RekTimes Weekly Markets
Writer: Zacharias
17 July 2022: The Cryptocurrency market reclaimed a $1 trillion market cap as many blue chip tokens & projects rallied hard over the past week. This rally was a much needed relief to exhausted investors after several months of brutal selling.
While the market has rallied and made back gains, it is still premature to say immediately that this is the official bear market bottom. The following will break down the latest updates from around the cryptoeconomy and provide analysis on the crypto market direction.
KeyTakeaway: Crypto Market Attempts a Breakout, Rallies Into the Weekend
In the Know — Around the Cryptoeconomy
The cryptoeconomy has found a support zone to build a nice rally over the past couple weeks. Elastic Finance and Decentralized Finance (DeFi) have been the leaders in development recently, helping push the Total Altcoin Market higher.
Below are some highlighted developments & headlines from the cryptoeconomy and broader market:
Crypto Market Updates
Ampleforth Launches New Geysers
Ampleforth protocol recently announced the opening of two new staking geysers — one with Uniswap (Beehive V5) and the other with Bancor (Trinity V3). Geysers have been a popular option among AMPL holders for a long time, giving token holders the ability to earn high staking yields for placing liquidity in the pools.
For example, the Uniswap geysers is offering ~70% APY and a compounding multiplier reward for keeping liquidity in the pool. The Bancor and Uniswap geysers are to run for the next ~90 days.
Buttonwood Foundation Launches First ButtonZero Bonds
Buttonwood Foundation is a crypto-agnostic, elastic finance protocol that recently released ButtonZero — an application where users can utilize novel crypto-based bonds. The most prominent example for the purposes of this newsletter to know is the concept of a zero coupon bond.
Zero coupon bonds have been around for decades — requiring no interest payments. The bond is initially sold at less than face value and paid back in full at a later date. Button Zero is focusing primarily on creating these financial assets to promote greater diversity and utility within DeFi.
Cardano Officially Announces ADA Pay Plugin
Cardano has launched an ADA payment gateway on Odoo (On Demand Open Object) — a platform with over 7 million users. Odoo will give millions of individuals and businesses (small to large) the ability to accept ADA as payment and utilize Cardano payment rails.
This is a major partnership and breakthrough for Cardano, adding a major utility to the ADA token. With the blockchain network boasting smart contracts and a high token utility, Cardano is looking to reverse the narrative of little development and insteadset the project up for success in 2023 and beyond.
Global Economy
US Inflation Rises to 9.1% YoY
The latest inflation data to come out of the United States showed a 9.1% YoY increase in the inflation rate — maintaining the highest gains on record in over 40 years. With the inflation rate in mind, many commodities and asset prices have come down substantially in recent weeks.
Lumber, core crops, precious metals, and other goods have dropped by as much as 30%+ from all time highs. This data suggests that the entire economy may be cooling off rapidly and could possibly signal the peak of inflation. If this is true, the economy is set to enter a recession.
EURO Falls to 20 Year Low Versus USD
The European Union’s EURO has fallen dramatically versus the USD over the past few weeks. For the first in 20 years, the EURO and USD shared a parity in value before the EURO continued its trend lower.
This has further damaged the EUs purchasing power overall as the coalition also battles high rates of inflation and an energy crisis due to the severing off of Russian oil.
China Facing Mortgage, Banking Crisis
The most interesting news to come from the global economy is the economic stressors being reported in China. Residents in multiple regions had recently made bank runs, fearing that their savings may be lost when access was restricted.
Many Chinese residents have also ceased their mortgage payments. In China, it is common practice for apartments and homes to be sold off prior to buildings being physically built. Ideally, Chinese citizens are able to put their money into highly stable assets while they await for the project to be finished. The problem in China now is directly intertwined with its real estate market.
Many companies within real estate have faced liquidity issues and have struggled to stay solvent. The high push of inflation made projects very expensive, leading to many to simply never get completed. This prompted Chinese citizens to stop paying mortgages, threatening the entire Chinese economy with an epic bubble burst scenario.
Market Analysis
The cryptocurrency market is finally seeing its most prominent bounce since March 2022, finding some temporary support. When looking at weekly charts, the Total Crypto Market has found near-perfect support at the 200 WMA.
The market itself declined almost straight down from April to July 2022 — a brutal 12+ week stretch of selling. Although the Total Crypto Market has found support, the Total Altcoin Market (excluding BTC) looks even more bullish.
Market Rally Longevity
The real question here is how sustainable this market rally is. Many are now calling for the bottom, a complete turnaround from the recent onslaught of bearish sentiment. In all fairness, the market itself has gotten far more quiet, with an obviously sharp reduction in those continuing to publicly follow the space.
Ethereum appears to have the strongest breakout as we grow ever-closer to The Merge. However, Ethereum is also coming off of 11 straight weeks of selling — a historical record for ETH.
In March 2022, following a sharp decline from the market peak, prices rallied 44% in what many thought was the “next leg up”. That never materialized as the market fell another 64% to the bottom of this latest decline.
Bitcoin Weakness
The biggest bear case in the entire market is with the largest coin by market cap — Bitcoin. Bitcoin is one of the only assets in the entire market to be well below its 200 WMA support. It also holds ~40% market dominance, though BTC.D looks excessively bearish.
A narrative will be put to the test here — most correlations have been related to the direction of Bitcoin, especially from an institutional perspective. If Bitcoin enters a deeper bear market, would alts dump too? Historically, the answer is yes.
If Bitcoin goes flat, dominance can still decline as altcoins rally. This is where the argument of “ the flippening” comes in. The flip refers to Ethereum flipping Bitcoin in market cap. If Bitcoin enters a deeper decline but alts like Ethereum rally anyway, a new market dynamic will have emerged.
Summary
We are in a buy zone and have been for weeks. Those who had been waiting for an entry point into this market — one was delivered in the form of 2017 high prices. Essentially, the market just reset the past five years.
Unfortunately, the global economy is still largely headed towards a deeper decline. Why? Central banks have been aggressively raising rates yet inflation YoY remains high. Recently, prices in many commodities have declined.
Prices declining leads to smaller profits, which leads to cost cutting. Many companies — both inside & outside web3 — have been conducting layoffs. This is grounds for a risk-off environment, which means stocks & crypto could see more dumping.
If you are looking to aggressively DCA aftering buying closer to the highs — this is a great opportunity. If you are looking for an entry point after missing the market explosion post-2017, this is a gift. Invest with a long term outlook, but don’t be surprised if this rally is short lived.
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