The cryptocurrency market is trading in green with Bitcoin and Ethereum surpassing critical resistance levels. The number one cryptocurrency, second by market cap, posted a gain of 10% and 15% in the last day and it looks like it is poised to make more profits during today’s trading session.
In order to get more clarity regarding the direction, Bitcoin should close the daily candle above $23,000 and Ethereum above $1700. Data from Material Indicators order book is recording something on the sell side if BTC price can rise above its current levels with a high probability of reaching $28,000 in the short term.
If this rally manages to surpass $25,000, the focus will be on $28,000 very quickly. If you are long, don’t forget to take profits along the way.
When the bear wakes up from hibernation, it will be hungry. pic.twitter.com/YGe4Swu3wT
– Material Indicators (MI_Algos) 28 July 2022
In the longer time frames, macroeconomic conditions will remain an obstacle to any sustained rally. In this sense, Toubian Adrian, director of the money and capital market for the International Monetary Fund (IMF), predicted further losses in the emerging asset class.
In an interview with Yahoo Finance, Adrian talked about the risks of the cryptocurrency market and risky assets, such as stocks. As for digital assets, Adrian believes that the collapse of a stablecoin could lead to another downturn. The IMF official said:
There may be more failures in some coin offerings – in particular, some algorithmic stablecoins have been hit hard, and there are others that can fail.
The IMF official noted the collapse of the Terra (LUNA) ecosystem. This event led to the collapse of Three Arrows Capital, Celsius and other companies in the crypto industry. Thus, this contributes to the collapse of the price of Bitcoin and other cryptocurrencies.
Adrian claims that digital assets may experience another similar event, but he did not mention a specific Terra-sized project that could trigger it. The IMF official believes that stablecoins may increase selling pressure in the emerging industry due to alleged vulnerabilities in collateral:
There are some security holes out there, because they are not supported. [Some fiat-backed stablecoins] Backed by rather risky assets… It is definitely a weak point that some stablecoins are not fully backed by cash-like assets.
Will the crypto market collapse if there is a recession like 2008?
In addition to the alleged risks from stable currencies, the IMF official spoke about the potential risks of an economic recession. The US recently reported a second consecutive quarter with negative GDP, which should technically lead to a recession.
However, Adrian ruled out that the global market will witness something like 2008. At that time the financial sector was exposed to the “banking shadow”, hidden assets from the balance sheets of banks which led to the collapse which exacerbated the economic crisis.
Cryptocurrencies could face an even bigger hurdle from international regulators. The IMF official claimed that these entities should apply securities laws to the 40,000 people he claims make up the sector. he added:
Organizing the coins themselves would be difficult, but organizing the entry points like exchanges and wallet providers to invest in those coins is something very tangible and very feasible.
The SEC appears to be following this approach. The Commission has been involved in legal battles with major players in the sector, including payment solutions company Ripple and the exchange Coinbase.
SEC President Gary Gensler has already stated that he is willing to admit that only Bitcoin is outside his purview. If the commission becomes more aggressive, the cryptocurrency market could suffer from a scramble for crypto projects to meet the requirements of the regulations.
Related reading | Bitcoin Rebounds From Consolidation, What’s In Store?
This is perhaps one of the biggest hurdles facing the emerging asset class in the coming months along with macroeconomic conditions. In this sense, the IMF official may be on guard, but cryptocurrencies have faced regulatory hostility since their inception.