Emerging Optimism
Pricing in the Rate Cuts
Despite the technical correction in early May and the subsequent spot price decline to $56K, bitcoin has found momentum again, uplifting it to $67K and beyond. The current market structure brings bitcoin close to early March highs, which eventually propelled it to an all-time high of $73K.
Bitcoin's price performance is currently supported by several factors, including but not limited to:
S&P 500 and Nasdaq-100 all-time highs
Peaking US dollar
Lower than expected US inflation
Dovish skew of central banks
Upcoming QT tapering
In particular, investors are now monitoring the anticipated central bank rate cuts. Federal Reserve has kept its interest rates unchanged at 5.25% - 5.5% since July 2023, the highest level in over two decades. The rate cut delay stems from slower than anticipated progress in lowering inflation and the robust US job market.
Nearly two-thirds of economists surveyed by Reuters in May 2024 predicted the first federal funds rate reduction will be in September 2024, to a 5.00% - 5.25% range. However, many analysts are pointing toward fewer cuts in 2024.
Fed and its interest rate cut schedule plays a big role in crypto price discovery, as the "cheap dollar" firstly benefits risk-on assets. During previous cycles, the low (or negative) interest rates have greatly elevated bitcoin and its higher beta low-cap token fellows.
Towards a New Paradigm
From a purely technical perspective, bitcoin is again testing the 2021 cycle resistance (turquoise, below) that will act as a support for future cycles. If we use the 2020 halving as a reference point, the current accumulation phase might lead to a parabolic price advance in late 2024 and 2025.
Sources: CryptoQuant, Timo Oinonen
From a shorter term perspective, the critical 60,000 US dollar support seems to hold, and is now strengthening (yellow, below). The demand in upper echelons seems rather low, for now. However, as we know, bitcoin has a tendency to surprise investors.
While the retail segments remain relatively inactive, the whale level buyers are accumulating on a weekly basis. Large $1M - $10M category orders have been in an elevated role during the past fourteen days.
Source: Material Indicators
Bitcoin's realized price (orange, below) has reached its highest point ever, rising to $29,133.09. The realized price is important because it represents the average price of all bitcoin purchases. At the same time, the realized price illustrates that bitcoin buyers are making a profit on their investments, on average.
Sources: CryptoQuant, Timo Oinonen
In a bigger picture, the fortune now favors the patient investor. Like Dan Tapiero said before: "Our space is the only truly free market out there. We have undergone tremendous volatility, massive creative destruction every 2-3 years". Digital assets are unique and asymmetric investments that require a long-term vision.
TON Outperforms BTC in early 2024
CryptoQuant's data shows how the competitive Layer 1 market has evolved during the early 2024. Somewhat surprisingly Toncoin has significantly outperformed bitcoin, as showcased by the TON/BTC pair's 86.89 percent growth.
In addition to Toncoin, BNB (22.31%), FTM (16.38%), and SOL (3.63%) have all outperformed the leading cryptocurrency bitcoin in 2024. From another vantage point, ETH (-12.32%), TRX (24.56%), AVAX (-41.33%), and ADA (-48.9%) have prominently underperformed bitcoin.
Source: CryptoQuant
TON has clearly been one of retail's favourite tokens in 2024, and acting as the native currency of the Telegram ecosystem, it might actually have real potential to scale and gain organic traction.
In our earlier articles we took a closer look at newer high beta tokens like Ethena. For Ethena's ENA token, the current float (supply available to the public to trade) is only 0.09, meaning that 91% of the supply is at the hands of the founders or locked in by VC investors. In general, the float of newer high beta tokens remains extremely low.
Ethena currently offers a 37.2% APR for USDe, making it an alluring investment. While Ethena's major VC unlocks are scheduled for January 2025, giving a "safe corridor" for this year, it still needs to gather a huge amount of fresh retail interest.
Exchange Reserves in Secular Downtrend
Bitcoin's exchange reserves have been in a secular downtrend since early 2020 and this trend has only steepened in 2024. In early January, exchange's bitcoin reserves were at 2.09 million units, and have since dropped to the current value of 1.92.
By our general rule, increasing exchange reserves are a negative signal to the market, indicating selling pressure. The decreasing exchange reserves are a positive signal, vice versa.
↑ Increasing exchange reserves: Bearish, indicating bitcoin selling pressure
↓ Decreasing exchange reserves: Bullish, indicating accumulation to cold storage
Source: CryptoQuant
Power Law Signals >$100K Bitcoin
Despite the technical correction, bitcoin still seems to follow the power law model, developed by Harold Christopher Burger and Giovanni Santostasi. The power law essentially is a predictive model developed to forecast bitcoin's price trajectory.
Source: Giovanni Santostasi
The model fits in the same category with the law of diminishing returns, a principle stating that profits or benefits gained from something will represent a proportionally smaller gain as more money or energy is invested in it. I.e. bitcoin will continue to appreciate over time, but with a calmer cyclical pace.
Unlike the ordinary linear models, the power law forecasts bitcoin's long-term price appreciation on a log scale, meaning that both price and time scale exponentially along its Y-axis and X-axis.
The power law model forecasts a 100,000 US dollar valuation level for bitcoin by the end of 2024, and a $142,000 level by the end of 2025, which both represent reasonable spot price targets.
Some Exchanges Delisting USDT Ahead of the MiCA Regulation
The USDT stablecoin (or Tether) is now facing restrictions by the MiCA stablecoin regulation, coming into force on 30th of June. MiCA aims to establish a comprehensive regulatory framework for cryptocurrencies, and OKX, a major crypto exchange, has already discontinued USDT trading pairs in the European Economic Area (EEA) in anticipation of the regulatory update.
The regulation classifies stablecoins into two categories: Asset-Referenced Tokens (ATR) and Electronic Money Tokens (EMT). EMTs, which include stablecoins solely backed by fiat currencies, will be subject to strict regulations, requiring issuers to meet specific licensing and operational standards. As a result, the future operation of USDT in the EU is uncertain, with the regulation potentially impacting its governance, usage, and acceptance within the region.
As a contrast to OKX's decision, the legacy crypto exchange Kraken announced it has no plans to delist USDT at this time. Kraken's Mark Greenberg recently commented the matter on X:
"We know our European clients value access to USDT and we continue to look at all options to offer USDT under the upcoming regime. We will of course follow all legal requirements, even those we disagree with. But the rules are not finalized yet and we continue to do everything we can to continue to offer all relevant stablecoins to our European customers."
