June 12 REX Wire Market Outlook

Critical inflation data and an interest rate decision, the Hinman emails and a deadline for the SEC: It's a big week for crypto.

June 12 REX Wire Market Outlook

Another week kicks off. Bitcoin started Monday morning just below $26,000 following a turbulent few days of regulatory action.

This week promises to be just as big a deal, as a number of important developments are set to take place—ones that could shape the crypto space for years to come.

The Current State Of Play

First up, we'll take a look at where the markets stand, before we delve into what's going to be happening in the coming days

Bitcoin is relatively steady at $25,800, for now, having put in a double bottom on the 4-hour chart over the weekend, with a low around $25,400. Price broke through the 200-week moving average, which now sits around $26,500, a gently-rising support/resistance line. To the downside, $25,000 is still a key support level. Above lies that tough band at $28-30k.

TradingView screenshot, BTC chart
Bitcoin (daily chart) has broken below the 200-week moving average (blue line)

Meanwhile the S&P500 is at a one-year high, with the tech-weighted NASDAQ in a similar position. The dollar is coming off a recent local high, though not by much—chalk that up to the noises coming out of the Fed recently.

What's Coming Up?

That's how things stand right now, but by the end of the week it could be very different. Let's dive into some of the big events in the calendar this week:

  • CPI data for May (Tuesday, June 13). This data will indicate whether inflation (and especially that sticky core inflation) is continuing to fall, and will help determine whether interest rates have peaked or will be raised again.
  • Hinman emails unsealed (Tuesday, June 13). These documents, linked to a speech by former SEC director of corporate finance William Hinman on 14 June 2018, are hoped to have a major impact on the SEC's case against Ripple, which is nearing a verdict. The messages supposedly discuss how Ethereum would have started out satisfying the definition of a security, but later achieved sufficient decentralization to be considered a commodity. Moreover, they demonstrate close ties between Hinman and Ethereum, possibly indicating a conflict of interests. Since the SEC has tried very hard to suppress the emails, it's assumed they will be embarrassing for the regulator and will increase the chances of a favorable outcome for Ripple. Hinman's biography page was recently scrubbed from the SEC's website, which surely cannot be coincidence.
  • FOMC Meeting (Tuesday-Wednesday, June 13-14). This meeting will take into account the latest inflation data and economic figures, with the committee deciding whether to hike or pause interest rates. This always has a significant impact on risk assets, including crypto. Another rise will also inflict more pain on the banking sector, and increase the possibility of more bankruptcies. The market is currently pricing in a roughly 25% chance that rates will rise to 525-550 bps this month, with the consensus being a hold at 500-525.
  • SEC deadline to respond to Coinbase (Wednesday, June 14). By this date, the SEC has to respond whether it plans to deny Coinbase's petition for rulemaking. If it's a "no", this can be challenged in court. Background: Coinbase has been hit by legal action from the SEC, but has always claimed the rules were never clear because the SEC failed to provide them (despite persistent requests). The SEC has so far refused to give any clarity for crypto businesses, but nonetheless takes enforcement action when it chooses.
  • ECB rate meeting (Thursday, June 15). It's a sideshow to the Fed as far as crypto is concerned, but it's still part of the picture. The expectation is currently for one more 25 bps hike, and then for rates to stay at 3.75% until the end of the year. As we've seen in the US, though, these things can change fast.

Altogether, it's set to be a very big week for crypto. In a best-case scenario, inflation and interest rates have peaked, the Hinman emails will deal a serious blow to the SEC's credibility and case against Ripple, and by extension against Coinbase, and the regulator will acquiesce and agree to provide greater clarity for crypto companies.

At the other end of the spectrum, crypto could be on the receiving end of a one-two punch if interest rates are raised further, and if the SEC manages to dodge the bullets coming back at it.

Most likely the reality will be somewhere between the extremes. What we almost certainly won't see is a knock-out either way. The battle against inflation, and against wayward regulators, has some way to run yet.

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