FOMC playbook: Protect your crypto

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Crypto investors de-risk ahead of FOMC as liquidations surge to +$270 million

Key points:

  • Investors were in a risk-off mode ahead of the double update of May US CPI data and Fed rate announcement.

  • Liquidations surged to $270M, but market observers expect a short-term bullish reversal of the market.

News - Crypto investors took a risk-off approach ahead of Wednesday’s Fed meeting and US CPI data, triggering a wave of sell-offs that escalated market-wide liquidations worth over $270 million. 

Market caution - Following a stronger US jobs report on 7 June, BTC slipped below $70K and extended losses early in the week after dipping to $66K before attempting a rebound. 

The strong US Jobs report complicated Fed rate cut chances in the upcoming FOMC (Federal Open Market Committee) meeting, tipping investors to de-risk. Investors’ risk-off approach was confirmed by US spot BTC ETFs outflows of $64.9M and $200M on Monday and Tuesday, respectively. 

The market sell-off saw liquidations spike to over $250 million in the past 24 hours before the time of writing.

Market analysts’ comments - Reacting to the market rout, Deribit CEO Luuk Strijers noted that ‘traders were likely to be conservative.’ 

‘Despite this short-term uncertainty, the basis yields and call skew remains high for all listed expiries,’ added Strijers. 

The bullish prospect was reinforced by QCP, a Singapore-based crypto trading and hedge fund. The firm stated, ‘Despite short-term headwinds, we think this might be a good opportunity to accumulate coin.’ 

“Bitcoin mining is the last defense against CBDC,” says Donald Trump

Key points:

  • Donald Trump claims BTC mining could defend against the Fed’s proposed CBDC.

  • The former president hosted BTC mining representatives on Tuesday at his Palm Beach resort.

News - The Republican presumptive presidential nominee, Donald Trump, has reportedly reinforced his commitment to advocating for Bitcoin miners.

The former president reportedly assured Bitcoin miners of his advocacy during a meeting held on Tuesday night at his Palm Beach resort

Trump’s pro-crypto stance - The former president has actively adopted a pro-crypto stance ahead of the upcoming November US elections. Trump recently expanded his political donations and now accepts cryptocurrencies. 

The Tuesday meeting was reportedly attended by key figures in BTC mining, including representatives from CleanSpark Inc. and Riot Platforms, some of the top miners listed on Nasdaq. 

In addition to maintaining his stance on advocating for BTC miners in the meeting, the former president stated that BTC mining was the last defense against CBDC. 

What’s more? Interestingly, Trump’s son, Donald Trump Jr, also championed his father as the ‘best choice for Bitcoin.’ 

Trump’s pro-crypto stance has startled Biden’s camp, especially after the US House passed the FIT21 Act and repealed the infamous SAB121.

As a result, Biden's campaign has reportedly contacted key crypto community figures for guidance on crypto policies. 

zkSync token launch sparks controversy, critics slam distribution criteria

Key points:

  • ZK token launch and distribution have faced criticism and backlash from some community users.

  • zkSync has dropped from nearly $200M in TVL to below $150M following backlash on the ZK token launch.

News - The token launch of zkSync, an Ethereum L2 scaling solution, sparked divergent views as TVL dropped slightly amidst negative comments on the token distribution.

ZK token launch - The ZK token, the upcoming native token for the zkSync ecosystem, will launch on 17 June. 

Per its tokenomics update, the supply will be 21 billion ZK tokens, and 17.5% of this will go to the community. A big chunk of the token supply would go to token assembly (29.3%) and ecosystem initiatives (19.9%).  

The rest will go to investors and teams at 17.2% and 16.1%, respectively. The update noted that ‘17.5% of the overall supply will be distributed through a one-time airdrop. The rest will be distributed over time.’

ZK airdrop criticisms - Users and market observers criticized zkSync’s anti-Sybil measures and distribution criteria. 

One of the critics, Polygon's information security chief Mudit Gupta, pointed out the defective anti-Sybil filtering. Gupta stated, “Anyone who knew the criteria could’ve easily farmed the airdrop.”

Another critic, Adam Cochran, partner at Cinneamhain Ventures, highlighted that zkSync's eligibility criteria were easily gamed by farmers and excluded genuine users.

However, zkSync stated that its distribution involved 89% of the 17.5% allocated to those who transacted a substantial figure on the network. 

