“Told You So!” – Every Crypto Investor

Every 6 months, crypto investors get to look at their friends who they have begging to get into the crypto game and say, “I told you so!”. Well, today’s the day! Bitcoin broke through its 50k ceiling and bitcoin investors are losing all of their friends.

Lets break down the crypto comeback!

Consumer Sentiment

Bitcoin fell from its $65k high in April after the Chinese government announced that it was going to crack down on crypto mining. To put this into perspective, at the time, 65% of crypto mining was coming from China and over the next 2 weeks, Bitcoin mining power was cut in half. This sent Bitcoin into a tail spin to its 29k low in July. At that point, many analysts predicted that consumer sentiment had dropped so low that we could see Bitcoin hit 20k for the first time since December 2020. Almost immediately, the opposite happened. Consumer sentiment sky rocketed on the backs of crypto celebrities (including Elon Musk) loud support for the crypto future.

Wall Street and Main Street Clout

Some of the worlds biggest banks and consumer facing companies jumped on the bandwagon this summer. These companies bought up Bitcoin in order to meet consumer demand as soon as pricing had overcome the China mining news. In addition to existing companies, one of the largest crypto platforms, Coinbase, had its IPO showing the rest of the market they mean business. While both Amazon and Walmart will not accommodate purchases in crypto in the next couple of quarter, they are both gearing up their operations to handle it in the mid-term.

Interest Rates

Easy money policies are gasoline for the stock market but are jet fuel for more volatile assets like crypto. We saw millions and millions of stimi dollars put right into the crypto market during the pandemic. However, like mortgage rates, increasing interest rates is bad for business. The Fed will soon have their Jackson Hole meeting where they are expected to taper easy money spending resulting in higher interest rates. While the degree of tapering is expected to be less because of the rapidly growing Delta variant, it will likely be bad for the crypto market.

Wrap it Up

While Cindy Wood thinks Bitcoin is on its way to 500k, most analysts think that $40-$50k is its short term sweet spot. As long as it holds above its 200 dma of $45,750, it seems to be in good shape.

The rates:

In the green! MBS’ are up 13 bps and have broken above their 50 dma. We are currently floating.