Published: November 9th, 2022
Bitcoin erased recent gains at the start of the week as markets were gripped by US election jitters and the anticipated release of CPI data.
At time of writing the biggest coin by market cap was trading at USD 18,257, down around 7.3 per cent in 48 hours according to data from CoinMarketCap.
That erases gains made over the weekend when BTC broke above the USD 21,000 mark, reaching USD 21,400 at one point on news of US job growth.
Ethereum, the second biggest coin by market cap, is down too, shedding more than 10 per cent of its value in 24 hours. It's currently priced at USD 1,293.
Both have been trending dowen since Monday 7th November, but also experienced sudden drops in the past 24 hours as the US vote count got underway. At time of writing, early trends suggested the Republicans might be on track to narrowly take control of both the Senate and House of representatives.
As BTC and ETH sink, Dogecoin, the eighth biggest cryptocurrency by market cap, has dropped off a cliff. The first meme coin and personal favorite of newly-minted Twitter owner Elon Musk had plunged by more than 12 per cent at time of writing, sitting at USD 0.0875.
The coin rallied into November when Musk announced his pursuit of Twitter had finally happened. DOGE shot up by 94 per cent in a week, making it November’s best performing digital asset to date.
Things began to change however when American voters headed to the polls in ‘mid-term’ elections that will decide the political make-up of next year’s Congress. The outcome is thought to be significant for the crypto market as lawmakers will likely decide how to regulate digital assets in the coming year.
As the election count roll son (US vote counts take notoriously longer to finalize than in other advanced democracies), the US Bureau of Labor Statistics will release the latest CPI inflation data on Thursday 1oth November. It will signal how hard inflation is biting into household spending as it tracks prices like fuel and clothing.
High inflation could set Bitcoin up for more losses as investors flee to safe-havens like the US dollar and leave more volatile assets behind.
DOGE briefly doubled in value to almost (USD) 15 cents on 31st October. That lifted its total value to about USD 15.8 billion and sending its market cap past established coins like Cardano.
During the week commencing 31st October DOGE saw heavy trading on the major cryptocurrency exchanges. On Coinbase it was the third most traded coin, accounting for over 15 per cent of total trading volume.
As Bitcoin has left a trail of disappointment for most of 2022, crypto traders have naturally followed number two ETH’s trajectory with high hopes. There was concern that a decisive break below the psychologically significant USD 1,000 could trigger margin calls or liquidations of large leveraged bets.
Happily, for most those fears have turned out to be unfounded, though nerves began to fray in June when two crypto lending platforms, Celsius Network and Babel Finance, halted withdrawals due to worries about ‘undue market volatility’.
The real sweating, however, started when crypto hedge fund Three Arrow Capital was unable to beef-up collateral to cover its riskier bets. It had been less than a month since Terra, a USD 40 billion stablecoin project collapsed. Some investors were clearly feeling a sense of deju vu.
Those events coincided with two large-scale capital withdrawals from Ethereum’s blockchain ecosystem that severely diminished its benchmark total value locked (TVL) metric. The unwind happened in two parts. The first occurred across Ethereum's decentralized finance (DeFi) projects in May, when TVL fell by USD 93 billion after the Terra collapse. This month (June 2022) has seen another USD 30 billion in withdrawals.
‘The deleveraging underway on Ethereum (was) observably painful, with characteristics that make it look like a financial crisis in miniature,’ said on-chain analytics platform Glassnode in an analyst note. ‘One only hopes that with the pain comes an opportunity to rid the network of excessive leverage and make space for a less risky rebuild on the other side.’
While the past eight months have seen most top-tier cryptocurrencies suffer losses of more than 90 per cent from their all-time highs (ATH’s), a group of holdouts has managed to achieve gains amid the downtrend, even if some have been short-lived.
While 2022 crypto bear market has hammered 70 out of the top 100 tokens, the coins with the biggest market caps have actually suffered least for most of the year. At mid-year, nine had fallen by less than 90 per cent at mid-year. Bitcoin (BTC) was down 70.2 per cent in June from its November 2021 high of USD 69,000. ETH was in second place, down 77 per cent from its high of USD 4,876.
Others in the top table included Cardano’s ADA, Binance’s BNB, Polkadot’s DOT, and Solana’s SOL which were all down between 67 and 86 per cent in June. The average fall from grace for the top ten coins is still a whopping 70-78 per cent. Extend your view to the top 20 coins and the average drop from ATH is closer to 80 per cent.
Amid all the carnage, tokens issued by crypto exchanges have offered occasional gains and cumulatively have ‘only’ posted an average drop in price of 65-70 per cent. From that perspective one of the top performers has been Unus Sed Leo (LEO), which attracted aggressive buying (at lower levels) in mid-June. LEO is the Bitfinex exchange Ethereum-based utility token, often used by crypto traders to reduce fees.