Cryptocurrencies Slide Over the Month Despite Bullish Fundamentals

Charles Bovaird

The digital currency markets continued to push lower in June, persisting in their broad, downward trend as investors sat on the sidelines waiting for greater clarity.

“We’re in a wait-and-see stage,” said Jeff Koyen, CEO of 360 Blockchain USA. Iqbal Gandham, U.K. managing director for eToro, concurred, stating that:

People are waiting on the sidelines for clear direction. Regulatory clarity is important and the noises are very positive.

Iqbal Grandham

Because of these trends, cryptocurrencies fell in value even as markets received news that would generally be considered positive, for example statements made by U.S. Securities and Exchange Commission (SEC) officials that the government agency did not consider bitcoin or ether securities.

SEC Chair Jay Clayton told CNBC on June 6 that digital currencies like bitcoin - which seek to replace fiat currencies - are not securities. Further, William Hinman, director of the Division of Corporate Finance, stated during a summit on June 14 that the SEC does not view ether as a security.

As a result, these cryptocurrencies are not subject to securities laws, which would obligate them to be registered with the SEC.

These developments were well-received by cryptocurrency traders, who pushed the digital currency market higher following Hinman’s speech. The MVIS CryptoCompare Digital Assets 100 Index (MVDA), a benchmark that measures the value of the top 100 largest digital assets, climbed more than 8 percent on June 24.

MVIS CryptoCompare Index

Ether, in particular, rose more than 11 percent that day, CryptoCompare data reveals, while bitcoin, the largest cryptocurrency by market value, experienced a roughly 2 percent gain.

While these increases might seem promising, they represent only the beginning of June. The broader cryptocurrency markets reached a peak during the start of the month, after which they declined.

Bitcoin

Bitcoin peaked at $7,774.96 on June 3, after starting the month at $7,502.45, additional CryptoCompare figures show. It fell to as little as $5,789.24 on June 24, at which point it had dropped 22.8 percent for the month. By the time June was over, the digital currency had recovered to $6,372.56, where it had depreciated 15 percent during the month.

Jon Pearlstone, publisher of the newsletter Cryptopatterns, shed some light on the market forces that drove bitcoin’s price movements last month.

“During June, BTC broke the important 2018 low that held for six months. While selling volume has been relatively low and price has currently recovered above the $6,000 range at June 30, there has been no sustained buying since breaking the $7000 level in early June.”

He emphasized that bitcoin finished June at a lower level than it did May, adding that:

“This lack of buying conviction in a bearish downtrend and ‘lower low’ close at the end of the month is consistent with a bearish reversal pattern which has a high probability of seeing lower lows during July. It's also worth noting this pattern is often seen as part of a longer term ‘bottoming pattern’ that can lead to a new ‘meaningful’ bottom in the coming months.”

Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, also spoke to a potential bottom, writing in a research note that bitcoin will probably fall to $5,000 before a bull run gathers momentum.

Ether

Ether, the world’s largest cryptocurrency by market value, followed a similar pattern, reaching $624.25 on June 3, 9 percent higher than its starting point of $572.51. It then pushed lower, reaching as little as $421.01, where it had declined more than 26% for the month. Ether then experienced a modest recovery, finishing June at $449.90, down more than 21% in June.

The digital currency received a major boost roughly halfway through the month, when Hinman stated during Yahoo Finance's All Markets Summit that:

"Based on my understanding of the present state of ether, the Ethereum network, and its decentralized structure, current offers and sales of ether are not securities transactions.”

His statement provided clarity for those watching the latest regulatory developments, as some consider ether to be more centralized than bitcoin, which had already been singled out as not being a security.

Pearlstone offered some input on the digital currency, providing some technical analysis.

ETH's price action during June was consistent with BTC, ending the month with the same bearish reversal pattern on the USD charts, and only a very small gain on charts priced in BTC. We’re seeing no signs that ETH can sustain a meaningful move higher without BTC also moving higher, so both charts should be considered for ETH analysis.

Jon Pearlstone

He added that:

One area of concern for ETH that is not as bullish long-term as BTC's charts are the volume patterns which show higher volume trading in the $3-400 range rather than at the all time highs. This ‘volume divergence’ could be resolved with a strong move up on very high volume but, for now, the probabilities favor lower prices and the volume divergence must be considered bearish.

Jon Pearlstone

“Key support levels for ETH are $400, then $300,” said Pearlstone. “Below that there is very little support and a danger of a fast drop to $100 or even lower. Key resistance levels are $700 and especially the $1000 level.”

IOTA

IOTA, a cryptocurrency designed to serve as the foundation for the Internet of Things, experienced some sharp volatility during the month. IOTA, which trades under the ticker symbol MIOTA, reached as much as $2.03 on June 3, marking the end of a brief rally that began May 28.

“The recent runup in IOTA is attributable to investor optimism for their Qubic protocol,” Anatoliy Berdnikov, CEO of Bit.team, a decentralized P2P online cryptocurrency exchange, stated in reference to the digital currency’s brief climb. Qubic, which was announced in early June, provided several updates, including smart contract functionality.

After experiencing these gains, IOTA dropped to as little as $0.8851 on June 24, a 48.8% decline from the starting price of $1.73.

The digital currency, which powers a blockless distributed ledger called the Tangle, recovered after this, climbing to $0.9945 by the end of the month. At this point, it was still down more than 42% from its June high.

Bitcoin Cash

IOTA was not the only digital currency that experienced sharp volatility during the month, as bitcoin cash plunged more than 45% from it starting price of $1,210.85 to a monthly low of $662.60.

After experiencing this sharp drop, the digital currency, which is a fork of the original bitcoin, rebounded slightly, finishing the month at $728.63. Bitcoin cash has a history of being a particularly volatile currency, so the sharp price fluctuations it suffered in June are nothing out of the ordinary.

‘Lasting Scars’

Following the losses that digital currencies faced this month, Koyen weighed in on how the industry is shifting.

I suspect that crypto’s wild first half of the year left lasting scars on institutional and retail investors. Their money is moving instead into proper blockchain startups and those companies, like IBM, that are staking their territory in the blockchain-as-a-service space.

Koyen