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Market picture

The cryptocurrency market has plunged 6% to a capitalisation of $2.08 trillion, its lowest level in nine days. Bitcoin is falling in line with the broader trend, while Ethereum and Solana are down 8.4% and 7.3%, respectively. Gold has also experienced an almost synchronised sell-off, losing around 1%, but equity markets remain generally positive and hopeful.

Bitcoin fell below $58K in thinly liquid trading early Wednesday afternoon but later recovered to $59K by the start of active trading in Europe. The sell-off intensified after a failed attempt to break above $65K early Monday afternoon, taking the price back below its 200- and 50-day moving averages. The first cryptocurrency may be heading towards the lower end of the trading range as it heads towards $54K. The market appears to be largely dragged down by automatic stop orders during light trading hours. Such sell-offs often take leveraged traders out of the market but also attract long-term buyers on dips.

Ethereum briefly dipped below $2400, its lowest level since 8 August. There is a risk that this week’s sell-off is a second leg lower, following the collapse and subsequent consolidation of previous weeks. A drop below $2100 could confirm this hypothesis.

News background

CryptoQuant doubted that the bullish scenario would materialise soon due to the activation of large sellers. The bitcoin futures market also shows that traders are cautious.

According to Henley & Partners’ Crypto Wealth Report 2024, the number of investors holding at least one million dollars in cryptos reached 172,300, 95% more than a year earlier.

The trustee of Celsius, a bankrupt lending platform, distributed $2.5 billion in digital assets and fiat to creditors, paying off 93% of the company’s financial obligations.

Mining company Rhodium Enterprises filed for bankruptcy with debts of up to $100 million.

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Artificial intelligence startup OpenAI is reportedly in talks with venture capital firms to raise the largest injection of fresh capital in more than a year, which could see the firm valued at over $100 billion. 

Venture capital firm Thrive Capital will invest $1 billion in the funding round and tech giant Microsoft is also expected to front up capital, according to Wall Street Journal report that cited sources familiar with the matter. 

The funding round would be the most significant injection of new capital for the AI firm since Microsoft invested $10 billion in the startup in January 2023.

Microsoft currently holds a 49% stake in OpenAI, having invested $13 billion into the firm since 2019. 

According to internal documents reviewed by The Wall Street Journal, OpenAI stockholders had been negotiating a deal to sell their shares at a price that would value the AI firm at around $103 billion. 

The documents also showed any new investment in the firm would likely value OpenAI at this price or above, excluding any new funds generated by the raise. 

In February, OpenAI signed a deal allowing its employees to sell their stakes in the company. The sales showed that OpenAI was privately valued at around $86 billion. 

OpenAI’s profitability raises eyebrows

AI firms continue to attract investors despite reporting relatively small earnings. According to recent reports, OpenAI is running an annualized revenue of around $3.4 billion. 

Several commentators have criticized OpenAI’s business model, with tech reporter Ed Zitron describing OpenAI’s path to profit as “untenable” on Aug. 2. 

He said that for OpenAI to survive beyond 2026, the company would need to raise more funding than any startup in history.

Zitron’s comments came following recent reports that OpenAI could lose as much as $5 billion in 2024, putting the company at risk of running out of cash within 12 months.

It’s important to note that OpenAI investors don’t own any private equity, as the startup is technically still a nonprofit organization.

However, investors instead put their money in a for-profit subsidiary of OpenAI (OpenAI LP) and are then entitled to a share of that entity’s profits once it reaches a pre-determined cap.

The news of a potential new funding round comes amid an increasingly competitive landscape for AI companies. 

Google has spent billions launching its own AI product Gemini, the latest version of its chatbot assistant originally known as Bard. 

Google and Amazon have invested a combined $6 billion into another AI company called Anthropic, which is behind the chatbot Claude. Another competitor, Meta, is behind Meta AI, which uses its own open-source large language model, Llama 3.1.

Source: COINTELEGRAPH

Major artificial intelligence-related cryptocurrencies tumbled following the release of Nvidia’s second-quarter 2024 earnings, which beat estimates but failed to impress investors. 

