Markets
History suggests the crypto market is about to skyrocket due to this little-known fact
History doesn’t always repeat itself, but if it does, it would mean big things for crypto.
Things in the crypto world are looking up. After a brutal crypto winter, many cryptocurrencies are at or near historic highs and the future finally looks bright once again.
However, the situation is likely to get much brighter for one fundamental reason: central banks around the world are starting to cut interest rates.
The two may seem unrelated, but the ties between central bank actions and crypto market behaviors run deep. For investors, this represents an attractive opportunity. A new wave of liquidity could soon be injected into the market, potentially setting the stage for a major crypto boom.
Image source: Getty Images.
Central banks start cutting interest rates
In recent days, the European Central Bank (ECB) and the central banks of Canada, Switzerland and Sweden have reduced their reference interest rates. Those changes followed some of the most aggressive rate hikes in decades, which banks instituted in their efforts to curb rising inflation.
While the US Federal Reserve has not yet started cutting rates, there is growing optimism among market watchers that it will do so by the end of this year. Given that the US is still the largest economy in the world, this potential policy shift is seen by many as the last domino that needs to fall to usher in a more favorable environment for risky assets like cryptocurrencies.
Why Interest Rates Matter for Crypto
At first glance, it may seem that interest rates and cryptocurrencies exist in completely separate spheres. Cryptocurrencies operate on decentralized networks with their own monetary policies. However, they are inextricably linked to the broader economy.
Crypto is a so-called risk-on asset class, which means it tends to perform well when investors are more willing to accept more risk in pursuit of profit. This typically happens during periods of high liquidity, when money is cheap and abundant. For this scenario to repeat itself, interest rates will have to be reduced.
To understand why central bank interest rate cuts will benefit crypto, it may be helpful to understand the impact of rising interest rates. When central banks raise interest rates, loans become more expensive, which tends to reduce the amount of money circulating in the economy. High interest rates also make low-risk interest-bearing assets more attractive, further reducing the amount of money invested in riskier assets.
On the other hand, when interest rates fall, borrowing costs decrease and liquidity increases. Lower interest rates also reduce the appeal of savings accounts and bonds. With excess capital circulating, this liquidity typically finds its way into multiple asset classes, including stocks, real estate, and, yes, cryptocurrencies.
Historical evidence
We don’t have to look far back to see evidence of how powerful the impact of lower interest rates on the crypto market can be. In 2020, central banks around the world cut interest rates to near zero in response to the economic fallout from the COVID-19 pandemic. This resulted in an unprecedented injection of liquidity into the global financial system.
The result? The crypto market has grown from around $190 billion to over $2 trillion. Bitcoin (Bitcoin 0.28%), the leading cryptocurrency, has seen its price rise from around $7,000 in early 2020 to nearly $69,000 in November 2021.
One of the most impressive examples of the 2021 bull market was Solana (SUN 0.43%). Taking advantage of waves of increased liquidity (and a lot of speculation), in less than two years, it jumped more than 25,000%.
Maintaining discipline amid the boom
While this round of rate cuts is not as dramatic as the 2020 cuts, they should still bring a significant benefit to crypto. And as is common in cryptocurrency bull markets, this means that some obscure cryptocurrencies will begin to post astronomical gains.
However, while this is easier said than done, it is imperative that investors maintain a balanced perspective and not get carried away by the hype of speculation – most of these cryptocurrencies simply are not good long-term investments.
To successfully navigate this next phase, investors will need to remain disciplined and focus on top-tier cryptocurrencies with proven track records and strong utility. Bitcoin and Ethereum (ETH 0.97%), for example, meet this criterion.
Although this strategy may not be as glamorous as investing in trendy products meme coinsIt is one of the few proven strategies that provides investors with the kind of gains that only crypto can produce.
RJ Fulton has positions in Bitcoin, Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum and Solana. The Motley Fool has a disclosure policy.
This week saw $722 million worth of Bitcoin spot ETF inflows, including the largest daily inflow in a month.
