Crypto Automated Trading

Weak Hands

After rallying to a new Bitcoin all-time high in March, markets had looked without momentum for weeks. New catalysts such as an Ethereum ETF approval look very unlikely. The launch of new Bitcoin and Ethereum ETFs in Hong Kong has not attracted meaningful volumes. The much-anticipated announcement of the Eigenlayer token in the Ethereum ecosystem led to more disappointment than excitement. On the downside, increasing US government crackdowns against crypto privacy tech and decentralised finance platforms has reminded market participants of the large existing legal and regulatory uncertainty.

The launch of the Bitcoin ETF had raised many questions. One of them was: will ETF holders be Hodl-believers who are buying for the long-term? Or will they weak-hand their positions at the first time of trouble? ETF outflows of $564 million on Wednesday this week alone give a clear answer to this question. Not everybody can stomach the volatility to which crypto traders have become accustomed.

On the other hand, Bitcoin’s drop below $60,000 is not a major cause for worry for battle-hardened market participants who have seen it before. The low $50,000 has been seen as a ‘bull-market’ drop area by technical analysts for a while. The saying ‘Sell in May, go away’ does not come from nowhere as market participants prepare for a quieter summer of accumulation.

Meanwhile, Morgan Stanley is looking to allow its 15,000 brokers to recommend Bitcoin ETFs to their customers. The 4th halving has also reduced Bitcoin’s issuance rate. Even if an Ethereum ETF may be delayed, it will not go away either. Blackrock’s ETF applications so far have a 100% success rate. Maybe the biggest risks are on the legal side. But that fight continues, it is led by large crypto players such as Consensys, Coinbase and Uniswap who represent a wide range of the industry. They have significant expertise and capital behind them. Most importantly, the SEC has been losing its cases at a fast rate. Its attempt to make policy by enforcement is not constitutional.

Many more catalysts for upside and downside lie in the future. The main question is not if the bull market will continue, the question is ‘when’.