April 3, 2023
Cryptocurrencies: Weekly Update
Bitcoin has been the best-performing asset so far this year, and it doesn’t look ready to stop anytime soon. This isn’t an April Fool's day prank, Bitcoin is up around 72% year-to-date as of the beginning of April.
The majority of Bitcoin’s outperformance over other equities in 2023 has been a result of 2 major breakouts. The first breakout saw BTC rally over 45% throughout January thanks to improving inflation expectations at the turn of the year. This most recent breakout has seen BTC rally over 35% in just 1 week as a direct result of the US banking crisis.
As we’ve discussed in recent CryptoPulse reports, the collapse of several well-known ‘crypto-banks’ likely should have crushed sentiment in the crypto market, but instead, Bitcoin tagged its 200-day moving average and bounced to new 2023 highs.
Bitcoin remains in a strong bullish phase above both of its key moving averages and has continued to set new 2023 highs nearly every day this past week. Truly, BTC has not cared at all about negative sentiment or regulatory pressure on the crypto industry in the US. Even with an onslaught of backlash from the SEC on the crypto industry in the US thus far this year, BTC has now accomplished a significant feat that we have seen occur in each of the past 2 4-year Bitcoin cycles.
Referring to our 4-phase understanding of Bitcoin’s macro market cycle, the breakout above the Bear market downtrend on the 1-month timeframe indicates that BTC has bottomed, Accumulated, and is likely now in the Expansion phase that typically leads to the beginning of the next Bull cycle. With the next Bitcoin halving set to take place early next year, we are right on schedule for BTC and the rest of the crypto market to build up once again in anticipation of the event.
If you want to learn more about this cycle and our method for examining Bitcoin’s long-term market cycle then you can watch our webinar discussing the topic as a CryptoPulse Quant premium member here. If you’re not yet a CryptoPulse Quant member, you can see the chart that we’re referring to above.
As far as levels go for Bitcoin, things look relatively clean for the first time in a while. Current short-term support looks strong around $26,500, so don’t be surprised to see a potential flush down to this level to shake out traders before another move higher. The worst-case scenario for Bitcoin’s price would be to lose $26,500 support which could lead to a drop all the way to $24,250.
However, if and probably when we do get another move higher, the psychological $30,000 level needs to be taken out on a weekly timeframe to confirm a continued rally. Beyond $30k, technically the $31,800 level would be a monumental resistance area to take out, because that would put BTC back in the low end of its 2021 Bull market range.
As things currently stand, Bitcoin’s dominance of the overall cryptocurrency market cap is back at around 48%, which is its highest level since the Bear market rally in June/July of 2022. This is a major inflection point not just for Bitcoin but also for the entire cryptocurrency market.
If BTC flies through the 48% dominance level then we will see more relative strength in Bitcoin than has happened at any point since early 2021, which would likely lead to altcoins bleeding capital back into BTC. However, if Bitcoin’s market cap dominance begins to roll over from here then it could be a strong indication of a rotation into altcoins.
For anyone who doesn’t know how to chart Bitcoin’s dominance for yourself, all you have to do is go to TradingView on your web browser and type “BTC.D” in the symbol search.
The optimal market conditions to indicate that its time to start buying altcoins would be if Bitcoin’s dominance begins to wind down from its current level, while the price of BTC continues higher. You can see that historically if BTC rejects the 48-50% dominance range, then you get a quick reversal on the metric, so don’t wait too long to take a stab at your favorite altcoin if these conditions come true.
For weeks we have been closely following and reporting to you all about the ongoing SEC enforcement against some of the biggest players in the US crypto industry, but as we just discussed above, Bitcoin has continued to rally regardless of the regulatory pressure. There have also been strong rallies in other top altcoins like Ethereum (ETH) and even Ripple (XRP) which have likely benefited to some degree from the surge of the new capital in the wake of the multi-bank collapse just a few weeks ago.