Cryptocurrency markets rallied on Wednesday, driven by inflows into spot Bitcoin exchange-traded funds (ETFs).
The price of Bitcoin (BTC) is up 3% over the past 24 hours to last change hands at $65,200, according to CoinGecko. Ethereum (ETH) is up 2% and is trading at $3,471. Solana (SUN) and Polkadot (POINT) increased by 4%.
Bitcoin spot ETFs saw $422 million in daily inflows on Tuesday, the highest in the past 30 days, according to Far side data, . The all-time record for a single day was $1.05 billion on March 12.
Among Tuesday’s top contributors, BlackRock’s IBIT led with $260 million in inflows, followed by Fidelity’s FBTC with $61 million. This week has already seen more than $722 million in inflows.
Among the top 100 cryptocurrencies by market cap, Worldcoin (WLD) led with a 28% increase, followed by Helium (HNT) with 20% and Lido DAO (LDO) with 15%.
Worldcoin, a decentralized identity project led by OpenAI CEO Sam Altman, announced is extending the lockups for early investors and team members. This means that tokens will be gradually released through 2029, instead of the original 2027 plan. Token unlocks are generally seen as a negative because they increase supply and early investors can sell their tokens for profit.
Meanwhile, XRP, the token of the XRP Ledger network, jumped 8% after the CME and CF benchmarks introduced new indices and reference rates for XRP.
U.S. stocks faced a downturn on Wednesday. The S&P 500 fell 1%, while the Nasdaq Composite and Dow Jones Industrial Average both fell 2%.
Markets
Altcoins on the cusp of a major breakout – WLD, AR, and INJ prices could surge by 20% in the coming days
Crypto markets appear to have been taken over by the bulls as major tokens have surged above their crucial resistance zone. Bitcoin surged above $65,000 while Ethereum was above $3,500, and XRP, which had remained passive for quite some time, surged over 40% in the past few days to hit $0.6. The uptrend has been captured in most altcoins, with Worldcoin (WLD), Arweave (AR), and Injective (INJ) leading the rally. Here’s what to expect for these tokens in the coming days.
Worldcoin (WLD) Price Analysis
O Worldcoin Price has been trading inside a descending wedge since it marked a new ATH near $12 in the final days of Q1 2024. The recent price action helped the price break out of the upper resistance of the wedge, breaking above the crucial resistance zone between $2.21 and $2.39. Market sentiments have changed, but technicals suggest that the bulls may remain passive for a while, which could offer some room for a bearish pullback.
The price broke out of the wedge with a significant increase in volume, but the current volume suggests that the bulls have taken a step back. Meanwhile, the RSI is about to reach the upper boundary, which could attract bearish forces. Additionally, the DMI has undergone a bullish crossover, but the decline in the ADX suggests that the rally may remain consolidated above the gains. Therefore, the WLD price is expected to maintain a horizontal consolidation between $3 and $3.3 and trigger a fresh rally to $4.4 during the next bullish rally.
Arweave (AR) Price Analysis
Arweave formed a strong base around $25, which helped the rally trigger a recovery during the bearish attack. Mt. Gox and German terror forced the price to fall below $20. However, the recent price action has brought the altcoin within the bullish range and raised expectations of maintaining a decent uptrend for a few more days.
AR price has hit one of the major resistances around $30 to $31.5, which could act as a strong base once overcome. The buying volume is slowly increasing, which could keep the bullish hopes for the rally high. Moreover, the supertrend has just flashed a buy signal, indicating a clean reversal of the trend. Therefore, AR price seems primed to maintain a healthy uptrend and rally above $40. However, if the bulls maintain a similar trend, making new highs above $50 may not be a tedious task for the bulls.
Price Analysis of Injective (INJ)
Injective price has been showing sharp strength since the beginning of the year and hence, the recent turnaround is expected to revive a good uptrend going forward. The bears engulfed the rally to a large extent, but the recent price action suggests that the bulls have regained their dominance. Therefore, INJ price is expected to maintain a strong uptrend with a bearish interference on the way down.
