First Mover Asia: The Renminbi Rises; Cryptos Suffer Another Lost Weekend
By Sam Reynolds, Damanick Dantes, James Rubin
The value of RMB payments gained over 10% compared to December amid an inauspicious test of the digital yuan at the Winter Olympics. Bitcoin and major altcoins tumbled as tensions continued mounting on the Ukraine border.
Insights: The renminbi is on the rise; the eCNY face-plants at the Winter Olympics. Cryptos tumble over the weekend.
Technician’s take: BTC momentum signals remain negative, indicating consistent selling pressure over the past month.
Bitcoin (BTC): $38,724 -3.3%
Ether (ETH): $2,649 -3.8%
|Solana||SOL||+1.0%||Smart Contract Platform|
|Polygon||MATIC||−5.7%||Smart Contract Platform|
|Cardano||ADA||−5.4%||Smart Contract Platform|
S&P 500: 4,348 -0.7%
IA: 34,079 -0.6%
Gold: $1,897 -.07%
Weekend market moves
Bitcoin tumbled below $40,000 in the early weekend hours and kept dipping amid rising tensions on the Ukraine-Russia border and continued inflationary fears. Ether and almost all other major cryptos also dropped.
A possible exploit of OpenSea, the leading NFT platform, may have further frightened investors away from crypto.
At the time of publication, bitcoin was trading at around $38,700, a 3.3% drop over the past 24 hours and its lowest level since Feb. 3. Ether, the second largest cryptocurrency by market capitalization, was changing hands at slightly over $2,600, off nearly 4% and its lowest point since the first week of the month.
The declines came as U.S. intelligence reported that Russia had already decided to invade Ukraine. On Sunday, U.S. Secretary of State Antony Blinken told CNN’s State of the Union talk show that “everything leading up to the actual invasion appears to be taking place. All of these false-flag operations, all these provocations to create justifications — all that is already in train.” Meanwhile, investors were gearing for the first of what is expected to be several Federal Reserve interest rate hikes.
Separately, in a late Saturday tweet, OpenSea CEO Devin Finzer wrote that “32 users thus far have signed a malicious payload from an attacker, and some of their NFTs were stolen.” Finzer suggested that a fraudulent website may be to blame. OpenSea said in a separate tweet that it was investigating the incident.
He noted that Solana was the only altcoin among the top 20 by market cap on the CoinDesk price page to rise over the weekend, reflecting “some strength from investors due to being a Proof of Stake protocol.” But DiPasquale called that increase “simply price recovery” because Solana had fallen more sharply than Bitcoin and other altcoins. “While Bitcoin is largely flat for February, Solana is still down, so its recovery simply returns it closer to parity of gains and losses for other crypto assets.”
PetroYuan, Digital Yuan, More Like One Big Yawn!
As last week came to a close in Asia, Chinese state media reported that China’s currency, the renminbi, was on the rise. Citing data from SWIFT, traditional finance’s closed ledger for interbank fund transfer, China media said the value of RMB payments increased by 10.85% compared with December. Now, the RMB accounts for 3.2% of all transactions worldwide, up from 2% in November. Meanwhile, Britain’s pound accounts for 6.3% of global transactions.
But neither of these stories are as earth-shattering as Beijing might have hoped.
Inbound flights into China sank to around 500 per week from 10,000 pre-coronavirus pandemic; only a fraction of these are from Russia. Oil is still priced globally in U.S. dollars (USD).
As for the eCNY, the Olympics were supposed to be its coming-out party, where foreign tourists would exchange their greenbacks or euros for some sweet reminbi issued on a digital ledger. But the borders are still closed. No foreign tourists are invited. Locals that were able to attend the games used eCNY at venues — cash was barred — while the few foreigners in attendance used Visa, the official credit card partner of the games.
All of this is a micro example of a macro problem for China. When it comes to digital currency, the USD is still king. In 2020, Chainalysis reported that $50 billion in capital flowed out from China in crypto and mostly in dollar-pegged tether.
As Bloomberg commodity strategist Mike McGlone has pointed out, the best thing for the dollar is crypto.
“Despite the shrinking U.S. portion of the world’s GDP, the dollar increasingly dominates, notably in the digital ecosystem,” McGlone wrote in April 2021. “There appears to be little to stop the most consistent trends in crypto assets: rising trading volume and the proliferation of stablecoins tracking the dollar.”
Despite Beijing’s digital dreams, the eCNY will be a tough sell on the market because of capital controls on the yuan. This is why China is only marketing it domestically now.
The few yuan that are allowed to leave the country have a specific pathway to the outside world via Hong Kong’s vast “offshore” RMB liquidity pools where they end up being converted to the freely convertible Hong Kong dollar, the original “stablecoin” with its USD peg.
Tim Draper had a simpler take on it, which he shared on a podcast in May 2020.
Bitcoin Under Pressure, Lower Support at $30K-$35K
Bitcoin weekly chart shows support/resistance with RSI on bottom (Damanick Dantes/CoinDesk, TradingView)
Bitcoin (BTC) remains in its short-term downtrend begun in November, currently off 40% from its all-time high near $69,000. The cryptocurrency tested initial support at $40,000 on Friday, although stronger support is seen at $30,000, which was roughly the bottom of 2021’s sell-off.
Momentum signals remain negative, indicating consistent selling pressure over the past month. Further, BTC was unable to break above its 40-week moving average at $45,724, which presents a bearish bias.
If the $28,000-$30,000 range is broken, prices could experience additional downside, similar to the 80% peak-to-trough decline during the 2018 bear market.
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