Is the Crypto Summer Back?

The crypto industry has gone through a rather tumultuous time over the past 2 years, with one bearish catalyst leading on to the next.

Using Bitcoin as an “index” for the crypto industry, we can see that volatility has raged on as Bitcoin crashed by about 75% from its all-time high of about $70,000 to lows of $16,000 before gaining some momentum to $30,000 which is where we are today.

And we can see this in Bitcoin’s chart. At the point of writing, Bitcoin has 2x from its $16,000 lows which supports my thesis that we are already in the midst of some form of “crypto-recovery”.

While we certainly need no introduction to the events that unfolded, I want to bring the recovery of the crypto industry to your attention.

If you had wished you got in earlier last round, then take note now! The crypto industry has started to recover from the chaos!

Here, I explore:

???? Is the Crypto Summer here?

2 positive catalysts for crypto

Many may argue that crypto is in its infancy and that the technology behind it can be used for the better of humankind. While there are indeed genuine use cases (one of my personal favorites is where blockchain is used to issue out educational certifications to prevent any fraudulent certifications), what I think is the most prominent near-term catalyst for crypto is the idea of accessibility.

Unknown to many, the trading of cryptocurrency is actually not as accessible to the general market as one might think. While it’s easy to set up a crypto brokerage account on a personal basis, many institutions and hedge funds do not have direct exposure to cryptocurrencies, be it due to accounting, risk, security, and regulatory concerns.

Temasek for example has no REPORTED cryptocurrency in their portfolio, however, they have exposure to the industry via their “investment” into FTX. (Remember that saga? I still think they got away easy).

We need to bear in mind that to date, the cryptocurrency industry is one that is still highly unregulated hence many sovereign funds are still sitting on the fence when it comes to exposing their portfolios to such assets.

As such, when it comes to the idea of accessibility, we are looking very specifically at how Smart Money (Institutions and Hedge Funds) can be directly involved in the trading of cryptocurrencies.

To this end, there have been 2 occurrences within the crypto scene that have surfaced in recent times which I think is bullish for the industry as they are indeed a step forward in making crypto accessible to Smart Money.

Catalyst 1 – Blackrock Spot Bitcoin ETF

The world’s biggest asset manager, BlackRock Inc., filed an application for a spot Bitcoin ETF in June, kicking off a fresh wave of speculation that the long-illusive investment product would finally get SEC approval. BlackRock’s application, in turn, led to a major crypto market rally and a flurry of similar ETF applications and resubmissions from issuers including Fidelity Investments and WisdomTree Inc.

Why Crypto and Wall Street Are Longing for Spot Bitcoin ETFs

This is a bullish catalyst because it would allow Bitcoin itself to be traded on the stock exchange, just like any other stock.

In addition, it is important to know that Blackrock is the main applicant for this Bitcoin ETF. This does call for some speculation as back in 2017, Blackrock wasn’t exactly an advocate for such assets:

What I find most interesting about Blackrock applying for this ETF is that based on past records, the SEC rejected about 30 other such applications. Hence, Blackrock is not the first asset manager to apply for such an ETF. However, in terms of their ETF application success rate, Blackrock has had 575 approvals against 1 rejection.

Hence, investors are now speculating that Blackrock knows “something” that others don’t as they wouldn’t be foolish enough to “tarnish” their application success rate if they knew that this application would be rejected. (Pause and think about this for a moment ????????????)

Should Blackrock’s application be successful, this would be a major milestone and HUGE catalyst for crypto as all other rejected applications would also very likely be approved as “why Blackrock can I cannot?“.

This would indeed add a lot of liquidity into the market and may potentially be the start of a new bull rally for Bitcoin.

Catalyst 2 – Digital Asset Exchange EDX Markets

A consortium of leading broker-dealers, global market makers and venture capital firms announced the launch of EDX Markets (EDXM), a first-of-its-kind exchange that will address latent demand for digital asset trading by enabling safe and compliant trading of digital assets through trusted intermediaries.

Digital Asset Exchange EDX Markets Launches

News of crypto exchange collapses makes more viral headlines, but we don’t get much news of new exchanges setting up shop. Initially planned for Q4 of 2022, the launch of EDX was delayed till recently when they launched early this month with just 4 tokens on the platform (Bitcoin, Bitcoin Cash, Ethereum, and Litecoin).

The launch of EDX Markets marks yet another milestone in making crypto accessible to Smart Money as with higher security and more transparent technology, EDX aims to provide greater liquidity to reduce the spread when trading allowing for “better prices for investors than those offered by existing cryptocurrency exchanges”.

Backed by some of the most prominent names in the financial world including, Charles Schwab, Citadel Securities, Fidelity Digital Assets℠, and Sequoia Capital, EDX is expected to be well taken up by institutions given the strength of their network.

Bitcoin’s Technicals

Since recovering from its lows of $16,000, here’re some interesting insights from Bitcoin’s price action:

• Bitcoin is currently trading at the previous support-turn-resistance range of between $29,000 and $32,000. (Indicated in Yellow) For this short-term bull rally to continue, we need to see the price action breakout of this range and ideally close higher than $32,000 for it to be deemed as a continuation pattern.
• Since the formation of the long-awaited GOLD CROSS (Typically a sign that the rally has shifted from bear to bull), the price action of Bitcoin has continued to observe the 200 Day Moving Average as a dynamic support level bouncing off it twice this year. (Green Arrow)

Will we see “sunnier” days ahead for crypto?

I approach cryptocurrency with caution but maintain a sense of optimism.

While I acknowledge their potential, I do so by ensuring that they occupy no more than 10% of my overall assets. As such, any bullish or bearish actions in the near-term do not have a life-changing impact on my portfolio.

Blackrock’s ETF application is indeed timely and while this application is facing some resistance of late, it is likely that it will be passed in which case I hope that this may end up being an “open the floodgates” moment for the crypto industry.