What to watch in the crypto markets in the weeks ahead

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By Jonty Sacks*

Expect volatility, but also expect some spectacular rebounds.

Jonty Sacks

The collapse of the TerraUSD stablecoin has the usual crypto sceptics sniggering “I told you so.” Warren Buffett, Larry Fink, Charlie Munger and the “gerontocracy” named by billionaire Peter Thiel as enemies of Bitcoin (at the 2022 Bitcoin Conference in Miami) may be gloating for now, but the tide of history is against them.

There is a financial revolution afoot, and it will not be a smooth ride. Those who invested fully in traditional financial markets had better brace themselves for a torrid few years. Decades of monetary stimulus cannot continue forever without currency debasement.

That is what Bitcoin was created to solve. It is programmatically impossible to inflate Bitcoin beyond 21 million coins in issue. Take a look at the following graph for a historical perspective of US dollar purchasing power.

Source: CPI Inflation Calculator

$1 in 1980 is worth just $3.51 today, and it’s going to get worse. Bitcoin’s purchasing power has grown by a compound 94% a year since 2016.

Ethereum (ETH), Cardano (ADA), Polkadot (DOT), Solana (SOL) and other cryptos have entirely different business uses. They provide blockchain solutions for common business and financial needs, such as lending and investing at interest, but without intermediaries such as banks. To participate, you need to own the native currencies on which these blockchains operate, namely ETH, ADA, DOT and SOL.

There are more than 3,000 “decentralised applications” or dapps now residing on the Ethereum blockchain – each providing a solution to a common need, such as the ability to earn superior interest rates to that offered by traditional banks, to insure an asset or a life, or borrow money, to name a few.

For information about Jaltech’s Cryptocurrency Basket, click here.

Anyone planning to build a new financial system to challenge the existing one had better be able to achieve massive volumes of transactions per second.

Card company Visa says it is capable of handling more than 24,000 transactions per second (TPS), while Solana boasts a transaction speed of 65,000 TPS. This is admittedly a theoretical transaction speed, but it shows that blockchain technology, even in its infancy, is capable of blistering speed. And those transactions on Visa cards are not fully settled for three or five days after the fact. Blockchain transactions are based on smart contracts, which are just lines of computer code setting out the parameters under which the transaction becomes self-executing. This means transactions are executed in microseconds.

How does this impact the crypto market?

ETH is down approx. 50% from its November 2021 high of $4,811 and SOL is down approx. 70%. Most altcoins are down by similar amounts.

Bitcoin is the tide on which other cryptos rise or fall. Crypto analyst Marcus Kramer argues that a large number of stimulus cheques dished out by the Joe Biden administration to help Americans survive these fraught economic times will likely end up in BTC (as they did in 2021).

“Secondly, institutional funds entering the crypto markets (Fidelity, Paypal, Tesla, MicroStrategy etc.) and even governments entering crypto now (Miami) comes on top of that,” says Kramer. That’s not to mention the number of countries now accepting BTC as legal tender, including El Salvador, the Central African Republic, and cities such as Miami and Lugano in Switzerland.

For information about Jaltech’s Cryptocurrency Basket, click here.

Altcoins (which are those cryptocurrencies, not Bitcoin) have started to show signs of recovery in the last few days, albeit from much lower support levels.

There may be further bumps along the way, but it’s clear that buyers have re-entered the market, believing this is the best buying opportunity of the year.

A decent gauge of investor sentiment is the futures long/short ratio, which measures the number of traders opening long positions versus opening short positions over a period of time. It’s now moved heavily to the long side of the trade, which is usually a bullish indicator.

These are not particularly alarming times for those exposed to cryptos for more than four or five years. For them, this is all too familiar. The volatility of cryptos is a feature of this emerging financial eco-sphere and will remain so for some years to come. There may be a period of exhaustion over the coming months, but we should also expect some spectacular rebounds.

  • Jonty Sacks – Partner at Jaltech

Jaltech offers everyday people effortless and convenient access to the cryptocurrency market.

One of Jaltech’s investments is its Cryptocurrency Baskets which is tailored for investors who are looking for an investment option that provides investors with exposure and diversification across protocols, digital currency and blockchain technology.

For information about Jaltech’s Cryptocurrency Basket, click here.

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