It is no surprise that ETH has been one of the only large-cap altcoins to go green alongside BTC so far this year because they are widely regarded as the two safest cryptocurrencies available. However, XRP has been a pariah in the US for several years now ever since the SEC targeted them on the claims of XRP being issued as an unregistered security.
Unfortunately, XRP hasn’t been available to traders on US exchanges for quite some time (some of you may still own it from several years ago or even from trading on decentralized exchanges). Despite the inability for US traders to participate in XRP’s rally, it has been a close second in performance behind BTC so far this year.
So what is going on with XRP? Well, 2 major legal developments appear to be going in the favor of Ripple Labs and their XRP token. The first is that the SEC appears to have potentially overreached with their supposed regulatory authority, as reports from their ongoing lawsuit against Ripple Labs indicate that everything is now going in the favor of the defendant. This isn’t at all surprising given that the overzealous action of the SEC since the FTX collapse has reignited a fire for US Crypto lobbyists and pro-crypto politicians to push back against the regulator.
The second reason why XRP has been flying is likely thanks to an unforeseen positive consequence of the CFTC suing Binance this past week, which is the world’s largest cryptocurrency exchange.
Here’s the thing… the CFTC appears to have caught Binance redhanded for a litany of severe financial crimes which include but are not limited to a multitude of compliance and AMLKYC violations, offering unregistered futures and options trading, and even having an internal quant desk which was allegedly being fed Binance user trade information to allow the exchange to trade against its users for a profit.
This could and likely should have been disastrous news at least in the short term for cryptocurrency prices, because the case from the CFTC points out tons of outrageous violations from the world’s largest crypto exchange, however, there is one plus side. Thanks to how airtight this case seems to be, it is extremely likely that the CFTC will win the case against Binance. This would mean that while the SEC has frivolously tried and failed to regulate the US crypto industry under existing securities laws for years now, the CFTC could establish the precedent that several of the largest cryptocurrencies are commodities rather than securities.
The entire CFTC case against Binance would serve as the antithesis of the SEC’s case against XRP, because if the CFTC wins and does establish the precedent that cryptocurrencies like XRP are commodities, then the SEC would have virtually no jurisdiction left with which they could go after Ripple Labs.
This is exciting for XRP lovers that have been eagerly waiting for the SEC vs. XRP case to come to a close because it could be the quickest path for the XRP token to be relisted and offered for trading by US exchanges once again. This is also exciting for the US crypto industry as a whole because it would see the defeat of one of its biggest opponents in the SEC and its Chairman Gary Gensler.
Stepping away from all of the exciting industry news, we have also had some recent updates to our CryptoPulse Quant model which is now fully allocated after buying both Bitcoin and Ethereum.
Unsurprisingly BTC and ETH have been the strongest coins out of our top 10 by Trend Strength (TSI), but several other smaller altcoins such as Chainlink (LINK) and Cardano (ADA) have been inching closer to Ethereum’s TSI level. This shows that BTC is clearly still completely on its own in leading the market, but other smaller coins appear to be keeping up and building momentum.
Another event that happens with our CryptoPulse Quant model is that we rerank the top 10 cryptocurrencies by market cap at the end of each quarter to check for any coins that have gained or dropped significantly in the overall market cap since the previous quarter. Although we expected that a couple of symbols could have gotten rotated out of the top 10 this quarter as a result of all of the FTX collapse at the end of 2022 and the ongoing regulatory witch hunt by the SEC, we can now confirm that all 10 of the top symbols from last quarter remain in the top 10 now.
We’re excited to see where our BTC and ETH trades can go from here, but don’t be surprised if we get a rotation out of one of these positions into a more speculative altcoin as the market continues to heat up.
If you’re not yet subscribed to either our CryptoPulse Quant model or the new CryptoPulse Sprint trading strategy and would like to learn more about our products then you can talk to our Chief Strategy Consultant, Rob Quinn, here.