By the CoinDesk Markets Team Edited by Bradley Keoun
Hello readers, you may notice some differences in today's edition. We're trying out a few new things with our daily markets newsletter, front-loading the biggest price jumps, refining our big story, and adding two new sections: Token Watch, with the latest developments in altcoins, and Analogs, which highlights how traditional markets are interacting with crypto. We're excited to experiment and iterate on First Mover to make it the best crypto markets newsletter it can be. Let us know what you think – feel free to email bradley@coindesk.com with your feedback. – Bradley Keoun
If you were forwarded this newsletter and would like to receive it, sign up here.
Bitcoin is again struggling to find a direction, with prices seemingly stuck between $11,000 and $12,000.
Ethereum "gas prices" are soaring, and cryptocurrency traders say it's a reflection of congestion on the blockchain that's now starting to slow down transactions on decentralized exchanges.
What's Hot – or Not: DeFi surge pushes Ethereum transaction fees even higher, LINK token leapfrogs bitcoin cash, and decentralized exchange Uniswap breaks its volume record.
PRICE POINT
Bitcoin has erased the dip to $11,300 seen early on Thursday, possibly tracking a continued recovery in gold.
The leading cryptocurrency is trading up slightly on the day near $11,570 at press time. Meanwhile, gold is trading at $1,935 per ounce – up 1.10%. Both assets have recently developed a relatively strong negative correlation.
Bitcoin's drop came after fresh evidence of uptick in inflation in the U.S., even though many investors argue the cryptocurrency should work as a hedge against rising prices.
A U.S. government report released Wednesday showed core consumer prices in the world's largest economy rose last month at their fastest pace in 29 years.
MARKET MOVES
Ethereum Faces Inflation Problem as Gas Fees Soar By Bradley Keoun and Daniel Cawrey
Congestion is building on the Ethereum blockchain, the second-largest blockchain, thanks to the recent popularity of dollar-linked "stablecoins" and "decentralized finance" applications like Compound.
And now fees to process transactions, which escalate when congestion is high as some users pay up for faster execution speeds, are soaring to levels not seen since the initial coin offering craze of 2017.
The fees are known as "gas" and people are starting to complain about Ethereum gas prices, just like motorists whinge about gasoline costs at the pump. One casualty of the spike could be a slowdown in the pace of development of new projects using the Ethereum blockchain.
"We've officially priced out experimentation," Messari's Ryan Watkins tweeted on Wednesday.
It doesn't help that gas prices are denominated in prices for ether (ETC), the native token of the Ethereum blockchain – since ether's price, as denominated in dollars, has tripled this year to about $390. Some options traders are even betting ether could hit $1,000 by December.
So the double-whammy of congestion and speculation has driven median gas prices to about 0.008798 ether, which works out to about $3.30, according to data aggregator Blockchair.
“It’s jamming up a lot of decentralized exchanges,” Peter Chan, lead trader for crypto trading firm OneBit Quant, told CoinDesk. “We and a few other market makers have been forced to stop quoting since gas cost is so high.”
Median Ethereum Gas Price, by day, last 90 days (Dune Analytics)
SPONSORED BY BITSTAMP
Enjoy zero fee trading on all XLM, PAX and GBP pairs through September 1st! Now is the best time to join over four million traders and financial institutions that trust Bitstamp’s powerful platform, intuitive mobile app and industry-leading APIs.
Bitstamp gives you all the trading tools to effectively execute your strategy:
Unmatched order execution, powered by Nasdaq: Cutting-edge Nasdaq matching engine delivers optimal trading speed and efficiency in all market conditions.
Tradeview interface: Our powerful trading interface offers advanced order types, live charting and an array of analytical tools. Available on web and mobile.
Robust API connectivity: Our FIX, HTTP and WebSocket APIs are consistently rated as the fastest and most stable in crypto.
Advanced custody solutions: Institutional-grade custody from BitGo with 98% of customer assets in cold storage and protected by BitGo’s insurance coverage.
Bitcoin's options market is skewed bullish despite bearish developments on the short-term technical charts.
Call options (bullish bets) are drawing higher prices than puts (bearish bets) on the one, three, and six-month time frames, according to data source Skew. Investors may be selling puts and buying calls, causing calls to trade at relatively higher prices.
Put sellers should note that short-term technical studies are now painting a negative picture. The daily chart moving average convergence divergence (MACD) histogram has crossed below zero, indicating a short-term bullish-to-bearish trend change. The indicator is printing deeper bars below the zero line, suggesting potential for a stronger move to the downside.
Further, the 5- and 10-day simple moving averages (SMAs) are charting a bearish crossover and the long upper wicks attached to the recent three-day candles are indicating exhaustion of the broader uptrend.
As such, the path of least resistance appears to be on the downside. The immediate support is located at $11,137 (Tuesday's low), which, if breached, would open the doors to $10,659, a low reached on Aug. 2.
On the higher side, an hourly chart descending trendline, currently placed at $11,600, may offer resistance, which, if violated, would shift the focus to $12,000.
– Omkar Godbole, Markets Reporter
TOKEN WATCH
Chainlink (LINK) keeps impressing – The DeFi oracle provider “hasn’t disappointed” when it comes to turning announcements of new partnerships into tangible results, according to Messari, a crypto data provider. “Over 30 projects have fully integrated Chainlink data feeds, most of which went live within the past month,” Messari wrote Wednesday in a daily newsletter. Prices for LINK have jumped eight-fold this year, by far the best performance among digital assets with a market capitalization of at least $1 billion. It's fueled by this year’s rampant speculation over the potential for DeFi (and maybe some marketing help from the so-called LINK Marines),
Yam (YAM)is officially a DeFi meme - In yet another example of just how chaotic the fast-growing (and wildly experimental) realm of DeFi has become, a two-day-old project called Yam quickly built up a market capitalization above $60 million before crashing to $0 early Thursday . Prices for the YAM token had peaked at $167 late Wednesday before spiraling down. The project apparently suffered a bug that led to the loss of $750,000 Curve tokens stored in its treasury. It's not for the faint of heart.
ANALOGS
U.S. Inflation jumps by most in 29 years: Consumer prices jumped in July by 0.6% from June levels, twice the increase expected by economists, according to Bank of the West Chief Economist Scott Anderson. Prices are up 1.6% over the past 12 months, accelerating from June’s 1.2% pace. Excluding food and energy, the "core" inflation rate also was 0.6%, the biggest monthly increase since 1991. It's yet another sign of how wacky the economic data is, as businesses, households try to manage through the coronavirus-related lockdowns and reopenings.
U.S. consumer price index, month-over-month change. (Bureau of Labor Statistics)
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
Ethereum Faces Inflation Problem as Gas Fees Soar