December 30, 2021
Cryptocurrencies: Daily Update
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December has been far less climactic for the crypto market than we were all expecting, with Bitcoin selling down below the $50k level to start the month and maintaining a trading range with $45,500 support and $52,000 resistance.
With reports of increasing inflows to global crypto exchanges like Binance for the month of December, we would usually be concerned that this is an indication of institutions preparing to liquidate their positions by moving their coins to exchanges in order to sell.
However, there are two reasons why the recent increase in exchange inflows may not be an indication of a coming sell-off.
Interestingly enough, the Chinese crypto bans from earlier in 2021 are now coming to fruition as China’s main crypto exchange Huobi stopped allowing citizens in mainland China from using their trading service. Chinese crypto traders have until the end of December to sell their remaining cryptocurrencies. Migration of Chinese funds to other exchanges like Binance has been happening en masse since Huobi disallowed Chinese traders on December 15th.
Another factor to consider as a major reason for exchange inflows is year-end institutional window-dressing. Major institutions and whales have been determining their end of Q4 and end-of-year taxes. They have also been preparing their 2022 allocation/investment plans.
Long-term holders are likely selling for the short-term in order to report profits on their crypto positions for the year, while shorter-term holders may be incentivized to sell in order to offset gains from other investments.
We are currently watching Bitcoin and Ethereum as our key measures of the crypto market for the coming month, and are trying to remain agnostic towards individual altcoin trends such as in Polygon (MATIC) and Terra (LUNA). Both Polygon and Terra are still relative newcomers to the crypto market and are moving at their own trend independent of established projects like Bitcoin.
Until we get a bit more clarity from Bitcoin’s price action, we’re happy to remain in cash and mitigate potential further losses. Aside from BTC’s December range of $45,500 to $52,000, Bitcoin also has longer-term support near the $41,000 level that was tested in the last week of September before the price flew over +64% in October.
Before you’ve made your mind up that Bitcoin’s bull-run is over, consider that the coin is still maintaining 2 crucial support levels. With $1.5 trillion flowing into the cryptocurrency market in 2021, it would be shocking to see that value get pulled from the market at a moment’s notice, so if we can continue to defend the $45,500 level through the first weeks of January then you should not expect a further selloff.
However, if $45,500 support is lost in Bitcoin it may be a signal to stay on the sidelines and out of cryptos.
Coins to Watch: Decentraland (MANA) is hosting their own New Year’s Eve ball drop party in the Decentraland metaverse, which is bound to circulate the coin through mainstream news cycles for the rest of the week. We’re expecting MANA and other Metaverse plays to be hot in January. There are also expectations that Coinbase ($COIN) will be unveiling their own NFT marketplace in January, as well as the Solana-based Phantom Wallet which is going to be available for mobile users for the first time in January.
Today’s Winners: Algorand (ALGO) is up nearly 10% Thursday after the Algorand Foundation announced a $3 million incentive program for the Algofi decentralized finance platform which aims to offer blockchain-based lending and borrowing services. These rewards will be distributed to individuals that stake, supply, or even borrow on the Algofi platform during Q1 of 2022.
Today’s Losers: Avalanche (AVAX) and Terra (LUNA) both marked 1-2% losses on Thursday while the majority of other large-cap cryptos held or even went slightly positive on the day. A bit of profit-taking is likely responsible for recent sell-offs in these two as they both made new all-time highs in the past 6 weeks. Current support levels are $98 for AVAX and $75 for LUNA.