Monthly Crypto Alpha Report – August 2023
Market Roundup
Things are looking up. Narratives are bullish or have at least broken out of the ‘bearish wedge’ they were trapped in, lol. Bitcoin had its bullish share of news in June with the Blackrock ETF filing. In July, it touched a new yearly high of 31.4k on the daily charts. Altcoins had their bullish injection in July, with the Ripple victory – more on that later.
In terms of price, the story of the month is sideways, in a narrow range. Even Bollinger himself would be impressed looking at these BTC charts!
I consider this stage of the market cycle as the hope phase, even though it can feel like between hope and fear. Depending on your temperament, and depending on the news of the day, one or the other emotion gets the upper hand. The Ripple court case is a victory but hasn’t won us the war. There is a ton of uncertainty left. Chokepoint 2.0 isn’t over. A recession may still be in the cards. The federal money printer is still sitting still.
The consensus among most analysts and traders is that we have entered the early stages of a bull market. The problem with early-stage bull markets? They can take a year or so to really take off.
Also: the early stage doesn’t feel bullish. The post-traumatic stress from the recent bear is hard to shake off. Prices can and will dip after strong rallies.
The Fear & Greed Index signals this too. It has been hovering around the 50 midpoint for weeks.
This midpoint is also reflected in the price. The current 30k or so for BTC seems to be the cycle mid-point in the same way that 6k was touched often in the previous cycle (see chart below). Metrics from Glassnode indicate a slow and steady capital inflow, with many resembling the choppy market conditions seen in the 2016 and 2019-20 periods.
Altcoins had their moment in July, and so did Coinbase. They pumped hard – admittedly from down bad after the SEC lawsuits in June – on the news that the SEC essentially lost its case against Ripple/XRP. The SEC can appeal and probably will, but the verdict has shifted the balance of power in favor of the US crypto industry. Eat that, geriatric anti-crypto army!
Seriously, the verdict signals a shift of perspective in how US courts in the future will likely classify coins. The existing framework of financial regulators like the SEC is binary. A coin either is or isn’t a security. This NY district court ruling has said – for the first time: it depends on the context. This shift in perspective is much needed for the future regulation of tokens/coins. After all, crypto is a new asset class that doesn’t fit in the century-old securities legal framework based on orange grove shenanigans. Unlike equities and bonds, tokens on a blockchain can be more than a claim on a company’s earnings and assets. They can have utility.
Regulation will have to adapt to this new reality and this verdict is a first step, however, the potential appeal of the SEC unfolds. There is bipartisan legislation underway, and this ruling can inform and speed up that process. Great. Hopefully, the US can get their regulatory act together.
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