Crypto markets await a greener start to the week

The European Central Bank (ECB) has released a report analyzing the growth of the cryptocurrency market over the past decade and the risks it poses to the existing financial system.

A section of the report dedicated to stablecoins discussed its central role in the current ecosystem. For example, stablecoins are increasingly used to interlink various blockchain networks and play a critical role in offering liquidity to the decentralized finance (DeFi) ecosystem.

The report further analyzed whether these stablecoins could find a place in the traditional financial system, but concluded that a lack of regulatory oversight added to the recent downfall of algorithmic stablecoins ecosystems such as Terra indicates the contagion effects such stablecoins could have on the financial system.

The ECB also shot down the idea of using stablecoins as a means of payment, claiming these are not practical as the speed and cost and their redemption terms and conditions have proven “inadequate for use in real economy payments.”

The ECB recommended appropriate supervisory and regulatory measures to ensure stablecoins don’t risk financial stability in European countries. However, the report did note that stablecoin penetration in the region is limited, given that European payment service providers have not been very active in stablecoin markets thus far.

Bitcoin price is retracing to a stable support area, suggesting a potential rally might be on its way. Unfortunately, this development has also pushed Ethereum, Ripple and other altcoins down before the recovery bounce appears.

Bitcoin price is dipping into the $19,284-to-$20,726 demand zone, which could result in a potential reversal that pushes BTC higher. This run-up could trigger a rally that could retest the $25,000 level. 

For this to happen, Bitcoin price needs to flip the 200-week Simple Moving Average (SMA) at $22,629. Hence, investors need to wait for confirmation to position themselves in the right direction.

Ethereum price is looking to find a stable support floor after getting rejected off the $1,284 resistance level. The midpoint of the $878-to-$1,284 range at $1,081 is likely the key level where buyers might step in.

Assuming this comeback does occur, investors can expect ETH to try and break out above the $1,284 hurdle. Doing so will open the path for Ethereum price to retest the subsequent levels at $1,543 and $1,697.