The total crypto market cap exceeds $2 trillion as major tokens rise despite macro headwinds. Crypto analysts assess the bullish catalysts that have fueled recent price movements and explain why Bitcoin (BTC) may be on the verge of a ‘huge uptrend’ and why last week’s Kiln Testnet consolidation of Ethereum could ultimately lead to an ‘inevitable speculative jump in price’.
A brief overview of developments in the crypto market
As we have mentioned in the news of Kriptokoin.com, the global financial markets have been stuck in a bearish mood amid geopolitical uncertainty, stagflationary pressures and tightening financial conditions, but major cryptocurrencies have been stuck in a bearish mood. It supported the trend with a relief rally last week. According to CoinMarketCap, Bitcoin and Ethereum were up nearly 10% last week to trade around $44,600 and $3,100, pushing the combined value of all cryptocurrencies to over $2 trillion as of Friday afternoon.
Goldman Sachs and Cowen are the latest Wall Street players to announce their crypto efforts, while BlackRock CEO Larry Fink says the firm is examining digital currencies, stablecoins and underlying technologies. In the crypto industry, Terraform Labs CEO Do Kwon said that Luna Foundation Guard, a nonprofit started to grow the Terra Blockchain ecosystem, is ready to buy $3 billion in Bitcoin to increase its TerraUSD stablecoin reserves. Meanwhile, Yuga Labs, creator of the Bored Ape Yacht Club NFT collection, has raised $450 million at a $4 billion valuation. Former Andreessen Horowitz partner Katie Haun has also raised $1.5 billion for two new crypto-focused venture capital funds.
“Bitcoin is on the verge of a major breakout”
According to Yuya Hasegawa, a crypto market analyst at Tokyo-based crypto exchange Bitbank, and ‘positive developments’ in market fundamentals could turn into a ‘major breakout’ for Bitcoin as the token tests the strong $45,000 resistance level. In his research note Friday, the analyst makes the following assessment:
Bitcoin’s gains on Thursday were accompanied by an increase in open interest among major futures exchanges, while the average funding rate fell into negative territory. This means that short sellers are accumulating their positions. Accumulated shorts can result in a gradual short sale in the event of a breakout, which can push the price up significantly.
If BTC successfully breaks above $45,000, Yuya Hasegawa expects the token to reach $48,000 to $50,000 in the short term. However, if the price fails to test the $45,000 resistance, the token could correct further and drop to $42,000.
Marcus Sotiriou, an analyst at UK-based digital asset broker GlobalBlock, notes that the recent surge in the leading cryptocurrency could also be linked to its potential to serve as a petro-asset. The ‘Petro Bitcoin’ narrative emerged from news reports about oil giant Exxon Mobil’s plan to expand a program in which it converts excess gas into energy for Bitcoin miners. Exxon has reportedly been trialling the program since January 2021, according to Bloomberg. In a research note on Friday, Marcus Sotiriou points out:
The world’s fourth-largest oil company integrating Bitcoin into its operations is also a strong bullish signal. More importantly, this integration allows Bitcoin to be mined in a more environmentally friendly way. After all, the environmental issue is a major concern for institutions.
According to Sean Farrell, head of digital assets at Fundstrat Global Advisors, seasonal trends as well as narrative-driven catalysts offer a positive outlook for Bitcoin over the next two months. Based on monthly returns data from the previous five years, Sean Farrell states that April and May have historically been a period of better performance for both Bitcoin and Ethereum, as illustrated in the charts below.
While there are several factors that contribute to seasonal performance, Sean Farrell believes the increased inflows of funds into crypto could result from solving tax obligations and returns. “Many predict that investors will undoubtedly be hit with tax bills for capital gains realized in 2022,” the analyst recalls, reminding that experience shows that those with significant capital gains often have the foresight to have the liquidity to pay taxes for them. In his research note, the analyst highlights the following:
We think the unraveling of tax season could provide individual investors with better clarity on how much capital they can allocate, possibly leading to favorable price action.
“Ethereum’s Kiln testnet could fuel the price boom”
Last week, Ethereum converged on the Kiln testnet. This development marks the final testnet assembly before the long-awaited conversion of the Blockchain network from Proof of Work (PoW) to Proof of Stake (PoS). The merger has increased demand for Ethereum staking, which refers to the act of ‘locking’ your crypto assets to help validate transactions on PoS blockchains in exchange for rewards in the form of tokens.
More than 10 million Ethereum tokens, or 8.3% of all Ether in circulation, have been staked so far, according to on-chain analytics firm IntoTheBlock. “The completion of the Kiln Testnet merge was a possible catalyst for many to start staking their ETH, thereby reducing the liquidity of the ETH supply on exchanges,” said Sean Farrell
So far, since the launch of Beacon Chain We have seen the highest monthly growth in new ETH. If the network maintains this level of momentum, we may see a massive squeeze in ETH supply at some point in 2022 as investors rush to stake their ETH.”
Sean Farrell also expects to see an ‘inevitable speculative jump’ in ETH price leading to and following the eventual merger, given the limited number of Ethereum tokens that will be in circulation. Analyst assesses:
These stakers are unable to liquidate their ETH due to the current locking mechanism that prevents existing stakers from reaching liquidity on day one post-merger. So any profits they collect will not enter the market until the protocol is updated to allow for this.
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