Last week (7.17-7.23), the overall performance of the cryptocurrency market was mostly bearish, with significant retracements across various indicators.

After reaching a high and retracing, the total market capitalization further declined from $1.21 trillion to $1.19 trillion, showing no signs of a turnaround yet.

The market sentiment index was even less optimistic, dropping from 57 to 52, a 9% decrease, marking a new low since July. It is approaching the neutral value of 50, and it would not be surprising if it falls below 50 during the current week, triggering a round of panic.

Trends of Cryptocurrency Market Cap (Yellow) and Fear Greed Index (Blue) from 2023.1.1 to 2023.7.23; Source: MacroMicro.

Last week, mainstream coins experienced significant divergence with an equal number of gainers and losers. Stellar (XLM) performed the best, maintaining its previous trend with a 21% increase, followed by Chainlink (LINK) with a price surge of 9.8%. Avalanche (AVAX) and Solana (SOL) underperformed, experiencing a decline of over 6%.

Bitcoin (BTC) saw a slight price increase of 0.2% while maintaining a market dominance of 48.5%, with no change compared to the previous period. Ethereum (ETH) witnessed a decrease in price by 1.2%, holding a market dominance of 19.1%, showing a 0.2% decrease compared to the previous period.

Price Changes of Major Coins from 2023.7.17 to 2023.7.23; Source: MacroMicro.

On July 19th, according to CoinDesk, the United States Senate is preparing to pass a new bill called the "Cryptocurrency Asset National Security Enhancement and Enforcement Act of 2023" (CANSEE), which proposes anti-money laundering (AML) requirements for decentralized finance (DeFi) protocols, similar to regulations imposed on banks. At the same time, it aims to expand the powers of the Treasury Department to regulate activities suspected of money laundering.

On July 20th, the chairpersons of major committees in the United States House of Representatives jointly introduced HR 4763, known as the "21st Century Financial Innovation and Technology Act." The committee stated that the bill "establishes a regulatory framework for digital assets, including cryptocurrencies, to protect consumers, promote innovation, and position the United States as a leader in finance and technology."

These two bills have generated heated debates within the industry regarding their potential impact. Cryptocurrency advocacy groups like CoinCenter and Delphi Labs criticized the Senate's CANSEE as "confusing, arbitrary, unconstitutional, unenforceable, and incompatible with digital asset technology," claiming that it severely hampers the development of DeFi.

The Chief Legal Officer of Coinbase expressed that HR 4763 proposed by the House of Representatives would engage the global dialogue on digital asset regulation and hopes for its passage in Congress.

Whether from the Senate or the House of Representatives, these bills aim to grant greater power to relevant regulatory agencies, restricting and supervising the compliant and legal development of cryptocurrencies. This implies that certain cryptocurrency projects or activities may be prohibited, leading to short-term outflows of capital and reduced liquidity.

However, as the saying goes, "rules are necessary for order." The introduction of these regulatory measures provides a compliance foundation for traditional financial institutions to enter the field, attracting funds in the long term while reducing fraudulent practices, which is particularly crucial for DeFi.

Currently, there are exit scams in DeFi, leaving investors with no protection. The CANSEE bill requires venture capitalists and other large investors to take responsibility to prevent money laundering and other illicit activities through DeFi.

Last week, Bitcoin experienced relatively low volatility, oscillating between the range of 29,500 to 30,500. It remained suppressed by the 5-day moving average (MA5) and showed relatively weak momentum.

Since the end of June, BTC has made three attempts to break above 31,500 and three descents below 29,500, but it hasn't managed to break out of the range in either direction. Additionally, trading volume has significantly declined during this period.

Bitcoin Price Trend from July 2022 to July 2023; Source: TradingView.

In such a narrow range-bound market, both long and short positions generally refrain from taking active measures and choose to maintain the status quo. Breaking out of this oscillating trend usually requires external news stimulation, and the most probable stimulus this time is the interest rate meeting.

On Thursday (July 27th) this week, the Federal Reserve will announce its interest rate decision, which will likely provide stimulus for Bitcoin. Investors will choose whether to take a bullish or bearish stance. With expectations of interest rate hikes, there is a higher probability of Bitcoin facing downward pressure. However, it shouldn't be ruled out that there may be a false upward breakout to lure in more buyers before heading downwards.

Ethereum primarily retraced last week and is currently approaching the end of an ascending triangle pattern, signaling an imminent trend reversal.

Ethereum Price Trend from June 2022 to July 2023; Source: TradingView.

An ascending triangle is a bullish pattern that typically results in an upward breakout. However, if the July interest rate hike triggers a downward move in Bitcoin, Ethereum is likely to follow suit and experience a correlated decline, with support levels at $1700 and $1600. However, it remains to be seen whether the outcome of the interest rate decision will exceed expectations. It is something to anticipate!