Daily News | Fed Decision Looms as Bitcoin Remained Stable Amid Negative Funding Rates, Frax Ends Algorithmic Stablecoin Experimentation

2023-03-07, 02:09

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## Crypto Daily Digest: <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> Maintains Stability Amid Negative Funding Rates, Fed Decision to Determine Market Future

Good morning, traders! Let's seize this Tuesday relentlessly and make the most of it! 🚀

The recent rally in the stock market has failed to sustain due to economic risks and pressure from rising Treasury yields. Although technical factors may provide some support in the short term, the fundamentals continue to deteriorate. The spread between BBB rated dollar-denominated corporate debt and the earnings available on the S&P 500 is now above zero, signaling caution on how global financial assets and the economy may evolve. The upcoming Federal Reserve decision and four major events will determine whether the 2023 revival in equities gets derailed or starts rolling again after a February slump.

Asian stock markets are expected to have a muted opening following lackluster trading on Wall Street. Australian stocks opened lower, while equity futures for Japan were slightly down. Hong Kong futures posted a modest gain, despite a 1.7% slide in an index of US-traded shares of Chinese companies. The Reserve Bank of Australia is expected to lift its cash rate by another quarter-point to 3.60%, before peaking at 3.85% in April. Later on Tuesday, Fed Chair Jerome Powell will begin two days of testimony before the Senate and House committees.

<a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and Ether started the week trading within a tight range with little conviction in any direction, reflected in low trading volumes. The negative sentiment continues to overhang markets following Silvergate Bank's asset base unraveling, but investors are re-pricing risk rather than abandoning markets. On-chain activity implies that demand still persists within the crypto space, with <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> Transfer Volume (BTV) increasing 79% year-to-date. <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> climbed to a peak of more than $22,500 on Monday, but then declined slightly and remained in a tight range since Thursday. The funding rates of BTC and ETH turned negative last week, which is a sign of pessimistic market sentiment. However, the closure of Silvergate Exchange Network did not significantly impact the price of BTC.

Meanwhile, according to a report from market research firm Kaiko, Silvergate Capital's decision to shut down its instant settlement service is expected to increase the importance of stablecoins and their issuers in crypto trading. These stablecoins, such as <a href="/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a>'s USDT and Circle's USDC, have taken over from government-issued fiat currencies like the US dollar as the mainstay of crypto markets. The report also highlights the declining role of the US dollar in crypto trading, with traders now opting to transfer funds to stablecoin issuers to obtain stablecoins and deposit them on exchanges. However, the report also warns that this shift concentrates risk as stablecoin issuers still require access to a crypto bank.

## Topic of the Day: <a href="/price/frax-frax" target="_blank" class="blog_inner_link">Frax</a> Ends Experimentation with Algorithmic stablecoins

<a href="/price/frax-frax" target="_blank" class="blog_inner_link">Frax</a>, a decentralized stablecoin platform, has made a significant decision to back its FEI stablecoin with USD equivalents, ending the experimentation with algorithmic stablecoins. This move has the potential to increase trust and confidence in stablecoins, leading to wider adoption of DeFi applications. A fully backed stablecoin can also help reduce risks for investors by mitigating depegging and loss of value.

However, the failure of algorithmic stablecoins like UST and overleveraged stablecoins like MIM has created a loss of confidence in decentralized stablecoins. Decentralized stablecoins only make up a small percentage of the total stablecoin supply, and transfer volumes have declined since Q3 2022, indicating challenges in gaining market share. Additionally, regulatory risks, as evidenced by a recent court ruling in England that impacted MakerDAO, remain a concern.

While <a href="/price/frax-frax" target="_blank" class="blog_inner_link">Frax</a>'s decision to fully back its stablecoin has positive implications, there are potential challenges to consider, such as rebuilding trust in decentralized stablecoins and navigating regulatory risks.

## <a href="/price/frax-share-fxs" target="_blank" class="blog_inner_link">Frax Share</a> (FXS) $9.684 (+0.91%) - Neutral Outlook

**Overview:**

- ***Closest daily support zone: 9.392 - 9.020***
- ***Closest daily resistance zone: 9.942 - 10.567***
- ***Key Level: 9.392 (Monthly Close of May. 2021)***

<br>![](https://gimg2.gateimg.com/image/article/1678154930Untitled0307.png)

Despite experiencing a nearly 20% decline between last Thursday and Sunday, FXS has demonstrated resilience by staying above the monthly level of 9.392. However, its current price level is in close proximity to the lower end of the weekly Fibonacci extended golden zone, which ranges from 9.020 to 11.865 and has been a crucial consolidation area since the breakout on Jan. 19. If FXS falls below its current price level, it will likely aim for the weekly level of 8.160. Alternatively, if FXS rebounds from its current price level, it will face a significant hurdle in the daily Fibonacci golden zone of 10.567 to 11.191, which will help determine if the recovery is a bull trap.

**Daily Resistance zones**

1. 9.942 - 10.567
2. 10.879 - 11.191
3. 11.865 - 13.210

<br> **Daily Support zones**

1. 9.392 - 9.020
2. 8.309 - 7.925
3. 7.611 - 7.263

<div class="blog-details-info">
<div>Author:** Peter L.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>