Impact - zkSync recorded a significant dip in TVL in the protocol. It was nearly $200M a few weeks ago. But it hit $133M amidst the token launch backlash, underscoring a drop in trust in the protocol.

Is Litecoin ready for a bullish recovery towards $85?

Key points:

  • LTC has formed a bullish divergence that could tip bulls to regain market control.

  • LTC’s price chart levels offered an attractive risk-reward ratio with overhead liquidity clusters supporting the bullish thesis.

News - Litecoin formed a bullish divergence, with network activity rising despite the recent dip below $75. This suggested a potential rebound to the upside that could push LTC to hit $85 soon. 

What’s more? Between May and June, LTC dropped from above $87 to a low of $75. Yet, the number of active users on the network surged from 345K to over 700K over the same period. Interestingly the bulk of the users increased over the few days at the start of June. 

The RSI (Relative Strength Index), which tracks buying and selling strength, graced the oversold area, suggesting that a reversal was likely. 

Risk and liquidity levels - The Reserve Risk metric, which was low, $0.00050, further cemented the bullish conviction at the current LTC price chart level. It suggested high confidence and an attractive risk-to-reward ratio. 

Besides, based on Hyblock Capital data, the overhead market liquidity was situated between $80 and $87. Price action tends to be attracted to high liquidity areas. If the trend plays out, LTC could target the overhead liquidity and drive an upside rebound. 

Did you know?

  • On average, BTC’s Q3 performance and returns have been historically low; analysts expect the same to play out in 2024 Q3. The average returns are always below 10% in Q3, while the highest gains always occur in Q4 at an average of 88%. Q1 and Q2 always register average gains at 56% and 27%.

  • Crypto users are expected to reach 1 billion by the end of 2025. Interestingly, Binance estimates that 65% of crypto users hold BTC. Reaching the 1B threshold is deemed a pivotal moment with the potential to drive digital assets value even higher.

  • Several Bitcoin miners are pivoting to AI to diversify revenue streams and stabilize income post-BTC halving event in April. Reports indicate that Bit Digital derives 27% of its revenue from AI. Hut 8 generates 6% of sales from AI, and Hive gets 4% of its revenue from these services.

Top 3 coins of the day

Arbitrum (ARB)

Key points:

  • ARB has been toiling below $1 for almost a week now.

  • An upcoming ARB token unlock worth $88.9M, scheduled on 16 June could add more sell pressure.

What you should know - ARB was amongst the trending tokens on X (formerly Twitter). After a May token unlock event, another one worth $88.9M was scheduled for 16 June. The L2 token has been toiling below $1, and the extra supply could fuel more sell pressure and keep it below $1. Key price chart indicators on the higher timeframe demonstrated low buying pressure as RSI (Relative Strength Index) flirted with the oversold level. Additionally, the CMF (Chaikin Money Flow) failed to breach above zero, indicating inflows were still low for the altcoin. This underscores bearish sentiment for the token.

Pepe (PEPE)

Key points:

  • PEPE showed signs of recovery at press time.

  • The memecoin has been defending the 38.6% Fib level as support.

What you should know - BTC showed a slight recovery above $67K after extending losses to the $66K region. The small bounce tipped PEPE into the top list of daily performers. It was up 5% as of press time and polled amongst the top 30 tokens based on daily positive Open Interest rates, per Coinglass data. It meant the meme attracted extra aggressive buys - a bullish sentiment. Should the recovery extend, a +40% gain could be possible, especially if it hits its recent ATH at $0.000017. However, the technical indicators, RSI and CMF, must break above their average levels to support an extra recovery scenario.

Bonk (BONK)

Key points:

  • BONK bulls were looking at +20% potential gains if recovery explodes.

  • Market indecision showed traders were cautious ahead of the FOMC meeting.

What you should know - Like PEPE, BONK was amongst the top coins that were 10% up as BTC reclaimed the $67K level as of press time. Similarly, its Open Interest (OI) rates were up 5%, underscoring a significant inflow of liquidity in the derivatives market - a bullish sentiment. However, on the spot markets, BONK showed indecision based on the candlesticks clustered below the $0.000028 level. Should bulls flip $0.000028 into support, a 20% gain could be possible. Price chart indicators were approaching equilibrium levels and underscored a neutral market that could go either way. BTC’s price reaction will shape BONK’s next target.

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