Bitcoin: Fed-Driven Reflective Rally (It’s Altcoin Season) – Seeking Alpha | Omd Cialis

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Rate hikes = bullish bitcoin?

The Federal Reserve hiked interest rates by 0.75 basis points during Wednesday’s (27/07) FOMC meeting, raising its policy rate to 2.25%-2.5%. Immediately thereafter, risk assets turned bullish as investors interpreted the Fed’s plan as dovish. During his speech, Jerome Powell stressed two overarching points:

  1. Talk hard about inflation.
  2. The likelihood of further hikes and a unusually strong increase in September.

Given the Fed’s explicit intention to fight inflation, markets know this will require rate cuts afterwards. Although the Fed’s words were literally hawkish, risky assets shifted bullish in anticipation Rate cuts in 2023.

In addition, markets are looking for a maximum of 50-100 basis points before the Fed stops raising rates. Also, Powell stressed the importance of inflation data ahead of September’s FOMC – meaning that as inflation falls, the Fed will tend to adopt a more dovish stance.

SPX: USD (week) vs. US interest rate

SPX: USD (weekly) vs. US interest rate (Trading View 8/2/2022)

Following the cryptocurrency’s bullish price action over the past week, investors have taken the Fed’s actions as a signal that altcoin season is about to begin. Consequently, we expect Bitcoin (BTC-USD) and many altcoins to trade bullish until September 20, 2022 when the FOMC meets again.

How to trade this altcoin season

altcoin season

altcoin season (blockchaincenter.net 31.7.2022)

The chart above calculates the percentage of bitcoin market cap dominance to determine if it is more beneficial for investors to hold altcoins or bitcoin. Observably, the last “altcoin season” took place in the first half of 2021. This previous altcoin season was mainly driven by Covid-19 stimulus and loose monetary policy that encouraged speculative investing.

With the recent rise in altcoin dominance, we believe the cryptocurrency market is shifting into one New Utility-driven altcoin season. This time, altcoin price rallies are being driven by:

  1. Rate cut expectations: Each altcoin season requires loose monetary policy, fueled by Federal Reserve rate cuts (or expectations of rate cuts).
  2. Ethereum’s 2.0 upgrade: this should propel the ETH-BTC chart higher and benefit both proof-of-work and proof-of-stake altcoins.
  3. High-Revenue, Transparent DeFi Protocols: Following the debacles of Terra Luna and Celsius (both centralized entities), investors in digital assets are now being encouraged to take advantage decentralized and provably safe logs.
  4. Corporate adoption of digital assets: We anticipate that big tech companies will increasingly use tokenization, metaverse, and NFT protocols to generate revenue.

August – September altcoin season roadmap

Bitcoin dominance roadmap

Bitcoin dominance roadmap (Trading view 7/31/2022)

  • To maximize profit potential, we think it’s prudent to get into cryptocurrencies that offer high-volume utility generated through real-world use.

From observing the cryptocurrency’s price action over the past week, we can conclude that this year’s altcoin season started on Wednesday (7/27) right after the FOMC meeting. At the time of writing, blockchaincenter.net reports the following top 50 price movements over the last 90 days:

Top 50 market caps over the last 90 days

Top 50 market caps over the last 90 days (blockchaincenter.net 31.7.2022)

In particular, the “altcoin seasons” continue stories rather than basics. Accordingly, the altcoins that fit the most popular narratives tend to see the biggest gains. As previously mentioned, we believe the most optimistic altcoin investment narratives are the Ethereum (ETH-USD) 2.0 merger (which affects both Proof-of-Work and Proof-of-Stake coins), high-volume DeFi protocols, and Metaverse /NFT include projects.

Proof of Work vs. Proof of Stake Coins

Cloning network ETH1 Ethereum Classic (ETC-USD) was the biggest gainer after Wednesday’s Fed meeting. In our view, this indicates that Proof-Of-Work vs. Proof-Of-Stake will be a hotly debated topic after the Ethereum 2.0 merger. We assume that this debate will attract new investors both Pages causing PoW and PoS coins are bullish. Some proof-of-work coins (besides bitcoin) that can benefit from this momentum are:

  • Ethereum Classic (ETC-USD) / RavenCoin (RVN-USD)
  • Monero (XMR-USD)
  • Filecoin (FIL-USD) / Chiacoin (XCH-USD)

Filecoin and Chiacoin in particular use PoSt (Proof-of-Spacetime) algorithms to manage decentralized blockchain security. The Proof-of-Spacetime serves as the basis for a valuable and environmentally friendly Proof-of-Work. We believe that decentralized storage networks using this technology have a bright future.

