December 8, 2021
BTC Weakness vs. ETH Strength – a Pivotal Moment For the Entire Market
After the last days’ strong bounce action, the time for a bit of cooling of the volatility has come – both in stocks and crypto (what a surprise). As we have repeatedly stated, after the massive capitulation last week, the most likely scenario was a bounce followed by consolidation. That’s exactly what we got.
It will take some time to work through the selling pressure from people who want to take risk off on the bounce and to find a new equilibrium of supply and demand. While on-chain and exchange metrics inspire optimism for the long-term outlook, we should expect more uncertainty and volatility in the short term.
While crypto prices have calmed down somewhat today, there are still intriguing observations to be made. A striking one is how weak Bitcoin’s chart looks compared to Ethereum.
Will this trend continue like the charts insinuate? If yes, the big question becomes: Will BTC’s weakness drag Ethereum’s performance (and the rest of the market), or will Ethereum become the new leader, propping up Bitcoin? It’s truly a pivotal moment in crypto history.
In the coming weeks, you should watch the following three charts like a hawk: BTC/USD, ETH/USD, and ETH/BTC. They will give the biggest clues on how the overall crypto market will evolve from here. (You should look at DXY and SPX as well to monitor the development of the macro environment…)
The Madness of Financial Markets
While the risk of macro tailwinds derailing the stock market (and with it crypto) is rising with every fresh record-high inflation reading and the looming slow-down of the economy, a total market meltdown is NOT the base case – at least not as long as the likes of Jerome Powell are in office.
We surely have to expect a more significant “macro event” that could drastically shake up the markets at some point in the future, but for now, “dips” will likely get bought up... (until they don’t)Thanks A replay of the very strong buy-the-dip/FOMO/TINA investor conditioning partially influenced by confidence in the Put. A big question for the next few quarters is how sensitive such conditioning is to an inflation shock to Fed policy. More to follow.
Liz Ann Sonders @LizAnnSondersWhat selloff? S&P 500 Tech sector has recouped its recent losses and is back to new high [Past performance is no guarantee of future results] https://t.co/q9afoR3xHI
It can certainly be maddening to observe this game of greed and “up only” stock markets, which are totally detached from the real economy. The fact is, it’s the reality the powers of be (governments and central banks alike) have created for us… The better we understand this game and learn to protect us from different averse scenarios, the likelier we will make it to the finish line.
A New Financial Paradigm Is Rising
While we often get distracted by daily price swings, we shouldn’t forget how far crypto has come in a very short period of time. After years of building “in the shadows”, the signs are mounting that crypto is increasingly penetrating the legacy financial world. It happens faster than anyone could have imagined just a year ago but too slow for the dopamine-addict crypto markets to notice…
NFT Bridging Is Finally Here
The NFT space has been facing a dilemma lately: Despite the high gas fees and inaccessibility for newcomers, most valuable NFT collections are still home on Ethereum. At the same time, new “siloed” NFT ecosystems have emerged on other chains…
With DeFi having already started its expansion to L2s and alternative L1s (aka, become “multi-chain”), it was only a question of time until NFTs would do the same. A crucial element for this are bridges which allow for seamless transfers between chains. With the emergence of multi-chain DeFi (on ETH L2s, Solana, Avalanche, etc.), we have witnessed bridging protocols like Anyswap flourish in the last few months. ANY has performed impressively despite the recent market correction…
Today we have seen Composable Finance, an established bridging protocol for fungible tokens as of yet, come out with one of the first NFT bridges – truly a remarkable accomplishment!
It will be exciting to see how fast the multi-chain NFT movement will gain traction and what new use cases can emerge thanks to the access to lower gas fee environments. It might be the necessary boost the NFT space desperately needed!