April 29, 2024
Savvy Investors Find Opportunity as Bitcoin Consolidates
Dear Subscriber,
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| By Marija Matic |
Major cryptocurrencies like Bitcoin (BTC, “A”) and Ethereum (ETH, “B+”) are consolidating, stuck in a tight trading range.
This type of price action isn’t out of the ordinary for a post-halving environment, as my colleague Dr. Bruce Ng mentioned previously. But it is worth mentioning how this action is mirroring the cautiousness in the stock market amidst worries about stagflation — a combination of sluggish economic growth and elevated inflation.
The gloomy outlook of GDP growth continuing to falter combined with worries of inflation remaining stubbornly high has subdued investor appetite for riskier assets, leading to substantial corrections in the altcoin market.
Despite these challenges, there is a glimmer of hope. Analysts at QCP Capital anticipate the potential for a massive $1.4 trillion liquidity injection into the U.S. economy before the elections.
That lines up nicely with what my colleague Juan Villaverde has been saying since the start of the year.
Such a significant influx of cash would likely rekindle bullish sentiments among investors as the year progresses, especially given the backdrop of an ongoing election cycle.
But an intriguing trend is emerging in the digital asset investment landscape as we wait: A diverse array of altcoins — including Solana (SOL, “B+”) and Chainlink (LINK, “B+”) — saw inflows over the past three weeks.
This is notable as digital asset investment products have experienced outflows for the third consecutive week overall, amounting to $435 million mostly from Bitcoin and Ethereum products.
This shift suggests that institutional investors may be slowly redirecting their attention from established cryptocurrencies toward riskier altcoins, seizing the opportunity to acquire them at lower prices.
Interesting, considering that is what Dr. Bruce said savvy investors should do just last week.
As mentioned, those inflows aren’t enough to offset the outflows. But don’t take this as a sign that institutions are losing confidence in crypto.
They’re not.
While still being notable, outflows from Grayscale’s ETF, for example, have been slowing down in the past two months, hitting their lowest levels last week.
More significant, however, is the imminent launch of a Bitcoin ETF in Hong Kong tomorrow and the potential introduction of spot Bitcoin ETFs on the Australian stock exchange by year-end. Both show continued interest in Bitcoin and should stimulate fresh demand.
Indeed, the issuer of the Hong Kong ETF has expressed optimism that the issuance scale of the HK spot BTC ETF on its first day could surpass that of the U.S. spot ETFs ($125 million).
He anticipates that the final market size could reach at least $2-3 billion at some point. While this figure is notably lower than the U.S. market, it also surpasses the $500 million estimated by U.S. analysts previously.
This positivity is encouraging, as renewed demand benefits Bitcoin, regardless of scale.
And there is additional demand anticipated right here in the U.S., as well, tied to expected increasing integration with banking platforms, wealth advisors and a broader range of brokerage platforms. That, however, will take a bit longer as we wait for the industry to mature.
In the meantime, price consolidation continues to characterize the current market landscape of large cryptocurrencies.
Bitcoin's price has maintained a boring range between $59,000 and $73,000 since late February, exhibiting no clear momentum in either direction:
In the near term, Bitcoin is trading within a descending pattern. This downtrend suggests the possibility of a false breakdown below support to around the $56,000 zone before a subsequent rally.
Similarly, Ethereum finds itself within a substantial descending channel:
Should Bitcoin dip below its support level, Ethereum may experience a decline toward the support zone of its channel, approximately around $2,650.
Although Bitcoin and Ethereum have shown non-eventful sluggish movements in the last two months, smaller altcoins have faced considerable challenges. That's why I'm inclined to hope for some volatility when it comes to these two giants.
If we end up seeing that price action — a quick break below their existing patterns and to test support levels below, followed by a renewed rally — would be beneficial for the broader crypto market.
However, patience is key in this volatile market. We'll have to wait and observe how things unfold … while keeping an eye on cheap altcoin opportunities in the meantime.
Notable News, Notes & Xeets
- Consensys is taking legal action against the Securities and Exchange Commission to protect the Ethereum ecosystem. The company has been served a Wells notice concerning MetaMask’s swap and staking functionalities, while the SEC is also probing Consensys's ETH sales.
What’s Next
This week holds the potential for significant market developments.
Investors will closely monitor the upcoming Federal Open Market Committee meeting on Wednesday and the U.S. employment report on Friday. These events are expected to influence investor sentiment regarding potential rate cuts in 2024, which could spill over into the crypto market.
And, as I mentioned earlier, tomorrow’s launch of the Hong Kong ETFs and the monthly close of Bitcoin’s price are also likely to add to the week's intrigue.
But I believe Wednesday's anticipated announcement from the U.S. Treasury could be the most compelling event of all this week.
If the Treasury opts to release funds from the Treasury General Account, it could stimulate economic activity and bolster bullish sentiment in risk assets.
Meanwhile, savvy investors are keeping a keen eye on altcoins and cherry-picking opportunities while the altcoin market is in turmoil.
As my colleagues have pointed out, the current correction is an excellent opportunity to load up on select projects.
And to narrow down which should be at the top of your list, I recommend following the top narratives leading the market and checking out the best-performing projects in each.
Best,
Marija MatiΔ
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