Why did the cryptocurrency market rise? Of course, it was the BTC halving. Every halving triggers a cryptocurrency bull run, and this time is no exception.
More importantly, I believe market conditions are more favorable today than they were in early April for the following reasons:
1. For the most liquid, highest quality crypto assets, your entry price is 8-25% lower than at the beginning of the month. For many Altcoin, the discounts are much larger, up to 40% in some cases.
2. Market expectations for rate cuts this year have been significantly reduced following the recent hawkish statements from the Fed. In fact, the market has now accepted the idea that rates may still rise, even though this is not the case at the moment. If economic/inflation data pulls back in the coming months, risk assets will rise as a result.
3. There is almost zero expectation that the SEC will approve an ETH spot ETF in May. If the SEC ends up approving an ETH spot ETF against market expectations, I think ETH could easily rise 50% in a few days, and all ETH derivative assets would follow. If this happens, it will probably be the most painful trade for most investors. On the other hand, if it is not approved, it will largely be a non-market event.
4. We are thankful that the conflict between Israel and Iran has not escalated. Both sides seem willing to temporarily cease fire. Although the situation is delicate and the risk of escalation is still possible, at least the market is now acutely aware of this risk and has priced it in to some extent.
5. Over the past 3 weeks, leverage has been cleared from the system after multiple rounds of liquidations. Therefore, the setup has been cleaned up and leverage will be reestablished in the coming weeks.
6. Crucially, despite the sharp market correction over the past few weeks, there have been no major breakouts. Large centralized exchanges have not collapsed. Most DeFi protocols are functioning normally. Even USDe, which has been likened to UST for its high yield, has not decoupled as some investors feared. Re-collateralization pools have also not experienced any problems. Part of the reason things are so good is that the sell-off was gradual and orderly, but it's good to know that there haven't been any breakouts.
So, where do we go from here? I think we are still in the early stages of this new cycle. I think the market environment is more favorable for Altcoin from now on. I expect we will see more participation from retail investors in the coming months.