Alternatively, some proof-of-stake coins we are watching include:

  • Ethereum 2.0 (ETH USD)
  • Polygon Network (MATIC-USD)
  • Binance Coin (BNB USD)
  • Hedera Hashgraph (HBAR-USD)

High Revenue DeFi Protocols

A second popular altcoin narrative involves high-volume and provably secure DeFi protocols.

The chart below shows that LooksRare, OpenSea, dYdX, MetaMask and PancakeSwap are currently the top-grossing dApps in the cryptocurrency market.

Top dapps total log earnings

Top dapps total log earnings (Token Terminal 8-1-2022)

Token Terminal uses data from The Graph (GRT-USD) to help investors distinguish between truth (log earnings) and marketing exaggeration (market cap). Regarding DeFi applications, the main sources of income in the cryptocurrency market are:

  1. Open sea
  2. Uniswap (UNI-USD)
  3. dYdX
  4. Convex finances
  5. Lido Finance
  6. Synthesis (SNX-USD)
  7. Aave (AAVE-USD)

As mentioned in our previous Bitcoin article, we strongly believe in the long-term growth potential of DeFi applications. By eliminating intermediaries, decentralized applications single out and To use of inefficiencies in legacy technology networks. As a result, we believe DeFi will eventually evolve into a trillion-dollar industry.

Metaverse / NFT Projects

Finally, we believe that Metaverse, NFT, and Play-to-Earn game logs have a tremendous advantage. Currently, most retail investors seem too distracted to exploit the growth potential of these digital asset sectors. For example, on July 13, 2022, Verified Market Research reported that the Metaverse is expected to reach $824 billion by 2030 and will grow at a CAGR of 39.1% from 2022 to 2030. Metaverse may exceed $1 trillion in annual revenue by 2030 achieve.

At BitFreedom Research, we believe that a significant A portion of future Metaverse earnings will be captured by The Sandbox (SAND-USD), Ethereum (ETH-USD) and Polygon Network (MATIC-USD).

Technical Bitcoin Analysis

The passages above explain some of the best investment opportunities for this altcoin season (if it happens). We will now conclude this piece by using Bitcoin’s technical analysis metrics to determine how long altcoin season may last and where Bitcoin may bottom.

Weekly Bitcoin Harmonics

Weekly Bitcoin Harmonics (Trading view 07/29/2022)

The chart above uses Fibonacci circle and Gann Fan analysis to track Bitcoin’s previous cycle and predict Bitcoin’s current cycle. In the last cycle, bitcoin peaked on December 17, 2017 at around $19,783 and bottomed out on December 10, 2018 at $3,157 of 84.04%. With Bitcoin’s current price structure, the chart signals two possibilities:

  1. The floor is in. Bitcoin’s >40% crash in June 2022 seems eerily similar to Bitcoin’s final crash in November 2018. If Bitcoin continues to follow this fractal, it will bring in $17,644 on June 18, 2022, Bitcoin’s macro low.
  2. Bitcoin’s bear market is only half over. During the previous two cycles (2013 and 2017), Bitcoin fell by over 80% about a year after it peaked. If Bitcoin is destined to follow this move again, it means that Bitcoin will bottom out around $11,000 on November 7, 2022.

On a shorter time frame, TrendSpider shows that Bitcoin is trading in a range. In our view, altcoin season can last as long as Bitcoin stays between its $24,000-$28,000 ceiling and $21,000-$20,000 floor.

Bitcoin trend lines: 4H (solid) vs. 1D (dashed)

Bitcoin trend lines: 4H (solid) vs. 1D (dashed) (TrendSpider 08/01/2022)

Additionally, Bitcoin’s daily trend lines (dashed) are showing significant bearish momentum, indicating that Bitcoin’s bear market is not over yet. To confirm a new uptrend (and confirm that $17,000 is the bottom), Bitcoin needs to confidently break above $28,000.

The central theses

  • Investors have interpreted the Fed’s actions to signal that altcoin season is about to begin.
  • Consequently, we expect Bitcoin and many altcoins to trade bullish until the next FOMC meeting on September 20, 2022.
  • After September bitcoin can mirroring previous cycles and plunging lower to form a final bottom around $11,000 in November.
  • The altcoin season can continue as long as Bitcoin stays between its $24,000-$28,000 ceiling and $21,000-$20,000 floor.
  • Investors can take advantage of this altcoin season (if it happens) by getting into cryptocurrencies positively impacted by the Ethereum 2.0 merger, high-volume DeFi protocols, and Metaverse/NFT projects.

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