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| By Sam Blumenfeld |
The crypto market finally looks to escape from its long-term downtrend as Bitcoin (BTC, Tech/Adoption Grade “A-”) and most altcoins are up slightly today.
Crypto will likely continue to gain ground as investors become increasingly optimistic about a Federal Reserve pivot. Currently, the Fed Fund futures market prices in an 84% chance for a 75-basis-point rate hike after the Fed’s meeting next week.
While that might seem steep, it’s down from a 99.9% probability a week ago.
Over the medium term, investors share even more hope. The probability of a peak interest rate greater than 5% next March fell from 59.3% to 34.1% over the past week.
This renewed optimism is helping the established cryptocurrencies gather momentum.
Bitcoin is back above $20,000 after a strong showing this week, crossing three key trend indicators as noted by our Crypto Timing Model, in the process.
The first two confirm that BTC did make an 80-day low on Sept. 21. The third is a long-term trendline, indicating that Bitcoin’s long-term trend may finally be shifting out of bearish, though we’ll need to see more bullish action before that’s confirmed.
The asset is still trading between its $17,500–$25,000 range, but the move is a positive sign that the end of crypto winter is approaching, barring significant price drops.
Currently, BTC sits about $1,000 higher than its 21-day moving average of $19,500.
In the meantime, it’s a positive sign to see the crypto market disassociate from technology stocks and other risk assets. While the Nasdaq 100 Index is about even over the past week following a series of Big Tech earnings misses, the major cryptos are making strides.
Here’s Bitcoin’s price in U.S. dollars via Coinbase (COIN):
Ethereum (ETH, Tech/Adoption Grade “B”) is up about a percentage point today to $1,540. But that’s just the latest in a successful week. The second-largest crypto by market cap gained an impressive 18% over the week compared to Bitcoin’s 6% upward move.
Ethereum’s outperformance follows the sluggish period after its successful Merge. Ethereum trades well above its 21-day moving average of $1,350 and its safely above the lower end of its established sideways trading range.
For now, we anticipate it’ll maintain the neutral trend as long as it avoids a major sell-off.
Ethereum is more established than it was during previous bear market sell-offs, shown by its comparable price action to Bitcoin’s during this crypto winter. ETH’s 61% yearly decline is less than BTC’s 65% drawdown, which is likely due to the significant wave of adoption as Ethereum’s ecosystem matures.
As the market moves forward, Ethereum should continue to act as a major driver for altcoin price action.
In time, we should start seeing a familiar pattern, with Bitcoin and Ethereum leading the way when conditions are favorable. Only then should altcoins see significant inflows as speculation grows.
Here’s Ethereum’s price in U.S. dollars via Coinbase:
Notable News, Notes and Tweets
- The total crypto market capitalization eclipsed $1 trillion again.
- Ethereum set a new record for short liquidations after $500 million in shorts were liquidated in two days. The data shows overly bearish speculators were burned.
- A Fidelity (FNF) Digital Assets report found promising adoption trends among institutional investors.
- Blockchain.com will partner with Visa (V) to begin issuing crypto debit cards for U.S. residents.
What’s Next
The crypto market continues making promising progress towards the end of crypto winter. After breaking out of its long-term downtrend, it just needs to avoid a major selloff to establish the bear market’s floor.
However, the end of crypto winter doesn’t necessarily mean significant upward price action is imminent. The crypto market still faces macroeconomic headwinds from inflation, rising interest rates and geopolitical instability.
The Fed will play a critical role in both crypto and traditional equity market price action. If it continues its aggressive approach to curb inflation, it will be more difficult to start the next sustainable rally.
Regardless, adoption is consistently progressing despite significant challenges during crypto winter.
Fidelity Digital Assets’ report surveyed over 1,000 institutional investors throughout the U.S., Europe and Asia. In the U.S. and Europe, digital asset adoption rose 9% and 11% over the past year to 42% and 67%, respectively. Adoption in Asia slipped slightly, but it still leads the way at 69%.
But these numbers are just the beginning. As the market moves past crypto winter, adoption should only accelerate. Improving fundamentals and institutional positioning should set the stage for the next major rally.
Best,
Sam
