Crypto Bumps Against Resistance Despite Positive Developments
- Bitcoin (BTC, Tech/Adoption Grade “A-”) seems to have drifted into the doldrums as volatility disappears.
- Polygon (MATIC, Tech/Adoption Grade “B”) is testing a key long-term trendline this week.
The bulls and the bears are caught in a stalemate. Bitcoin is experiencing an unexpected lack of volatility as it sits near the key $42,000 level.
If the bulls lose ground, this level will remain as strong resistance.
But if BTC can build even a little upward momentum, it could break above and confirm $42,000 as support. If that happens, the next resistance level will be near $46,000.
Here’s BTC in U.S. dollar terms via Coinbase Global (Nasdaq: COIN):
The current pullback — which started all the way back in November — is one of the longest market corrections in Bitcoin’s history, negating any hopes for a bounce thus far.
At some point we would have to expect that a relief rally, or a potential dead cat bounce, will be coming.
That neither has manifested is strange for two reasons.
- The market is severely oversold.
- There have been several bullish developments for Bitcoin lately that should be fueling upward momentum.
What sort of bullish developments?
Fundamentals are stronger than ever, as the hashrate hit an all-time high recently, less than a year after China banned Bitcoin mining.
Adoption is also growing. You can now purchase homes in the United States using Bitcoin-backed loans thanks to a new Miami-based fintech startup, Milo.
This is likely just the start of a trend of new financial products that will allow crypto holders to implement the “Buy, Borrow, Die” financial tricks of the elite. The strategy involves buying assets, never selling them, and instead borrowing cash against those assets for additional funds.
This is just another example of Bitcoin and crypto leveling the playing field for its users and another sign of the greatest wealth transfer in history that is taking place before our eyes.
But for now, we’re still waiting for these developments to have an impact on price action.
Unlike Bitcoin, Polygon’s positive developments have been reflected in price action over the past few months. The developers have cranked up new app-development funds and are focused on building a thriving gaming and NFT ecosystem.
Polygon has been outperforming the broad market in that time. In fact, it was one of the best-performing altcoins over the past month or so, hitting an all-time high on Dec 27.
It has since broken down a little bit and is retesting the bottom of the ascending channel that it’s been trading in for months.
This is a critical level. If it breaks down further from here, its recent upward trend will likely end. On the other hand, a recovery to levels at or above $2.25 will dispel any worries of a trend reversal for this Layer 2 project.
If Polygon keeps up what they’ve been doing, we expect MATIC to be around for a long time. It could even be one of the biggest winners over the next few years.
Here’s MATIC in U.S. dollar terms via Coinbase:
Notable News, Notes and Tweets:
- There is a one-way talent flow from web2 to web3 despite the salary discrepancy. That trend is unlikely to change.
- In case you’ve forgotten about the El Salvador Bitcoin adoption news, more than 4 million people have now downloaded the El Salvador wallet.
What’s Next
At this point, we’re just as tired of saying that the market’s current price action isn’t reflective of fundamentals as you likely are of hearing it.
But we’ll keep saying it. It’s still true, and it’s vital that investors understand it.
Crypto adoption continues to increase and expand. In just the past year, there have been accomplishments that many crypto analysts, evangelists and investors would have thought were pipe dreams not too long ago.
Things like ...
- Bitcoin becoming legal tender.
- The approval of a BTC futures exchange-traded fund (ETF) ... with the possibility of a spot-based ETF on the horizon.
- Central governments and large international companies buying Bitcoin using their treasury funds.
- More hedge funds and family offices investing in crypto as more financial tools are released to help drive in further institutional investments.
- People having access to tools that will allow them to purchase homes using Bitcoin-backed loans.
All led me to think that the next bear market — whenever it comes — will look a whole lot different than what we’ve witnessed in the past.
There are too many reasons for current holders not to sell ... too many ways for them to take advantage of their current investments ... and too many people still sitting on the sidelines waiting to jump into this market.
Of course, we’ll closely evaluate that hypothesis when the time comes. Until then, we’ll keep you posted with the latest updates and market news, so stay tuned.
Best,
Alex
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