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The Crypto market won't rush to growth


3 August 2022 Written by Alex Kuptsikevich  FxPro Senior Market Analyst Alex Kuptsikevich

Bitcoin continues its soft landing towards the lower end of the upward corridor, losing around 0.5% over Tuesday and retreating to $23K. Ethereum has strengthened by 2.7% to $1630 in the past 24 hours. Leading altcoins moved from down 3.8% (Solana) to up 2.6% (BNB). Total cryptocurrency market capitalisation, according to CoinMarketCap, rose 1.1% to $1.06 trillion overnight. The Cryptocurrency Fear and Greed Index added 3 points to 34.

Cryptocurrencies await further signals from policymakers or the macro economy, with a total capitalisation hovering around $1 trillion. The market managed to stay above the 2018 highs. The market has moved out of the extreme lows and removed oversold conditions.

However, we conclude from previous crypto market cycles that even if the bottom is passed, there could be a prolonged lull and a very uneven recovery ahead. A powerful year-long surge, as it has been since early 2017 and October 2020, follows only after a long lull.

The Crypto market won't rush to growth

Due to falling real incomes (wages are growing slower than inflation) in much of the global economy, people will be less inclined to be quite adventurous to seed investments in cryptocurrencies. This means that the industry is now entering a stress testing period in which only the most viable projects will survive. For crypto enthusiasts, the most prudent approach may be to focus on the most global projects, such as BTC, ETH, and products that have become businesses, not just industry hype. 

Stablecoin USDT's capitalisation has risen for the first time in three months, indicating consolidation and further growth in cryptocurrencies. However, it could also prove to be a sign of an increasing number of people's interest in transactions bypassing the traditional banking system due to both the sanctions against Russian banks and the declining confidence in traditional finance in less developed parts of the world.

Meanwhile, Glassnode questioned the continuation of bitcoin's recovery rally, citing that on-chain indicator data has not improved fundamentally in recent days. Online activity remains subdued, suggesting little new demand is coming in. According to the Morgan Creek CEO, bitcoin will not enter a new growth phase until 2024, when the halving will take place. However, the cryptocurrency's current price is too low; a fair price for BTC should be around $30K.

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