Heavy unwind continues across cryptocurrencies

Cryptocurrency markets dived following the South Korean currency exchange hack, which has revived concerns on security. BTC/USDT dived below 6500 and the MACD turned negative indicating that the downside move could gain further momentum. Key mid-term support is eyed at 6000, if broken should increase the bears’ appetite for a further decline toward 5000. Resistance is eyed at 7375/7450 area, including the 38.2% retracement on May – June decline, the 200-dma and last week’s resistance. 

ETH/USDT slipped below the 500-support on the back of the broad-based sell-off in cryptocurrency markets. Decent sell orders are sitting at 500, adding an additional downside pressure to the market. Recovery attempts remain weak; buyers are no where to be found below 550 (weekly pivot). 

Despite poor sentiment, Ether is doing well from a fundamental point of view. Ether's market volume is expanding steadily. Lately, the number of Ethers in circulation surpassed 100 million coins.

Bitcoin Cash has also been hit by a wave of sell-off, after the S. Korean crypto-exchange hack weigh on the sector-appetite. BCH/USDT slipped below the 1000 level. The fading positive momentum hints at a building case for a further decline toward the 800 level. The key resistance to the actual bearish trend stands at 1190 , the 38.2% retracement on May – June decline and the 50-dma. Intermediate resistance is eyed at 1005, weekly pivot.

Fundamentally, Bitcoin Cash’s larger capacity crunch is expected to bring the network close to Visa and MasterCard scale, according to developer Amaury Séchet. Bitcoin Cash holds ground near the 200-dma against Bitcoin.

LTC/USDT trades with limited enthusiasm, with 100-support out of the way following the broad-based sell-off across the crypto-markets. The weekly pivot has retreated from 113 to 110. Relatively low volatility has prevented Litecoin from breaking important technical levels over the weekend, but the breach of the 100-support could increase the volatility in the coming days.

Does Swiss Sovereign Money initiative weigh on the sentiment?

The Swiss initiative to give the Swiss National Bank (SNB) the authority to be the sole money creator has been rejected with 75% on Sunday.

Although the Swiss vote did not target the cryptocurrencies, there are speculations that the sharp rejection of the Sovereign Money initiative may have explained a part of the debasement across the cryptomarkets during the weekend, as there is one important parallel between the sovereign money initiative and the creation of central bank cryptocurrencies: the reserve ratio.

In fact, the early examination of the possibility for using the blockchain technology for national cryptocurrencies showed that the latter would probably lead to a 100% reserve system, where every unit of cryptocurrency would be backed by the central bank reserves.

The rationale behind the 100% reserve requirement is that, assuming that the cryptocurrency holdings are remunerated with the same rate than the central bank reserves, users would be tempted to hold risk-free, interest-rate-bearing central bank coins instead of deposits with the commercial banks.

Consequently, in a monetary system including a national cryptocurrency, the central bank reserves would represent the entire monetary volume available in the market. This would make the central bank the sole creator of sovereign money, as opposition to the actual system where commercial banks create money by lending most of the available volume to other institutions and users, while keeping only the minimum reserve ratio on their balance sheets.

So, the fact that Switzerland, which has a long banking history and has been home to many innovations in cryptocurrencies, is not ready to change its monetary system in favour of a configuration that could eventually be compatible with the use of official cryptocurrencies, may have deteriorated the sentiment across the market.

Bitcoin traded below 6800 versus the US dollar, while Ethereum tested the $500-support.

Dont be confused: Switzerland hasn't voted against cryptocurrencies

Although the markets settled parallels between the Swiss initiative and the cryptocurrencies, Swiss citizens have not rejected the idea of using cryptocurrencies. They rejected the idea of a system, where 100% of the monetary volume would be backed by the central bank reserves, because it would have put too much pressure on the central bank, compromise the independency between the monetary and fiscal policies and lead the country to a period of economic uncertainty by adopting a model which is not in line with the rest of the world.

We also remind that there are important differences in terms of functionalities between hypothetical national cryptocurrencies and the existing cryptocurrencies.

It is important to highlight that trading of non-sovereign cryptocurrencies do not interfere with the monetary policy mechanism. At least, not more than the traditional asset classes. In this sense, the cryptocurrencies should be considered as traditional financial instruments such as stocks, and not be confounded with the sovereign money.

Hence, the result of the Swiss vote should not be perceived as a direct negative reaction to the use of cryptocurrencies.