One Spark to Set the Market on Fire – Chung’s Weekly Digest (2/13)

Price action appears to contradict on-chain metrics, the pressure is building up for an explosive upswing.

The Price Veil

Two very bullish on-chain metrics are prepping the market for an explosive move, illiquid supply of Bitcoin ($BTC) continues to climb and stablecoins are heading to exchanges. The first metric will cause a supply shock when demand kicks in, driving the price north. The second metric is often an indication that buyers are loading up on dry powder to make purchases on exchanges. 

The second scenario identified in last week’s digest played out. There is a prolonged consolidation above $41k creating a new floor for the next leg up.

The bearish scenario of Bitcoin being unable to hold itself above $41k did not play out. In a chart by on-chain analyst Will Clemente, Bitcoin is currently ranging close to its support and will likely face its first major resistance at around the $47k-$49k range. If the resistance is broken, the next major resistance is at around $57k.

The question to ask is whether institutions are selling their Bitcoins. They are not, instead they are shorting the futures market according to Willy Woo. 

Weekly Recap

Polygon, Ethereum’s layer-2 solution raises $450 million in its funding round. 

Safemoon prepares to launch its payment card with Mastercard. 

Ethereum continues to dominate the Non-Fungible Token (NFT) market with $4 billion in sales on a 30-day volume.  

KPMG, Canada jumps into the Bitcoin bandwagon by buying Bitcoin to be part of its balance sheet. 

Binance Labs jumps in on GAMEE with a $1.5 million strategic investment. 

Binance’s Secure Asset Fund for Users reaches $1 billion.  

The US Department of Justice arrested a duo and confiscated $3.6 billion worth of crypto assets from a 2016 exchange hack. 

Russia will unveil its draft legislation by February 18 to recognize Bitcoin as currency. 

Binance agrees to invest $200 million in Forbes and will be one of the two biggest investors in Forbes. 

Uber confirms that it will eventually accept cryptos. 

Tezos strikes a new partnership with the Manchester United brand. 

Market Sentiment

Bitcoin is not far from its greed and fear index reading a week ago. 

The market is fearful because of the surging inflation rate, the Federal Reserve will move to increase the interest rates. 

The US inflation rate is at a 40-year high. 

Geopolitical uncertainty is also prompting investors to move their assets from risk-on assets to risk-off assets. Crypto assets are widely regarded as risk-on assets. 

Many influencers are calling for a $30k Bitcoin because of the uncertainty in Ukraine and FED’s decision to increase interest rates. It remains a possible scenario but it is also an unlikely one.   

Coins to Watch

PancakeSwap ($CAKE) is the main Decentralized Exchange (DEX) on Binance Smart Chain (BSC). Apart from being an exchange, the platform also provides other products and services. 

Decentralized exchanges perform a pivotal role in the crypto ecosystem. A matured ecosystem like the BSC attracts a lot of attention.  

Many industry players prefer to rely on decentralized exchanges rather than centralized exchanges for fear of censorship. 

Trader Joe ($JOE) is a DEX on the Avalanche network. A rapidly expanding layer-1 solution. Trader Joe is also trading at a massive discount from its all-time high price of $5.09. It is currently priced at $1.24 at the time of writing. 

Avalanche is a real contender as the top layer-1 solution and will grow exponentially. $JOE has very little downside given its value. 

Serum ($SRM) sits on the Solana blockchain. Solana is an ecosystem that is actively building. Many institutions are building their projects on Solana and this network has been regarded as one of the top contenders for the Ethereum market share. 

Raydium ($RAY) and Osmosis ($OSMO) are also tokens with very promising prospects. 

Projects that are in operation, present a real value proposition. There are credible benchmarks to project the growth of the platform and the price of its token. 

Given the current market scenario, crypto assets with low market capitalization will return better gains than those with heavy market capitalization. 

Discarding the 4-year Cycle Mentality

Bitcoin has a short history and in the past, its market cycle lasts four years. The bull cycle is often sparked by a halving event. The result of halving is to slow the rate of production of new coins. If the demand remains the same, the halving process will drive the value of Bitcoin up. 

However, the prolonged bull market cycle seems to suggest that Bitcoin is no longer following the same cycle. In the previous cycles, Bitcoin ought to have reached its macro top by the 4th quarter of 2021. Instead, Bitcoin capitulated even before the crypto market hit euphoria. 

In this cycle, the market is seeing unprecedented participation from institutions. Even a sovereign nation has adopted Bitcoin as its legal tender. The game has changed. Mainstream assets are less volatile because of institutional participation. There are more fundamentals and regulatory clarity in the crypto ecosystem today compared to the yesteryears. 

Adoption will continue but the price will not go on massive wild swings. In this cycle, Bitcoin will behave differently. Volatility will be significantly reduced and this will make crypto assets a hedge to inflation. It may no longer be a four-year cycle, but a prolonged and gradual bull cycle. 

Source : bsc.news