Following a nice rally to start off the year, the crypto market has continued its slow but sure pullback, exacerbated by the SEC lawsuits against Binance and Coinbase, respectively.
So, what’s happening on the charts and what’s next for the market? Let’s begin with Bitcoin’s dominance. If you look at the Bitcoin dominance chart historically, there are a couple of things you will notice.
First off is that it’s a good sign of investors going risk-off. This is because while Bitcoin is a risky asset in a broader context of investments, it’s the low-risk asset in the context of the crypto market. The second thing you’ll notice is that it also led the market out of the last bear cycle. This makes sense because as investors tiptoe back into crypto after a brutal bear market, they tend to start off by playing it safe in Bitcoin before diversifying into other opportunities.
Currently, Bitcoin dominance has just broken above 49%, which is the highest it’s been since 2021 when the last bull market was in full swing. This is a pretty good sign that investors are still uncertain about a significant move for the rest of the market, and they’re continuing to add to their positions in Bitcoin while, for the most part, staying away from other crypto assets.
Another piece to this story could also be the developments in the Bitcoin world in terms of Bitcoin NFTs and BRC-20 tokens, which basically add custom inscriptions to satoshis that make them unique, essentially allowing for token issuance on the Bitcoin network. This effectively decreases Bitcoin’s circulating supply and has also increased network activity and fees. All changes are positive for the value accrual of Bitcoin.
Next, looking into Ethereum. We were eyeing a bullish setup moving into July. However, that’s currently been invalidated until we have substantial signs of a reignited rally in the broader market. That aside, Ethereum recently broke through its support around 1700, so 1400 is looking like the next most viable support unless we can reclaim 1700.
The total crypto market cap is also looking pretty bearish. After rejecting its 1.2T resistance, we’re eyeing a continued move to its previous level from early March. We will then reassess what’s next. Likely, we’re looking at a boring summer for the overall market unless we get some good news that turns price action bullish again.
The one other thing we feel needs to be noted is that the total crypto market cap excluding Bitcoin has just hit a pretty significant level. So, were it to stay above that level, we may see a rebound.
Last but certainly not least, moving on to Bitcoin. The local support is roughly the 25k zone. If Bitcoin can find some strength there and stay above that level, then we could move higher to hopefully retest 30k. If we were to break that level, though, 20k would be next.
Our Take
While it may be frustrating as a crypto investor to see stocks rising and crypto falling, it’s important to remember that crypto moves very cyclically. Frankly, the current price action is actually very reminiscent of previous market cycles, that being stocks and crypto rallying out of a bear market, and then stocks continuing higher as crypto pulls back.
Here are a few of the key factors that we’re currently watching outside of the charts:
- The SEC’s respective lawsuits against Binance and Coinbase.
- Global liquidity conditions (click here for more on that).
- BlackRock’s recent filing for a Bitcoin spot ETF
- Continued talks about crypto legislation from congressional committees. There are actually some good conversations happening in Washington, and our outlook is fairly positive in that area, despite the SEC lawsuits, which aren’t completely unwarranted even though some crypto degens may tell you otherwise.
We also maintain a very bullish outlook on risk assets more broadly, as we have since the start of the year (read about that here), and our long-term outlook for crypto is also bullish with the upcoming Bitcoin halving which will be here before we know it.
Consistent with that, we’re actively searching long and hard for the next big opportunities and are eyeing some very good ones. Click here so you don’t miss out on taking full advantage of the next bull market.