Undead: Just in time for Halloween, crypto markets have awoken from their deathly slumber as the price of Bitcoin (BTC) finally surged through its $20,000 price barrier, while Ethereum (ETH) spiked 12% from yesterday, pushing above $1500 for the first time since the Merge.
Bitcoin is up 5% for the day, currently changing hands for roughly $20,100 — its highest point in three weeks. This rare piece of positive price action has also seen crypto’s overall market capitalization reclaim territory beyond the US$900 billion barrier, currently flexing an overall valuation of $935 billion.
Altcoins have also been enjoying a respite from the slump over the last 24 hours as well, with Cardano (ADA) witnessing a substantial 12% gain, Solana (SOL) jumping 10% and Dogecoin (DOGE) zooming 9%.
This refreshing hit of green in crypto markets — something that has grown increasingly rare over the past few months — is being widely attributed to the encouragement investors received from a number of big companies reporting solid third quarter earnings.
Solid earnings in traditional finance (TradFi)
The main leaders in Q3 earnings were Coca Cola (KO) and General Motors (GM) which surprised investors by beating expected targets by a considerable margin yesterday morning. General Motors came in nearly 20% above their estimates and Coca Cola beat theirs by just over 8%.
Banks also had a good earnings season. Last week, Goldman Sachs, JPMorgan Chase and Wells Fargo all showed great results for Q3, furthering the argument that we’re in a “pasta bowl recession”, a term used to describe the long, shallow, downwards price action that’s come to characterise both stock and crypto markets.
Carlos Gomez takes a macro look at crypto markets
Carlos Gomez, the Chief Investment Officer at Belobaba Crypto Asset Fund acknowledged the role of these recent earnings reports in driving crypto-related bullishness, pointing out two core themes behind the market’s newfound confidence.
The first was “better than expected quarterly earnings from big tech companies” with Carlos saying that even though there’s no technical reason that crypto should trade alongside Big Tech earnings calls, that’s just the way markets work at the moment.
“The strong correlation that exists between the SP500 and Bitcoin makes it rational to expect investors to trade Bitcoin in the same direction,” he said.
The second major point, says Gomez, is the recent election of the UK’s new Prime Minister Rishi Sunak who — outside of his love for Bored Apes and friendliness towards cryptocurrency in general — will bring about some much-needed stability to a struggling United Kingdom.
“Regardless of whether you’re Tory or Labour, there’s finally some political stability, plus the new PM is pro-crypto.”
“He expressed his intention to transform the UK into a crypto hub back then when he was Treasurer. If he continues with his line of thinking, he could influence and push now as PM some serious but positive regulatory reforms,” Gomez added.
Bryan Ventura zooms in on Ethereum
Bryan Ventura, a senior lawyer specialising in Web3 and crypto startups and the chair of BlockchainNZ, took a slightly closer look at the crypto markets themselves, saying that there’s no reason why this couldn’t be the return of the bull market.
“I won’t count this out as a new bull market. I’ve been a forex trader since 2010, been in crypto since 2016 and a crypto lawyer since 2017 during the ICO boom.
We’ve never seen how crypto markets might behave during high inflation environments. The markets could finally be seeing Bitcoin and ETH and other crypto assets as inflation hedges,” he said.
Taking notice of Ethereum’s particularly impressive price action, Ventura said that a mix of growing developer activity on the blockchain combined with a more environmentally friendly consensus mechanism are starting to materialise as clear ‘buy’ signals for crypto investors.
“ETH pumped leading up to the Merge, which played out as a ‘buy the rumour, sell the news’ scenario,” he said.
“ETH has bullish fundamentals, with the bulk of Web3 and DeFi projects still using the network. Ethereum validators are now also earning a stable income through proof-of-stake consensus. It’s also a more ESG friendly asset for institutional investors now that it uses proof-of-stake,” he added.
“Ultimately, I think ETH’s recent price surge finally reflects these good fundamentals.”
With this in mind Ventura adds that there’s always the ever-present threat of rallies like these being a “bull trap” which occurs when a sharp rally tricks overly optimistic investors into buying only to lose out shortly after.
“There’s a risk of this being a bull trap. That’s why I’m always careful taking big long positions in a bear market. That said, the daily and weekly charts might suggest these bullish moves could last a little while,” Ventura said.
Undead: Richard Fetyko says a 30% rally is on the cards
Richard Fetyko, the CEO of crypto analytics platform altFINS said that there’s a solid chance that a short-term crypto rally is back on the cards.
“I think we could see a decent 20-30% rally near-term from what were oversold levels, followed by some profit taking,” he said.
Investors would be wise to look to the future as well, says Fetyko, suggesting that the flood of bear-market Venture Capital will see a host of new investment opportunities join the fold over the next few years.
“I also expect many new digital assets to hit the market in 2023/2024 timeframe from a large cohort of blockchain projects that were funded by 2022 when a record breaking $25B was invested by VCs into digital asset startups,” he said.
Fetyko adds that it’s entirely possible this run could be the start of a new bull market.
“It’s possible that we’ve seen the bottom already after 70%+ drawdown from prior cycle’s highs. Crypto markets have been in a sideways channel since June really, despite absorbing all sorts of negative macro news — inflation, the UK mess, war and the China slowdown,” he explained.
“The initial stages of a bull cycle tend to be choppy, with lots of contradicting noise that will drive waves of greed and fear.”
Overall, it looks like the sea of green could last a little while longer. Investors would be wise to keep a watchful eye on upcoming Q3 reports from Microsoft, Alphabet, Meta, Apple, and Amazon which are scheduled to come through later this week.
Due to crypto’s increasingly high correlation with similarly risk-on assets like Big Tech stocks, significant gains or misses from any of these companies could be a pretty strong leading indicator for future crypto price moves.