The cryptocurrency market is cooling off after a red-hot run led by altcoins. This type of action is healthy because it’s a period of preparation for the next leg of a long bull run.
• Ethereum (ETH, Tech/Adoption Grade “A-”) has leveled out near $4,000 after a slight fall from all-time highs.
• Polygon (MATIC) is sitting just under $1 after an excellent month of trading.
• EOS (EOS, Tech/Adoption Grade “C+”) has hit price levels not seen since its initial listing.
Ethereum has hit major resistance at the $4,000 level, which isn’t too surprising given that those big, round numbers typically hold a sort of psychological importance.
ETH did manage to break above $4,000 for a little while, and, even after a slight retracement, it’s holding just under that resistance.
By all measures, Ethereum has had one heck of a month, rising more than 40% in May alone and 85% in just the last 30 days despite trading at all-time highs at the start of this run. If ETH can manage to extend this run past $4,000, the altcoin market might go even more parabolic, if you can believe that.
EIP-1559, Ethereum’s big tech update due later this summer, could help reduce gas fees, which are currently at the highest-ever levels in U.S. dollar terms. Lower fees would help to make the Ethereum network more usable again and would likely result in a price boost for ETH.
So, even though Ethereum’s price has risen so much already this year, there are still bullish factors on the horizon that could push this run even further.
Here’s ETH in U.S. dollar terms via Coinbase Global, Inc. (Nasdaq: COIN):
Polygon is another project that’s had an outstanding month, as the MATIC token is up more than 20% in May alone and 175% over the last 30 days. It’s been sitting just below the key $1 level for the last three days, though it has managed to cross that hurdle briefly a few times.
Polygon is a Layer 2 solution for Ethereum and offers a similar experience on its decentralized app (dApp) platforms as users are accustomed to on Ethereum — but with drastically lower fees. Layer 2s like Polygon offer similar security as Ethereum because they checkpoint on the Ethereum network every so often, but they require much lower fees on the users’ end.
We think solutions like Polygon will be the future of the decentralized web. But they’re already showing their worth with an enhanced decentralized finance (DeFi) experience that cuts down on fees for users. Ethereum-based Layer 2s offer much better alternatives to DeFi users than centralized solutions like Binance Smart Chain (BSC) and will likely eat into BSC’s market cap.
Here’s MATIC in U.S. dollar terms via Coinbase:
EOS is another big winner so far in May, as the asset is up more than 78% so far this month. EOS has managed to smash through $10 and is trading just north of $11 today.
EOS is now trading above previous all-time highs set on Coinbase, although it did briefly trade for more than $20 on Binance in 2018, which goes to set the next big resistance level. If EOS manages to set a new floor above $10, a run to $20 is likely.
Perhaps some of today’s price action is due to the announcement of Bullish Global, a new separate entity from Block. One that will combine the ease of use and compliance of a centralized crypto exchange with the benefits of decentralized infrastructure.
Bullish Global was founded with more than $10 billion in funding from the likes of Mike Novogratz and Peter Thiel, among others. Bullish will use the EOS blockchain to support its new exchange.
Big price runs like this are what make altcoin season so exciting. This right here is also another lesson that shows “HODLing” in projects that you believe in is one of the best possible strategies, as many thought EOS was a dead project while it traded at fractions of its all-time high for over three years. Now, the conviction of those long-term holders has paid off.
Here’s EOS in U.S. dollar terms via Coinbase:
Notable News, Notes and Tweets
• Stanley Druckenmiller thinks the U.S. dollar might lose its status as the global reserve currency within 15 years, and he notes crypto might be the solution to that problem.
• Did you forget about non-fungible tokens (NFTs)? We hope not, as more use cases for NFTs might be around the corner.
• Dfinity’s Internet Computer ICP token listed today and skyrocketed into the top 10 coins by market capitalization right away. Here’s Messari’s overview of the project.
What’s Next
This slight retracement over the last 48 hours shouldn’t be confused with a market dip. It’s likely more of a quick cooling-off period for an altcoin market that’s been red hot. Altcoins continue to decouple from Bitcoin (BTC, Tech/Adoption Grade “A-”), as the King of Crypto has lost some of its legs recently.
This dynamic shows that we’re in a healthy market, and the same altcoin phases of the last bull run are in place today.
As investors and traders shuffle their gains from Ethereum and large altcoins down to smaller and more speculative investments, those gains will eventually make their way back to Bitcoin as we prepare for the next leg up — the final, most drastic phase of the bull market.
Not only are the crypto market phases pointing toward another bull run for Bitcoin … they’re pointing soon … the macro backdrop is also aligning well. Consider Stan Druckenmiller’s assessment of U.S. dollar reserve currency status.
Bitcoin is no longer seen as the weird, fringe asset it once was. And the masses are slowly but surely warming up to it.
When these new market entrants’ perception of Bitcoin shifts from “risky investment” to “future of finance,” we might start to see mass adoption of crypto and Bitcoin alike.
Best,
Alex
