with crypto potentially sensitive to the associated swing in risk appetite.

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