Weekly Markets 1.17
10 December 2021: The cryptocurrency market has continued its trend down over the past week with Bitcoin falling through key support. In broader news, inflation has been measured at 6.8% annually as of November; This puts it at nearly a 40 year high. This week we will discuss the outlook of the cryptocurrency market, take a look into the inflation data, and bring it all into perspective for the remainder of 2021.
The main news stories of the week are available below:
Crypto-Economy
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Summary of recent developments on Algorand (RekTimes)
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Craig Wright trial concludes in Florida (Fortune)
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South Africa announces plans to regulate cryptocurrencies (Bloomberg)
World Economy
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Inflation hits highest levels since 1982 (NPR)
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Russia bolsters troops at Ukraine border as US, NATO worry (CBS News)
- Top world scientists say Omicron variant not more dangerous (France 24)
- Court rules Julian Assange can be extradited to the US on spy charges (New York Times)
Crypto-Economy & Markets
The cryptocurrency market has taken quite the tumble over the past month. Bitcoin dominance has fallen, giving some life to alt coins like Ethereum, but overall the market is down nearly 30% since November 10th. Bitcoin has mounted a bounce back up to the mid-$48k level, but it has fallen out of the key upward trend and failed to resurface at the $52k level. Below this mark is at least short term bearish.
Of course, with three weeks left in 2021 anything is possible. The market is still in a state of extreme fear meaning a reversal could come if the technicals allow it. From a risk-off perspective at this point in the bull run, we feel asset safety should be prioritized.
Total Market
The total cryptocurrency market has fallen another 14% over the past week. It punched straight through long term key support and confirmed the downtrend after a retest. The total crypto market did create a descending candle down to the 200 day moving average, potentially illustrating where at least an interim bottom could be should selling continue.
That bottom is at approximately $2 trillion, nearly another 10% down.
Bitcoin
Over the past week, Bitcoin fell a hefty 14%, modeling the decline in the broader cryptocurrency market. Bitcoin has since broken down through support.
Alt Coins
Ethereum has managed to decline significantly less than that of Bitcoin. This has been demonstrated well in the falling Bitcoin dominance which now sits at 38.96% of the total cryptocurrency market. Ethereum is currently holding the $4,000 mark right at key support.
Total Crypto Market Analysis
There is no way around the Bitcoin chart - it looks ugly. Nearly 30% off all time highs isn't necessarily a total killer but Bitcoin is in a bearish trend. A reversal is always possible (something we will be watching for) but should not be counted on. For now, Bitcoin has found support at the $46,800 price point.
Should it fall through this support, Bitcoin is free to fall to $43,000 or lower. A break below $40,000 would be an almost certainty of the new bear market.
Something potentially interesting to keep an eye on is a rally in alts despite the falling Bitcoin price. With Ethereum seemingly holding for now, it could establish the grounds for a late 2021 altcoin rally that sees Bitcoin dominance shrink to all time lows. It should be stressed this is only a possibility and is by no means a confirmed development.
This weekend will help paint the picture going forward of the cryptocurrency market as a whole. Ultimately with 2021 winding to a close, the bear market would be relatively on time compartively to past analysis.
World Economy & Markets
The big story this week is the recent inflation numbers. The confirmation of worsening inflation points again to the need to cool the reckless monetary policy seeing billions in fiat printed every single month. Of course, it takes years for such a crisis to fully develop which ultimately encourages politicians and top officials to react to these slowly.
The following chart shows the consumer price index (CPI) over the past 25 years in the United States:
There can be no deflationary collapse in the world economy without a shift away from current trends. China's economy is obviously showing holes with the reporting of the Evergrande default. As the for the United States & Europe, inflation is the real danger as it leads to two potential choices:
- Raise interest rates and reverse monetary policy which could create massive defaults and a deflationary collapse
- Do nothing and potentially suffer a complete currency collapse or extreme inflationary scenario
Neither option at this point is a positive one but one needs to be made. Looking at that graph above, you seriously have to acknowledge just how much money has been printed over the past 18 months and just how truly steep of an increase we are seeing in the inflation rate historically.
Summary
While many simply do not want to see the bull run come to a close here in December, it actually could provide the greatest buying opportunity. Inflation, at the rate in which it is increasing, is something that any government or central bank will struggle to reverse. This is true even if the Federal Reserve raises rates (which could actually bankrupt the United States Government).
Regardless of the choice western governments make on inflation, it will continue to increase - potentially at an increased pace - well into 2022 and possibly 2023.
Why does this matter? If cryptocurrencies do enter a bear market it could be a historically short one. Lower prices in the cryptocurrency market compared to other asset classes like the stock market would incentive anyone trying to avoid inflation. Should this trend continue and this bear market does come to fruition, it could be the greatest accumulation opportunity of this generation.
Coming within the next week from RekTimes includes:
- Article on Africa & Crypto (Monday)
- Article on InterPlanetary File System (IPFS) (Wednesday)
- RekTimes Weekly Markets 1.15 (Friday)
Best of luck over the next week!
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