Bitcoin rose above $13,000 again early this morning, and everyone is talking about it. What does it mean? Will the altcoins see their value rise as well? When will the profits being taken in the BTC market begin to accumulate in tokens such as Cosmos and Chainlink and EOS? Will we see over 100 consecutive days of BTC prices over $10K for the first time ever?

In the past, we’ve seen market actions that seemed to be explainable by factors such as BTC profits trickling down the altcoin market cap list. We’ve also seen the direct impact made by the first stimulus bill.

However, this fall it has taken a great deal of time to try to negotiate a second stimulus package. Fiscal conservatism has taken over the Senate. It appears as though Trump and Pelosi are likely to team up to win the support of Mitch McConnell, but despite McConnell’s promise to bring the Democratic bill to a vote, it may be difficult to find 13 Republican senators willing to force the issue.

It is certainly possible that the market is beginning to price in what is seen as an inevitable deal of some sort on stimulus in Washington, but there was also news early yesterday of a deal between Bitcoin and PayPal. 0xMaki, the new chef of SushiSwap, tweeted that PayPal “are still scumbags” and that today the DeFi movement have won. 

This tweet is a bit cryptic, especially as DeFi is rapidly losing the hype it produced earlier this fall, but competition for the banking space is certainly not likely to cool down anytime soon.

In any case, a higher Bitcoin price is good for many of the projects in the altcoin space, or soon will be, if it is not destroyed by the announcement of a failure to reach the next stimulus package. It is entirely possible that the market is trending higher despite the lack of a stimulus bill and not because of any increased perception of the likelihood of it passing before the election.

The Situation

The crypto markets soared for a protracted period late last summer when stimulus helped to stabilize the American economy. The stimulus was allowed to expire, which has perhaps affected certain crypto tokens more than it has the market as a whole. Tezos, for example, is still under $3, just as EOS is, yet Cosmos has remained over $5 during most of this time, reflecting perhaps increased investor confidence in the effort to facilitate interchain communication or perhaps reflecting the appeal of the 21-day token staking model to investors who, like myself, are inclined to ride out the rough times.

It seems likely that the minor surges we’ve seen on news of coming stimulus are being, for the most part, rapidly canceled out by sell pressure on tokens perceived to have little in the way of major development news. EOS in particular recently surged on the news of a Google deal to help with network validation, but as soon as the hype died down the price of the token returned to previous levels.

This sort of “sideways” momentum has afflicted most of the market in the period since the DeFi hype of August cooled down. Now that Ethereum gas prices have returned to near-normal levels, we can probably expect to see more people doing what I did and pulling their money out of DeFi lockups to put it someplace more profitable. I wasn’t all that successful in DeFi and I can assume that most of the folks who did what I did and invested a small amount of money just to see what would happen to it are probably looking for the exits as well.

Still, there is a bright future on the near horizon with the imminent ETH2 launch and the presidential election coming up in November.

So What, Exactly, Is Priced In?

The biggest question on everybody’s mind right now is what the next major market action will be. Short answer? No one knows. But here are a few scenarios that may play out.

1. Stimulus passes, Biden wins the presidency.

This is probably the most likely thing to be priced into the market, but the uncertainty surrounding both events after McConnell has taken up opposition to stimulus and Biden’s supporters struggle to ensure that a repeat of 2016 does not take place.

In the sense that the current market is a reflection of the high probability of both of these events, we should not expect a major change. However, stimulus will put more money into the markets and thereby cause prices to rise, and a Biden presidency will instill confidence about controlling the COVID-19 pandemic and should help to allay some of the fear of a winter like that of 1918. Consumer confidence may rise and people may buy more stuff as they prepare to get ready for a return to something like normal after spring arrives.

This seems to be the most likely situation, and it seems almost certain that markets will rise if these events take place.

2. Stimulus fails, Biden wins the presidency.

It’s probably about a coin flip whether the currently proposed stimulus measure will pass Congress. Ultimately, this means that the present market has probably priced in a bit more of the expectation that the bill will at some point pass and prices will begin to rise again.

This may turn out to be wishful thinking, and if we go into the winter recess without a stimulus bill even a change of the guard in the presidency will be unlikely to turn the wheels much. I would still expect some amount of hype to kick up, with the sheer volume of traction various crypto projects are managing to produce, but stimulus is important because many people lack the disposable income they’d need to invest.

3. Stimulus passes, Trump wins re-election.

This is one of the least likely scenarios on the board here. Current polling suggests a wide lead for Biden just as public opinion favors more stimulus. Passing another stimulus bill may be about the only for Trump to return to the good graces of his voters, however, as his pandemic response has been a disaster and no one can deny the negative impact this has had on markets.

During the winter of 2016–2017, there was widespread rumor of a “Trump Bump” that was coming to the stock market. This did take place, but given the difficulties of the past year, it seems unlikely to repeat itself.

We can therefore expect a market retraction if Trump pulls off another upset, even if the stimulus bill passes. Perhaps the market will expand upon announcement of the stimulus bill and then retract upon a protracted legal struggle or the announcement of another Electoral College win against the Popular Vote for the Trump administration.

4. Stimulus fails, Trump wins re-election.

The single least likely scenario on the board for us here, this event is so unlikely given all present information that it may actually tank the markets substantially. If you’re an investor, one of your main goals needs to be to predict what will happen so that you can read the market reactions and make your moves in real time.

An announcement of the stimulus failing will be read in the media as the final nail in Trump’s coffin. Businesses and investors will be expecting Trump to lose by a historic margin unless something major changes in addition to Trump somehow returning to the good graces of American voters.

If this happens, concurrent market actions are anyone’s guess. It could tank, in fact it’s difficult to see there being much upside to this scenario as it represents more of essentially the same doldrums we’ve sat through all autumn now. But it’s possible that ETH2 will be substantial enough to cause the market to rise anyway, or that Trump could pivot on some of his unpopular policy decisions such as the opposition to a national level COVID-19 response.

Long-term Outlook

My forecast for the market in general remains quite bullish. In particular, I think Cosmos is holding up exceptionally well under pressure and I cannot wait to see the sort of performance BAND Protocol will turn in over the next few months with its $125M market cap. If it is adopted rapidly, it could shred the $1B market cap level and top out somewhere north of $50 by the end of the year!

ETH2 is a difficult read, still. It is unlikely that the rollout will go off without a hitch, but as long as downtime and fees remain manageable, it’s possible that big money will take notice of the massive ecosystem that has grown up and pour in the funding.

EOS, Tezos, Algorand, and the rest of the altcoin markets have remarkable potential and are at absolute bottom levels in terms of price. The events we’ve been anticipating all year are about to start happening, so the time is right to make sure everything is set before things escalate rapidly in the coming weeks.

It seems likely that the present bull run will continue even without a new stimulus agreement, but the hopes of an agreement are certainly not hurting prices as they trend upward. If an agreement is reached, however, that could be the catalyst that could lead to massive growth through the end of 2020.

Disclaimer

Nothing in this article constitutes financial advice. Content provided only for entertainment and informational purposes. If it were financial advice, it would probably be terrible because its author is a philosopher and a bit of a scientist, but by no means any sort of authority on anything financial at all. All investments carry risk and the author of this article assumes no responsibility for any gain or loss incurred by a reader under any circumstances.

Contact the Author

Thomas Dylan Daniel is a philosopher and biophysicist. Connect via his website or Facebook, or have a look at his books. Find him on the blockchain at epicdylan.eth!