Crypto crash continues, but is it time to panic?

This summer season, a time traditionally set aside for relaxing and unwinding by the pool or at the beach, has been anything but a welcome break for many crypto investors. Instead of reaping the rewards of their hard-earned gains, many digital asset holders will be nursing their losses after a string of shock declines in some of the biggest and most established projects. Bitcoin, for one, has dropped nearly 15% since the start of June, while smart-contract forerunner Ethereum has tumbled more than 30% over the same period. And it's been a similar story across the altcoin space, too, with virtually every coin and token either matching or exceeding Bitcoin's losses. But before we give in to despair, we would be wise to consider the bigger picture.

Following a relatively brief post-pandemic crash, the entire cryptocurrency market has been in a veritable boom since January 2023. Even taking into account the recent corrections, Bitcoin has still more than tripled from $16,529 on 31 December 2022 to floating around the $60,000 mark as of 22 August 2024. Meanwhile, Ethereum has more than doubled from $1,195 to about $2,600. In fact, the six-month Bitcoin chart actually shows a more than modest gain of 14.5%! So, is this just a small blip ahead of more upside to come or a harbinger of the latest crypto bear market? What will be the main trends to watch during the rest of 2024 and beyond?

Catalysts galore

While it's easy to get worked up when the red days start racking up, we have to remember that no market can rise indefinitely, and corrections are totally normal. It's understandable that the big swings associated with crypto can be particularly unnerving, but we have to stay logical and look at the fundamentals, which are undeniably positive. After a period of stagnation, the US stock market sprang to life this month, which means an increase in appetite for risk assets. Even better, the July CPI index showed inflation down below 3% for the first time in three years, while the latest job report has revealed a significant cool-down in the labour market.

When taken together, these two developments have all but assured a Fed rate cut of at least 25 bps in September. As always, this is brilliant news for risk assets, of which cryptocurrencies are notoriously the riskiest. If we couple this with the already widespread and growing adoption of major digital currencies by big financial institutions and pension funds following the approval of spot Bitcoin and Ethereum ETFs by the SEC, everything is in place for further gains in the two big legacy coins in Q4 2024. In fact, the latest batch of 13F filings revealed 1,924 institutional holders of spot BTC ETFs, according to ETF Store President Nate Geraci, up from 1,479 in Q1. The fact that this adoption accelerated during a period of declining prices is a great sign of growth to come in fairer conditions.

Ctrl+Alt

Bitcoin and Ethereum are all well and good, but as established instruments, their potential for huge upside is now somewhat limited. For the really big potential gains, would-be investors will have to look to the altcoin space. Luckily for them, some of the best deals around can be found precisely here. One of the most prospective altcoins in 2024 is the famous "Ethereum-killer", Solana, whose much faster transaction speeds make it an ideal choice for DeFi, NFTs and smart contracts.

Over the past few months, active Solana users have been rewarded with significant airdrops from multiple projects built on its platform. For example, users of Jito and Jupiter Exchange received airdrops worth upwards of $10,000. This added value and potential for returns have been and will continue to be key to drawing in capital and further energising the ecosystem. At its current level of $141.36, SOL is still well below its November 2021 ATH of $259.96. In the next bull cycle, it's hard to envisage a scenario where Solana fails to set a new maximum, which makes its current pricing very attractive.

Another altcoin that could be set for large increases in the next bull cycle — albeit for very different reasons — is the quintessential memecoin, DOGE. Despite the downturn in the wider crypto market, Dogecoin managed to register a single-day 5% gain following the publication of a topical meme by patron Elon Musk. This is a sign of how susceptible to external influence this canine coin can be, and bull cycles are exactly the time that we see plenty of hype. Getting technical, DOGE is forecasted to encounter resistance at $0.188, aligning with the 50% Fibonacci retracement level. This leaves a solid 80% potential gain based on its current price of $0.10, which makes it worth at least a small speculative allocation.

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