INJ price has surged above the lower support zone and has registered consecutive bullish candles. Although the volume is below the required levels, the OBV is maintaining a sharp uptrend. Furthermore, the Ichimoku cloud lead span B is heading towards the lead span A and a healthy crossover indicates the start of a new uptrend. However, INJ price may be out of the bears’ reach once it secures the resistance zone between $30.77 and $32.12, which seems to be on the horizon.
Ethereum (ETH) supply on exchanges has hit a 34-month high as the asset’s price surpassed the $3,500 mark.
ETH has risen 2.3% over the past 24 hours and is trading at $3,490 at the time of writing. The second-largest cryptocurrency — with a market cap of $419 billion — briefly touched an intraday high of $3,517 earlier today.
ETH Price, Whale Activity, RSI, and Exchange Supply – July 17 | Source: Santiment
Ethereum’s daily trading volume also increased by 7.6% to reach $19.8 billion.
According to data provided by Santiment, the supply of Ethereum on exchanges has reached $19.52 million ETH. This level was last seen in September 2021, when the asset was trading around the same price.
On the other hand, data from the market intelligence platform shows that the number of whale transactions has fallen by 12% in the last day — falling from 8,730 to 7,629 unique transactions per day.
The move shows that the supply of Ethereum on exchanges has been increasing with small deposits rather than large transactions from whales.
Additionally, the ETH Relative Strength Index (RSI) is currently hovering at the 60-mark, per Santiment. The indicator shows that Ethereum is slightly overbought at this price point, but it may not be in a critical position due to its large market cap.
One of the main drivers of Ethereum price increase is ETH spot expectations ETFs in the US Investment products are scheduled to start trading on July 23rd.
Markets
Bits + Beeps: How to Play the ‘Trump Trade’ in Cryptocurrencies After the Assassination Attempt
Also, how much will the Fed cut rates (and when)? What will be the inflows into ETH ETFs? And what is the near future for Bitcoin?
Posted on July 17, 2024 at 12:00 PM EST.
Listen to the episode at Apple Podcasts, Spotify, Capsules, Source, Podcast Addict, Pocket molds, Amazon Musicor on your favorite podcast platform.
In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger and Joe McCann, joined by guest Jack Platts, dive into the market reaction to the recent assassination attempt on former President Donald Trump, analyzing how this event will influence the 2024 US presidential election and the cryptocurrency markets.
They also cover potential rate cuts: Could there be a cut in July? How big could the September rate cut be? Could the decision be influenced by the upcoming election?
They also give their predictions on what percentage of BTC ETF inflows the ETH ETFs will reach, and James talks about what he expects for Grayscale’s ETHE (hint: his outlook would be positive for ETH).
Finally, they delve into what’s next for Bitcoin as the German government runs out of BTC and Mt. Gox distributions begin. Just now?
Program Highlights:
- Whether Trump’s shooting decided the election and whether the event caused a “flight to safety”
- How election markets are becoming a place to watch election probabilities and whether cryptocurrencies “lean right”
- Whether rate cuts will occur in July or September and by how much they will cut: 25 bps or 50 bps
- How Joe sees the relationship between global liquidity cycles, rate cuts, and the potential rise of Bitcoin
- What are the new updates about Ethereum ETFs and their expected launch?
- Why Solana Hasn’t Performed Significantly Better Since Trump News
- What Market Breadth Indicates About the Current Market Rally and the Impact of Rates on Small Caps
- Everyone’s predictions on ETH ETF inflows and how much outflow we’ll see on Grayscale’s ETHE
- What’s Next for BTC After German Government Exits Bitcoin and Mt. Gox Giveaways Starting This Week
Hosts:
Guest:
- Jack PlattsCo-Founder and Managing Partner of Hypersphere Ventures
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Lyn Alden – The real Bitcoin Bull Run is starting very early (it will be explosive)
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