Crypto Bulls Struggle to Break 6-Week Downtrend as U.S. Debt Ceiling Looms
Cryptocurrency Bears Take Control, Derivatives Metrics Suggest
Overview of the Situation
• Crypto bulls have a hard time breaking the six-week downtrend.
• U.S. debt ceiling standoff and gold prices adds to bearish pressure.
• Stablecoins like USDC and DAI increase their portfolio holdings of U.S. Treasurys as a safety measure against potential default.
Descending Wedge Pattern
The total market capitalization for cryptocurrencies has been pushed to its lowest level in two months due to a bearish market structure over the past six weeks. Analysis on a shorter timeframe provides a neutral view with Bitcoin, Ethereum, and BNB on average gaining 0.3% between May 12 and May 19; however, there is still an impending descending wedge pattern that will last until July if not broken by crypto bulls soon.
U.S Debt Ceiling Standoff
The Biden administration is quickly running out of cash due to the looming U.S debt ceiling standoff, which could cause a government shutdown and eventual default if not resolved soon enough. Even gold, which is usually considered the world’s safest asset class cannot escape from this correction as it trades down from $2050 on May 4 to $1980 currently.
Stablecoins Increase Holdings as Safety Measure
In light of this situation, Circle’s USDC stablecoin has ditched $8.7 billion in Treasurys maturing in longer than 30 days for short-term bonds and collateralized loans at banking giants such as Goldman Sachs and Royal Bank of Canada as an additional protection against potential default risks for its reserve fund in case no deal is made before then expected dateline set by the government shutdown . Similarly, MakerDAO’s DAI stablecoin has also increased its portfolio holdings of U.S Treasurys to $1.25 billion in order “to take advantage of the current yield environment and generate further revenue” .
Given all these factors affecting cryptocurrencies’ prices, Bitcoin price bulls have no reason to bet against this descending wedge pattern lasting until July unless extra effort from them can break it sooner than expected .