What does the rest of the year have in store? A lot, according to William Quigley, the cryptocurrency fund manager at Magnetic, and the co-founder ofTether, the most traded cryptocurrency in the world. And, he’s the co-founder of WAX, a purpose-built blockchain for video game virtual items.
Let’s have a look at some of his predictions, including thoughts about how long it will take crypto to recover.
- Valuations: Valuations in many private crypto companies are likely overstated and will have to earn their way into those valuations. Massive VC funding also weighs on these companies as that capital must be paid off first before any common shareholders receive proceeds from a sale. Many first-time entrepreneurs don’t understand this dynamic.
- Shocks: The two biggest potential shocks to the crypto industry are stablecoin legislation and categorizing crypto as securities. This will likely play out in the US by 2024.
- NFTs: Despite a slowdown in NFT sales volume,NFTs are still popular and not going away.
- Metaverse: Predictions about the size and future impact of the Metaverse have little credibility because the term itself is undefined. There is no standard definition. It’s become an amorphous marketing term.If what people mean by Metaverse is a permissionless and open blockchain-based environment, that will not come from established Web 2 companies. That will come from new entrants. Which means it will take a long time to develop.
- Investment needed: The market size of the Metaverse will eventually be big, but it will take a decade at least.Massive investment is needed to get there.In addition, there won’t be one Metaverse, the name itself should make that evident. There will be thousands of Metaverses, most not interoperable.
- Creeping Big Tech: Apple and Google are opposed to the core principles of blockchain-based environments. No Metaverse from them will be included the sought-after benefits of blockchain that make the Metaverse concept a desirable alternative to the current internet ecosystem.
- DeFi: Decentralized finance has performed reasonably well during the crypto meltdown.DeFi gets conflated with centralized blockchain businesses like Celsius, Luna and BlockFi which performed poorly when hit with dislocations in the crypto market.
Are crypto investors rotating from Bitcoin to altcoins?
The crypto market is pulling back into support and could face potential headwinds in the short term. In the crypto Top 10, Bitcoin has been outperformed by the altcoins sector with Ethereum and Binance Coin, and Polkadot still preserving some of its gains from the past week.
This might show a shift in the crypto market dynamics as investors seem to be regaining confidence in the sector and moving away from Bitcoin. Therefore, the number one crypto by market cap appears to be lagging which translates into a decline in Bitcoin dominance.
As seen below, this metric has been moving sideways since May 2022 after seeing a small push to the upside. In 2021, as Ethereum and other altcoins reached new all-time highs, Bitcoin dominance plummeted to its current levels.
According to a report from Arcane Research, their Crypto Indexes for altcoins have been showing positive returns in August. As seen below, the research firm records 9%, 7%, and 5% profits for their Large, Mid, and Small Cap Index while Bitcoin records 2% profits.
Source: Arcane Research
Arcane Research noted: “With bitcoin underperforming relative to altcoins, the bitcoin dominance has plummeted from a peak of 47% in the middle of June to 40.5% now. As the market sentiment has improved traders have been more interested in getting exposure to altcoins than bitcoin.”
In the crypto market, altcoins might continue to dominate in the short as BTC’s price moves sideways. Thus, investors seeking higher returns might consider rotating into Large to Mid-cap cryptocurrencies, and Small Cap if they have bigger risk tolerance.
How does BTC react?
Despite a positive month for the majority of the crypto market, most cryptocurrencies are experiencing downside price action on low timeframes. This is due to the potential short-term impact of the macro-economic factors affecting the sector.
Tomorrow, the U.S. Federal Reserve (Fed) will release July’s Consumer Price Index (CPI) print. This metric is used to measure inflation in the U.S. dollar, which has been trending upwards and stood at a 40-year high. Thus, the Fed has been hiking interest rates and shifting its monetary policy in an attempt to slow down inflation. If July’s CPI print hints at success in those attempts, the financial institution might be inclined to act less aggressively.
This could lead to a stronger bullish momentum across risk-on assets, such as Bitcoin and the crypto market. In the meantime, market participants seem to be sidelined and expecting tomorrow’s outcome.
Bitcoin price struggled to gain pace above the$24,000 resistance zone. The price formed a top near $24,285 and started a fresh decline.
There was a clear move below the $23,800 and $23,500 support levels. The bears pushed the pair below the 61.8% Fib retracement level of the upward move from the $22,846 swing low to $24,286 high. Besides, there was a break below a major bullish trend line with support near $23,320 on the hourly chart of the BTC/USD pair.
Source: BTCUSD on TradingView.com
Hourly MACD – The MACD is now gaining pace in the bearish zone
Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now well below the 50 level
Major Support Levels – $22,650, followed by $22,500
Major Resistance Levels – $23,250, $23,500 and $24,000
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