Bitcoin BTC has risen above $23,000 since its June low, and traders are beginning to believe that the bear market is over. Ether ETH eum, on the other hand, has outperformed Bitcoin, rising above $1,500 since the June low. What are the fundamentals indicating?
According to blockchain analytics firm Glassnode, the number of pleb addresses owning more than 0.1 Bitcoin but less than 1 Bitcoin has been increasing at a parabolic rate, with a significant increase when Bitcoin was trading in the $20,000 range. Furthermore, a Cointelegraph article published on June 20 stated that over 13,000 Bitcoin wallets had achieved wholecoiner status in the previous seven days.
This is a clear indication that retail Bitcoin buyers (plebs) have been stacking Sats at low prices despite the bearish market and the collection of fear, uncertainty, and doubt (FUD) news dominating the major news outlets.
The total market capitalization of cryptocurrency has returned to levels above $1 trillion. The crypto market cap had fallen below $1 trillion in mid-June 2022 and had struggled to break through that barrier until Saturday, July 16. Positive sentiment could drive the market cap higher.
The quantitative tightening implemented by the Federal Reserve Bank of the United States and other central banks has contributed significantly to the crypto bear market, in addition to the liquidation of margined trades and the collapse of some crypto exchanges. Since interest rate hikes are expected to continue, many analysts were surprised by the recent bullish momentum of Bitcoin, Ethereum, and other cryptocurrencies, as they were expecting lower prices.
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Many Bitcoin stakeholders expected the US SEC to approve Grayscale’s application for the first US spot Bitcoin ETF in recent weeks. SEC Chairperson Gary Gensler rejected the proposal, citing a lack of a proper framework to protect investors and Grayscale’s failure to clarify concerns about market manipulation. Despite this bottleneck, many investors continued to accumulate Satoshis, increasing demand for Bitcoin and, as a result, driving up the price.
Last week, Ethereum developers discussed a tentative merge date for the long-awaited upgrade of the Ethereum chain from proof-of-work to a proof-of-stake protocol. After the merge, Ethereum’s energy consumption is expected to drop by 99.5%, while the minting of new Eth tokens will be cut by 90%. Investors have been accumulating Ethereum at low prices betting that the upgrade will raise value of the Etheruem ecosystem.
Aside from Bitcoin and Ethereum, DeFi platforms have had a strong recovery, with Lido Finance up more than 160% in the last seven days. Aave AAVE , the crypto lending platform, has increased by more than 40% in the last seven days, while Avanache has increased by more than 45% in the same time period.
The next round of FED and ECB meetings could have an impact on how the crypto market develops. The SP500 stocks and cryptocurrency markets continue having a strong positive correlation. Over the last month, the crypto market may have rallied in tandem with the SP500 index. If the Fed accelerates interest rate hikes by 100 basis points, we may see a weaker equity market and possibly a weaker crypto market.
The SPDR S&P 500 ETF is up 4.59% in the last month, with the most growth coming in the last seven days at 4.56%. Further quantitative tightening and rising inflation rates around the world may put additional pressure on equities and, as a result, crypto prices. We may not be out of the woods yet.
Disclosure: I own bitcoin and other cryptocurrencies.