A key to understanding the present cryptocurrency cycle

Bitcoin has been trading in the $35500/38500 trading range for the past few days. After yesterday's declines, also driven by the difficulties in the stock market, BTC returned to put pressure on the top of the trading channel in the $38K region.

Yesterday, stock markets suffered very significant losses, with the S&P 500 dropping 2.44% below 4500 points and the Nasdaq losing 3.74%. The turbulence was triggered by Meta's quarterly report. The stock deflated 26.44% to summer 2020 levels, recording the worst session in its history.

Amazon's report, which showed a better-than-expected performance, partially rebalanced the picture.

The situation on the American stock market is reaching levels comparable to the microcap altcoin market, with companies that capitalize hundreds of billions (when not thousands) but record intraday declines of 20%, like any shitcoin. And the amazing thing is that this figure doesn't surprise anyone anymore.

The main cause of such a scenario, is dictated by the fact that there is too much money on the market and many improvised "investors" who, when making decisions, are not guided by reason but by greed and fear, emotions that are the only drivers of the markets.

Obviously we know that to invest profitably, we must do the exact opposite of what the masses expect.

On the crypto front, bitcoin continues to trade within its trading range, with intermediate support falling to the $36350-36300 level. Looking at the current short-term technical structure, the main cryptocurrency seems ready to test again the resistance area at $39000, the last obstacle before the psychological threshold in the $41K region.

We have already seen how Bitcoin's road is paved with a series of resistance levels up to $44000, so a major effort from buyers is needed.

If we enter the weekend with Bitcoin above $38000, reasonably we will have a clear break attempt with the simultaneous rise of the altcoins.

Conversely, if BTC is rejected again, we should expect a test of local support in the middle part of the range. In general, at this stage I don't particularly like altcoins because of bitcoin's dominance on very low levels, so I find it rewarding to target only the top alts. This is because once bitcoin is able to materialize a decisive technical breakout, it will reasonably catalyze much of the capital.

Kind of like what happened between October 2020 and January 2021, with bitcoin rallying and altcoins chasing.

A key to understanding the present cryptocurrency cycle

The very particular cryptocurrency cycle we are in differs from any previous cycle. I have argued that there are very good fundamentals in crypto that are completely independent of their price in the market.

In fact, 2021 was the year of the transformation of the crypto market from a purely speculative thing to something more complex.

Since the United States began integrating cryptos into its economic system, the number of bitcoin transactions has jumped 317% to $4.2 trillion and the number of ether transactions has soared 729% to $3.3 trillion.

The total supply of stablecoins also grew by 388% to $140 billion, while the transaction volume of this class of coin increased by 370%, reaching the respectable figure of over $5 trillion.

A significant portion of these transactions, about 70% is caused by the crypto hunger that is infecting public institutions of all kinds, not only multinationals and investment funds, but also government coffers.

From this point of view, El Salvador and more recently the municipality of Rio de Janeiro, which announced its intention to allocate 1% of its treasury to cryptocurrencies, have made headlines. But few know that US municipalities are also moving in the same direction.

For example, Miami Mayor Francis Suarez promised that the city would buy bitcoin and create a "MiamiCoin," which is a hub where anyone can mine on Stacks' blockchain to collect rewards for both Miami's semi-official wallet and themselves.

New York City Mayor Eric Adams also wants to become "the mayor of all bitcoin," while Scott Conger, mayor of Jackson, Tennessee, is trying to find a way to mine bitcoin in a disused wing of City Hall and Mark Wheeler, Chief Information Officer of Philadelphia, has spoken out in favor of crypto adoption in the public coffers by the city.

Funding for crypto projects has reached a record $25 billion, indicating that more money has been allocated to this sector in 2021 than in the previous six years combined.

Recent examples include:

• Large NFT projects like PleasrDAO, which raised $69 million in funding;
• Crypto tax platform Cointracker, which announced an initial $100 million round of funding;
• Fireblocks, which earned $550 million from "venture" investors and is now worth $8 billion;
• Nexo (a platform used by many of our subscribers), with one of the largest-ever "round A" funding rounds in the U.K. from BCB Group at $60 million.

Basically, the numbers tell us that the industry is going strong.

The only weak side to this trend is the fact that this economic miracle is confined to the Western world and the US in particular.

Unfortunately, the world is raising economic fences divided by increasingly deep ditches between Western economies and those of the rest of the world. And crypto is no exception.

It's no coincidence that the countries that are closing themselves off to crypto are precisely those that are least supportive of the West.

Today, banning bitcoin on its own territory means sending a clear signal of not belonging to the US orbit.

But even within the U.S., there continue to be large swaths of the establishment, right and left, who do not understand what is at stake on crypto, especially on the eve of the launch of the digital yuan in the Chinese Winter Olympics.

Until 2017, the fate of cryptos (in terms of quote cycles) was in the hands of the Chinese. In the 2021-2022 cycle, it is the US that holds the fort.

Of course, this makes the price performance today very vulnerable to US policies. So even though the economic fundamentals of crypto in the US are great, we still have a sword of Damocles over us.

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