Cryptocurrencies under the pressure of hedge fund redemptions

It is yet another difficult week for the cryptocurrencies.

BTC/USDT rebounded after testing the $6000 support. The recovery was partly due to the issuance of 250 million worth of Tether, which is backed by the USD at 1:1 ratio and acts as a quantitative easing for the crypto-markets.

However, Bitcoin remains comfortably in a bear market. According to Spencer Bogart, a blockchain venture capitalist, the decline in crypto prices is also due to a forced sell-off by the crypto hedge funds, which emerged in summer 2017 and ‘hit their one-year lock-up’. If this is the case, the fund redemption could be expected to push the prices artificially lower and further dampen the mood among the bulls. A move below $6000 should encourage a further sell-off in Bitcoin toward $5000 and across the altcoins.

On the upside, dip-buyers could look for an upside attempt toward 6750/6870 (weekly resistance & minor 23.6% retracement on May – June), with fading momentum into the 50-day moving average (7256).

The stagnant Bitcoin also weighs on the overall investor sentiment. Ethereum, Bitcoin Cash and Litecoin are also under a decent selling pressure.

LTC/USDT tanked to 76, following the failure to clear the solid 100 resistance. The negative trend could encourage a further decline toward 65/55 weekly support area. Offers at 110/115 (minor 23.6% and major 38.2% retracement on May – June decline) are expected to cap the short-term positive attempts, as long as the crypto-markets remain under the broad-based selling pressure. This is because the demand in Litecoin is highly contingent to Bitcoin’s performance, as it is often seen as a good alternative for Bitcoin's high transaction fees/ long blocktime especially when its price rises significantly.

Hence, we maintain our cautious stance in Litecoin, as crypto-users should continue moving toward more promising cryptocurrencies, once it will be the right time to return to the market.

ETH/USDT trades within the 440/540 range with greater volatility when it comes to downside moves. The poor appetite in cryptocurrencies and the lack of positive momentum weighs on recovery attempts. We are looking for a move above 580 (major 38.2% retracement on May – June decline) to update our view from neutral to bullish.

From a fundamental standpoint, Ethereum continues expanding its activities. On June 25, a new ERC-1155 token was launched for video games specifically, hinting at Ethereum’s determination to spread to the online gaming industry in an impactful way. Such news should have a delayed positive impact on ETH's value.

Finally, Bitcoin Cash, one of the most popular and promising coin on the market, extended losses to 680 against USDT, its lowest level since April, after clearing the 820-support. Trend and momentum indicators remain comfortably negative, as traders consider the possibility of a further debasement toward 530/500 area, the year-to-date lows. The negative trend should remain in play below 1105 (major 38.2% retracement on May – June decline). Bitcoin Cash slipped below the 200-day moving average (0.1360) against Bitcoi as well. The RSI indicator hints that the pair will soon hit the oversold market, opening a window for short-term correction.

While the global lack of appetite is the major motive for the falling crypto prices, Bitcoin Cash is increasingly charming across businesses. In this context, a second tier Scottish football club, Ayr United, has recently agreed to accept payments in Bitcoin Cash.

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Trading of cryptocurrencies (BitCoin, Ethereum or any form of coins) and blockchain assets is highly speculative, carries a high level of risk and is not appropriate for every investor. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margins.