Crypto-versed: prices pull back amid low volatility

Crypto Prices have pulled back from the highs as investors seek new catalysts. In this week’s Investor Spotlight, we look ahead to what could drive market action this week, and home in on three cryptos to watch.

Crypto prices pull back

A lull has hit the financial world, despite uncertain economic fundamentals, ongoing risks to market stability, and a lacklustre US reporting season.

Crypto assets pulled back last week, however, volatility remains subdued as traders of all ilk search for a catalyst to drive the next move in markets. The economic calendar is risk-laden this week and will serve as the prelude for the US Federal Reserve’s next meeting on May 3.

As it currently stands, market participants are pricing in a near certain 25 basis point hike from the Fed at that meeting. The odds of another hike lifted last week, after several hawkish speeches from Fed members, many of whom asserted the need for “higher for longer” policy settings.

The probabilities of a hike rose as well on resilient economic data and strong US bank earnings that allayed fears of financial stability risks.

Bitcoin’s volatility – which can be used as a crude baseline for general crypto volatility - has trended lower since spiking around the mini-crisis in US banks, which embroiled several crypto lenders.

The 10-day moving average of the indicator is back to where it was in February.

The lull in volatility is backed up by the drop in the US VIX, the so-called stock market “fear gauge”. Remarkably, it hit new 52-week lows last week, falling to 16.

New crypto regulations in the EU pass

Although it appeared to have relatively little impact on crypto prices, new milestone crypto regulation passed in Europe last week. After several years of deliberation, the European Parliament passed the Markets in Crypto-Assets (or “MiCA) set of regulations.

The regulations are intended to protect consumers and preserve financial stability while promoting innovation in digital assets. The rules will harmonize laws across several jurisdictions while encouraging a common market in Europe.

The rules will also track transactions over EUR1000 through centralised exchanges, in a bid to monitor and curtail money laundering using cryptos.

Three Cryptos to watch

• Bitcoin

Bitcoin prices have pulled back with momentum looking as though its running out of puff. Support is currently around $27,000 with sellers in the short-term emerging above $30,000. Consolidation above $30,000 would be a bullish signal.

A break below $27,000 of support could open a drop towards $25,000.

Bitcoin daily chart

• Ether

After outperforming the crypto world following the Shanghai upgrade, Ether has pulled back and is signalling short-term bearishness. Price remains in a broader uptrend but looks at risk of falling further with support possibly around $1800.

Another push above $2000 would point to renewed bullishness.

Ether daily chart

• Cardano

After hitting new highs, the turn lower in crypto assets has seen the smaller and more volatile Cardano drop 15% from its highs. Short-term trendline support has broken with a confluence of support found around 0.3750.

Cardano daily chart