First Mover Americas: ECB (Finally) Exits Negative Rates as Bitcoin Digests Tesla Sales

Good morning, and welcome to First Mover. We're Bradley Keoun and Shaurya Malwa, here to take you through the latest in crypto markets, news and insights.

(First Mover lead author Lyllah Ledesma is in Paris for the EthCC conference. Her dispatch from the conference on Wednesday is here. Spoiler alert: Ethereum's Vitalik Buterin was overheard ordering a hot water during one of Europe's worst heat waves in recent memory.)

• Price Point: Crypto analysts were racing to assess the impact of Tesla's bitcoin sales as well as Thursday's decision by the European Central Bank to move to hike interest rates at an accelerated pace.
• Market Moves: As crypto analysts scramble to assess whether the market bottom is in, Wall Street's JPMorgan is now weighing in. Oliver Knight reports.
• JUST IN: The European Central Bank (ECB) on Thursday raised borrowing costs for the first time in 11 years, exiting the six-year era of the negative interest rate policy (NIRP). The ECB's exit from the NIRP is pivotal, since the unorthodox practice of setting borrowing costs below zero was considered by many as a sign of cracks in the traditional financial regime – a common theme among cryptocurrency analysts. Read Omkar Godbole's breaking story here.

This web version of today's First Mover newsletter was produced by Sage D. Young.

Price Point

Cryptocurrencies reversed Wednesday’s price gains as traders took profits after days of an uptrend, causing bitcoin to slip below $23,000 and majors taking hits of as much as 10% in the past 24 hours.

Solana’s SOL slid 8.8% to lead losses among majors. Cardano’s ADA fell 8%, DOGE$0.1973 dropped 7%, while XRP and BNB fell nearly 5%. Ether dipped but continued to trade above the $1,500 level.

A drop in bitcoin prices came as electric carmaker Tesla said in an earnings report on Wednesday that it sold $936 million worth of bitcoin, or 75% of its holdings, in the second quarter. CEO Elon Musk cited “the uncertainty of the COVID lockdowns in China” as a crucial reason for its decision. Musk added the company did not trim its dogecoin holdings.

However, Musk said Tesla is open to increasing its bitcoin holdings again in the future and noted that the second-quarter sale "should not be taken as some verdict on Bitcoin.”

Analysts said retail investors should not take the bitcoin sale as a caution sign. “Having the billionaire’s company sell a majority of its BTC holdings shouldn’t necessarily be taken as a statement or reflection of Elon Musk’s position towards Bitcoin,” said Claudiu Minea, CEO of crowdfunding platform SeedOn in a Telegram chat. “This is likely more of a need for liquidity for the company as their profitability for Q2 has suffered due to the current downward trend for bitcoin’s price."

“Therefore, the decision to sell might be due to the need for cash on the balance sheet, rather than not seeing bitcoin as a valuable asset anymore,” Minea said.

Biggest Gainers

Asset Ticker Returns DACS Sector Cosmos ATOM +8.1% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector Gala GALA −10.2% Entertainment Loopring LRC −8.0% Smart Contract Platform Cardano ADA −7.8% Smart Contract Platform

Market Moves

By Oliver Knight

Wall Street analysts are signing on to a market thesis suggested by the sudden rally in digital-asset markets over the past week: That the worst of this year's price crash in cryptocurrencies might now be over.

Crypto analysts and traders warn that there might still be another price drop on the way. But the signals are turning more bullish.

Demand among retail investors in the crypto market is improving, and the "intense phase" of deleveraging appears to be over, JPMorgan Chase wrote Thursday in a report.

"The extreme phase of backwardation seen in May and June, the most extreme since 2018, appears to be behind us," the bank said.

Crypto markets have bounced back in recent weeks as investors anticipate the Ethereum "Merge" that is set to commence on Sept. 19.

Ethereum network activity has increased alongside an uptick in investor sentiment, JPMorgan said.

Read the full story here: JPMorgan Sees Crypto Retail Demand Improving, End of 'Intense' Deleveraging Phase

Latest Headlines

• Dogecoin's DOGE Sees Volatile Trading After Upgrade: Dogecoin regressed Wednesday's gains even as the upgrade went live.
• Bitcoin Slips Below $23K Ahead of ECB Rate Decision: The central bank's move likely won't dent the appeal of investing in fiat alternatives like cryptocurrencies, one observer said.
• The Case for Investing in Bitcoin During Crypto Winter: The cryptocurrency still has an important role in a diversified portfolio, Andy Edstrom writes.
• Blockchain.com Cuts 25% Workforce Amid Crypto Bear Market: The crypto trading firm said it would be closing down its Argentina-based offices and halting team expansion plans in several countries.
• Crypto Exchange KuCoin Raises $10M From Susquehanna to Fund Hiring, Growth Plans: KuCoin and SIG will also collaborate in incubation and ecosystem building for crypto startups through incubation, investment and technical consultation.
• Thai SEC Asks Zipmex to Clarify Withdrawal Freeze: The regulator has asked whether Zipmex used Celsius or Babel Finance in connection to its ZipUp program.