Thu, 10/05/2023 - 09:07
Following a year of ups and downs for digital assets – amid regulatory uncertainty, increasing energy prices and investor hesitancy – things are finally looking up for cryptocurrencies. While Bitcoin and Ethereum have both gained a whopping 38% and 65% YTD, those metrics don’t really tell the full story. Most of these gains came in a short burst of growth during the first few weeks of 2023, which famously followed a monster crash of almost 80% spanning from late 2021 throughout the entirety of 2022. Since March 2023, prices have been literally stagnant across a majority of digital currencies. But now, after six consecutive weeks of outflows, crypto is finally back in the game with $21 million of inflows recorded this week.
That said, however, it’s not all smiles for every digital currency, and there are still some definite winners and losers. Market leader Bitcoin recorded an impressive $20 million in inflows, while short BTC saw outflows of $1.5 million ($85 million since April). Major altcoin and potential Ethereum killer Solana had quite a good week, too, recording $5 million in net inflows and hitting a total value locked (TVL) of $338.8 million, its highest level this year.
Ethereum, on the other hand, continued its losing streak to post outflows of $1.5 million despite the buzz around a potential spot ETF product. As we enter Q4, investors want to know what the key factors will be for crypto and where we can expect prices to move.
Spot the difference
One of the biggest stories in the digital assets space this summer has been the SEC and its decision to approve multiple applications for spot Bitcoin and Ethereum ETFs from big names like Ark Invest, Blackrock and Invesco. The regulator has already taken full advantage of each possible comment and review period to delay making their final decision until their statutory 240-day response period is up. Commenters have suggested that this is to ensure no provider has an undue advantage over any other provider and that they will all likely be approved at once.
However, Bloomberg analyst Eric Balchunas has suggested an encouraging signal that the SEC could move to approve these earlier than the 10 January 2024 deadline. This is the fact that the regulator has sent comments to address the investment firms’ S-1 filings (related to plumbing, legal, and other technicalities). After all, VanEck’s Ethereum ETF is set to launch on the CBOE, though this has failed to ignite interest in the coin as expected. Bitcoin is a different animal altogether, though. Factors such as huge institutional demand, a proven track record, and trailblazer status coupled, of course, with its anti-inflationary model, make it much more likely to take off as an investment vehicle among more traditional investors.
Alt is the new black
Beyond the uptick in interest in BTC expected from institutions and more traditional investors, early adopters and true crypto aficionados are very much focusing their sights on the altcoin space for interesting and highly capable projects with good growth potential. With these savvy and prospective investors, functionality is everything. It’s also in this part of the market where we can expect to see the biggest swings in the coming months.
Solana, for instance, is already taking huge market share away from Ethereum and is slowly but surely laying the foundations to become the smart contract coin of choice. As we already mentioned, SOL reached a record TLV this past week and has enjoyed vigorous price growth over recent weeks. It’s currently trading in a horizontal range between $18 and $32 and sits comfortably at $23.14 at the time of writing on 5 October 2023. Since the beginning of the year, however, it has more than doubled in value to cast a shadow over the gains made by ETH and even BTC.
Another functional coin that is turning heads right now is Chainlink. In fact, in the past month alone, this smart contract darling is up 29.15% and looks set to make further gains before the year is up. The evidence would seem to suggest that two markets are now emerging – or rather, the bigger, more established projects like Bitcoin and Ethereum are being absorbed into the broader financial market system. As this trend deepens, the altcoin space will be fertile ground to grow for digital assets with real-world applications.
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