Artificial Superintelligence Alliance (FET) fell approximately 7.8% to $1.1663 just hours after Nvidia’s earnings release. Bittensor (TAO) fell 4.5% to $295.22, and Render (RNDR) fell 6.8% to $5.47, according to CoinMarketCap data.

Despite Nvidia’s $30 billion revenue in Q2 2024, a 15% increase from Q1 and around $1.32 billion above previous estimates, it seems it wasn’t enough.

“Better-than-expected doesn’t cut it for Nvidia. Evidently, investors expect this company to blow away expectations,” market commentator Lisa Abramowicz wrote in an Aug. 28 X post following Nvidia’s announcement. 

Some analysts even predicted that it would be Wall Street estimates by at least 10%.

Nvidia’s (NVDA’s) stock price closed the Aug. 28 trading day at $125.61 and has since fallen a further 6.89% in after-hours trading to $116.95, according to Google Finance data.

The performance of AI crypto tokens has been closely linked to Nvidia’s performance and earnings reports in previous quarters.

Some crypto market participants had predicted ahead of time that AI crypto tokens would stumble after the earnings release.

On Aug. 23, one X user by the name “Shogun” wrote “you might catch gains being long until a day before, but I’d bet you’re better off shorting for the dump after.”

Nvidia produces chips companies use to train and deploy AI models. After releasing its Q1 earnings in May, AI crypto tokens similarly tumbled despite its Q1 revenue jumping 18% from Q4 2023.

Source: COINTELEGRAPH

The Gold price rebounds above $2,500 in Thursday’s early Asian session. 

Rising Fed rate cut expectations and ongoing conflicts in the Middle East underpin the yellow metal. 

Firmer US Dollar might limit the Gold’s upside. 

The Gold price (XAU/USD) recovers some lost ground on Thursday after bouncing off the weekly lows in the sub-$2,500 region per ounce troy. The expectation of US interest rate cuts might lift the Gold demand as lower interest rates reduce the opportunity cost of holding non-yielding gold. Additionally, the current political uncertainty in the US, geopolitical tensions in the Middle East and global economic concerns contribute to the precious metal’s upside. 

On the other hand, the renewed US Dollar (USD) demand could weigh on the USD-denominated Gold price as it makes gold more expensive for most buyers. Investors will closely monitor the preliminary US Gross Domestic Product for the second quarter (Q2) on Thursday for more cues about the size and pace of the Federal Reserve (Fed) rate cut. On Friday, the US Personal Consumption Expenditures (PCE) Price Index data for July will take center stage. 

Daily Digest Market Movers: Gold price remains strong amid rising rate cut bets

Demand for gold will continue to be driven by emerging markets, particularly China, India, and Turkey, noted John Reade, Chief Market Strategist at the World Gold Council.

“US data has failed to give gold any further lift, so the temptation for traders to book some profit after a long run has been rising,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S.

The US Gross Domestic Product (GDP) growth number for Q2 in the second estimate is expected to grow 2.8%.

The headline Personal Consumption Expenditures (PCE) Price Index is expected to show an increase of 2.6% YoY in July, compared to 2.5% in June. The core PCE inflation is projected to rise from 2.6% to 2.7% YoY.

The rate futures markets have fully priced in a 25 basis points (bps) rate cut in September, while the possibility of a deeper rate cut stands at 36.5%, according to the CME FedWatch Tool. Traders see 100 bps Fed easing this year. 

Technical Analysis: Gold price offers a bullish outlook in the longer term

The Gold price trades in positive territory on the day. The precious metal remains stuck under a five-month-old ascending channel upper boundary and the all-time high. However, the overall picture is bullish, with the price well above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is confirmed by the 14-day Relative Strength Index (RSI) positions above the midline near 61.00, indicating that there is potential room for further upside. 

The confluence of the all-time high and the upper boundary of the trend channel in the $2,530-$2,535 zone acts as the crucial upside barrier for the yellow metal. Extended gains could see a rally to the $2,600 psychological mark. 

The immediate support level for XAU/USD is located at the $2,500 round figure. A decisive break below this level could lead to a significant sell-off towards $2,432, the low of August 15. The next contention level is seen at $2,367, the 100-day EMA. 

Source: FXSTREET