Daily News | Stable Crypto Prices; Coinbase and Block Q1 Results Beat Expectations While US Banking Faces FDIC Fees Despite Struggling Markets
Crypto Daily Digest: Stable Cryptocurrencies, Bitcoin Miners Benefit from Blockchain Congestion, and Coinbase and Block Q1 Results Exceed Expectations Despite Struggling Traditional Markets
The financial markets had a mixed day on Thursday, with Bitcoin (BTC) decreasing slightly by 0.5% to $28,855 and Ether (ETH) dropping around 1.2% to around $1,878.
However, the two largest cryptocurrencies are showing stability in their prices while stock markets struggled, driven by concerns about bank sector contagion after the collapse of several banks. Bond markets showed a decrease in near-term interest rate expectations, potentially leading the US Federal Reserve to consider rate cuts and a return to quantitative easing. Despite the uncertainty, some analysts suggest that Bitcoin may benefit from the current financial crisis.
In addition, Bitcoin‘s blockchain has experienced a temporary surge in congestion due to increased activity involving Ethereum-style tokens and NFT-like “inions”. The rise in activity has led to a surge in transaction fees, which has been good news for miners. However, some analysts believe that the situation is a short-term one.
Meanwhile, Coinbase, the largest US digital-asset trading platform, reported its Q1 2023 results, which included a narrower loss and a smaller-than-expected revenue decline. Despite facing regulatory challenges, the company remains committed to the US and saw its shares rise by around 8% in after-hours trading.
In another impressive Q1 performance, fintech firm Block (SQ), founded by Twitter’s Jack Dorsey, reported $2.16 billion in Bitcoin revenue, up 18% from the previous quarter and 25% from Q1 2022. The company also reported Q1 revenue of $5 billion, beating estimates by $390 million, and non-GAAP earnings per share of 40 cents, beating expectations by 6 cents.
Cash App, a subsidiary of Block, generated $50 million in Bitcoin gross profit in the first quarter, up 43% from Q4 and ahead 16% year over year. Block’s Bitcoin holdings did not incur any impairment losses in the first quarter, thanks to the rise in Bitcoin‘s price.
Bitcoin (BTC) $28,896 (+0.19%) - Neutral Outlook
To get a broader understanding of Bitcoin‘s current outlook, please read yesterday’s daily news article (Daily News | Fed Ends Tightening Cycle; BTC and ETH Rise as SEC Removes Digital Asset Definition and Global Stocks Decline). Using the dynamic Wyckoff logic on the 1-hour timeframe, we can see that the drop in value we witnessed yesterday confirmed the strength of the monthly level of 29300. This indicates that if Bitcoin were to return to this level in the future, smart money would likely make a clean break above to affirm bullishness, causing the price to rise with ease. However, before this occurs, smart money will likely lower the price to accumulate more Bitcoin, setting a target range of 27790-27235, and possibly even as low as 26700. This is a strategic move to establish the “Path of Least Resistance” upward.
Overview:
- Closest hourly support zone: 28730 - 28412
- Closest hourly resistance zone: 29037 - 29096
- Key Level: 28419 (Weekly High between Dec. 21 - 28, 2020)
Hourly Resistance zones
- 29037 - 29096
- 29300 - 29477
- 29618 - 29888
Hourly Support zones
- 28730 - 28412
- 28215 - 28019
- 27790 - 27235
Macro: FDIC Plans Fees for Big Banks as US Banking Sector Suffers Major Setback and Regional Banking Index Slumps, Making Global Markets Nervous
The US banking sector is currently experiencing a decline, with regional bank stocks suffering significant losses. Western Alliance Bancorp and PacWest Bancorp have lost over 60% of their value, while First Horizon Corp. has lost over 30% after its merger with Toronto-Dominion Bank was scrapped. The sell-off has extended to big banks like JPMorgan Chase & Co. and Bank of America Corp., as well as the broader market, with the S&P 500 suffering its fourth straight decline. This comes despite assurances from Fed Chair Jerome Powell that authorities were closer to containing the crisis.
The recent sell-off is being attributed to an interest-rate issue rather than a credit crisis, following the collapse of First Republic Bank and a lending crunch. The Fed is unlikely to cut rates unless a recession is imminent, and investors are gearing up for Friday’s key jobs report. Meanwhile, concerns about a political standoff over the US debt limit are driving up rates on short-term Treasury bills.
The impact of this sell-off is not limited to the US. Asian equities are expected to start weakly as well, following a rout in regional banks that rattled Wall Street. Traders are increasing their bets on Federal Reserve rate cuts due to anxiety about the next financial shoe to drop. The S&P 500 tumbled by 0.7% on Thursday, and a fourth consecutive decline was fueled by a probe into Goldman Sachs Group’s role in Silicon Valley Bank’s deal. The yen and gold both rose as a search for safety was sparked. The Cboe Volatility Index (VIX), known as Wall Street’s fear gauge, spiked to hit the key 20 mark, with investor confidence remaining fragile.
The decline in regional bank stocks is a significant concern for the sector, as several firms have already collapsed in recent months. Reports that PacWest and Western Alliance are exploring strategic options have only fueled these concerns. The KBW Regional Banking Index has slumped, extending this year’s rout to 31%. In response, the Federal Deposit Insurance Corp. (FDIC) plans to hit big banks with fees to refill its insurance fund, while exempting smaller lenders.
TL;DR: the current decline in the banking sector is causing anxiety among investors and traders worldwide. While the Fed has yet to make any significant moves, the possibility of interest rate cuts and the ongoing political standoff over the US debt limit are both significant factors that could impact the sector’s future performance.
