XRP X-Factor, SEC Soap Opera & Dollar Drama
 |
| By Juan Villaverde & Alex Benfield |
In a surprise move, the U.S. pulled some regulatory clarity from its hat regarding crypto last week.
Apparently, the Securities and Exchange Commission was stumped in proving that sales of Ripple's (XRP, “B-”) token were security offerings. So, other crypto projects recently named on the SEC's naughty list found a new lease on life.
The aftermath? Predictably, a frenzy.
Suddenly, the crypto market was no longer shouldering the regulatory boogeyman and seemed all set for a moonshot.
In response, XRP experienced a whopping 100% surge, while other tokens caught up in the SEC’s lawsuits against Coinbase (COIN) and Binance basked in double-digit growth.
For instance, Solana (SOL, “D”), Polygon (MATIC, “B-”) and Cardano (ADA, “B-”) hitched an upward ride of 20% in just one day.
Not to be left behind, Bitcoin (BTC, “A-”) celebrated with a new closing high for the year around $31,500. And Ethereum (ETH, “B”) smugly crossed the $2,000 mark for the first time since April!
But oh, how quickly the party died down.
Come Friday, Bitcoin was right back at the $30,000 doorstep — where it's still sitting, probably sipping a martini. Ethereum took a chill pill too, cooling down to $1,900, its home away from home for weeks, maybe months.
Although altcoins also dialed back a bit, they kept their Thursday gains nice and snug. It looks like punters are still playing the long game on these assets.
So, how do we make sense of this crypto coaster? Despite the hoopla, last week checked out with little change in prices, save for the altcoin chosen few.
Now, one possible reason for this is the global liquidity downturn as China moved to defend its currency and tightened the liquidity noose.
But hey, there's a twist: China's liquidity drain is currently on a coffee break. This should, theoretically, give crypto asset prices a friendly boost.
Throwing more spice into this financial gumbo is the U.S. dollar's latest nosedive. The once-notorious greenback bully of 2022 is now free-falling, hitting new 2023 lows.
Meanwhile, gold — crypto's regular dance partner — is moving up in the world.
Gold’s upward shuffle, combined with the dollar’s swan dive and China’s liquidity time-out, should be lighting crypto’s fuse. Alas, it hasn’t … at least not yet.
One potential culprit for this head-scratching price action could be stagnant trading volumes, stuck in limbo since the November 2022 bear market low. This drowsy market state makes it prone to dramatic swings and U-turns, underlining a glaring lack of enthusiasm from crypto players.
Even with the news ticker spinning positive yarns — like the wave of new spot exchange-traded fund applications from financial juggernauts like BlackRock (BLK) — most crypto aficionados seem to be enjoying their bench-warming stint.
Indeed, this lukewarm response is why I've dubbed this year in the crypto four-year cycle a "transition year." It's the awkward teen phase, morphing from a bear market in 2022 into a strapping bull market in 2024–2025.
Now, let’s turn to Alex for some more market insights and a closer look at Bitcoin's price action.
The Crypto Calm Before the Storm
Previously, we dubbed this part of the four-year cycle as “the neutral year.” But 2023 has proved to us that it was an inaccurate name.
Although this part of the cycle is more neutral than either of the bull market years or the bear year, price action isn’t flat.
It’s more of a transition between the bear market and the next bull market. And while price action has been positive, it’s not hard to see why we don’t call this a bullish year.
Namely, there have been many positive news stories over the past few weeks, such as a pause in interest rate hikes, the slowing of inflation and the recent win in the Ripple lawsuit. However, none of these events have had a huge impact on crypto price action.
You see, in a bull market, even the slightest hint of positive news can send prices soaring. This is because there is simply more speculation in a bull market.
So, while the transition year isn’t necessarily bearish or even neutral, it certainly leaves more to be desired. Thankfully, it seems like it’s starting to come to a close.
In the short- to medium-term outlook, we still expect prices to climb higher than current levels at some point before coming back down to Earth before the end of the year.
After prices correct a bit more, then we can expect to see the next bull market kicking off toward the end of 2023 or sometime in early 2024.
Now as Juan mentioned, Bitcoin has been pretty stagnant after it flashed some bullish momentum. Since then, it has reverted back to the $30,000 level.
Although the $31,000 level has proven to act as strong resistance, at some point, we expect Bitcoin and the rest of the crypto market to make some noise. But since this is a transition year, BTC could face some neutral price action for longer than expected.
So, be patient, as it may take a while for Bitcoin to break through resistance.
Right now, the crypto market is still flush with the fallout from recent regulatory clarity and brewing economic variables. But it’s preparing to spring back into action.
Looking ahead, the next few months could be a little boring relative to the usual crypto price action. However, it will be an important transition phase as we inch closer to the next bull market.
It's clear that we're standing at the precipice of exciting shifts in the crypto sphere. During this time, the next bull market’s narratives will emerge, paving the way for new price explosions in different sectors.
As we bid goodbye to the mixed vibes of 2023, there will likely still be some up and down price action as things shake out. But these movements are nothing to panic about.
It's crucial to remember that while Bitcoin and the larger crypto market seem to be caught in a neutral standstill right now, these moments of pause often precede significant market movement.
Overall, it will take time for many cryptocurrencies to smash through their resistance levels — especially Bitcoin. This will require patience from traders and investors alike.
But in the end, it will all be worth it. After all, these events are setting the stage for the upcoming bull market, slated for late 2023 or early 2024.
So, as we navigate this transition period, remain vigilant, informed and above all, patient.
The silence before the storm is no reason to doubt the storm's coming. And in the world of crypto, the storm is always worth the wait.
Best,
Juan & Alex
