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Crypto's Volatile Week and Future Market Factors

2024-07-05 06:34:14

Bitcoin experienced a tumultuous week. Starting on July 4, coinciding with U.S. Independence Day and the UK election, Bitcoin plummeted from $59k to the $55k level, its lowest since April, and maintains a downtrend to $54k. As the leading cryptocurrency, it triggered a market-wide downturn, with major coins like Ethereum dropping off the $3k level. With such market conditions emerging at the start of the second half of the year, several factors need to be considered when planning investment strategies in the coming months.

Highlights:

  • Bitcoin’s plunge is reasonable when considering a simple trading strategy.
  • The upcoming U.S. election, the expected rate cut, and the expectations on the Spot ETH ETFs will influence market sentiment in the next few months.
  • Technological advancements like restaking and parallelized EVMs are set to play a crucial role throughout the remainder of the year.

Should the Bitcoin Selling Pressure Be Expected?

CoinGape reported that around $2.4 billion in the value of the cryptocurrency was moving throughout the price decline that lasted between three and six months, with CryptoQuant’s data support. This might point to selling pressure from investors who purchased Bitcoin at the start of the year, potentially speculators who entered the market as a result of the expectations from the ETF approvals and the halving of Bitcoin.

In the past few cycles, Bitcoin halving significantly influenced the price level after the event, causing Bitcoin's price to reach a new all-time high (ATH). However, things were different this time. The price had already reached a new all-time high (ATH) before the Bitcoin halving, due to the long-awaited approval of the Bitcoin ETF.

So the price fall of Bitcoin could actually be predicted if you applied the simple “buy low, sell high” strategy. 

What Major Events Might Shake the Market in the Next Few Months?

There are some major events that might shake the crypto market in the next few months.

The upcoming U.S. election

The U.S. election will be held on November 5, 2024. What is the implication of the election in terms of the price of Bitcoin? Some opinions in the space said that the current Bitcoin price is now highly related to the S&P500, and the index usually has a growth rate of 11.28% on average. It could be one of the catalysts for the Bitcoin price to go higher.

The expected rate cut

The Fed has stated that there will be one rate cut in the coming second half of the year. The market is expecting this to be the beginning of a phase of rate cuts. In general, when the rate goes lower, risk-on assets like Bitcoin have been favored.

To look for more support for a rate cut, it might be a good idea to keep our eye on the U.S. unemployment rate because if the economy is showing signs of going south, the Fed is expected to take action.

Spot Ethereum ETFs expected to boost ETH prices and market liquidity

8 different ETF issuers have filed registration statements with the SEC for Ethereum ETFs. Bloomberg analyst James Seyffart and his colleagues predict that spot Ethereum ETFs could launch around July 15, pending regulatory approvals. This follows Bitwise's amendment to its ETF application, including a six-month fee waiver. While confidence in the exact launch date is low, the launch is anticipated soon.

The launch of spot Ethereum ETFs could boost ETH demand, market liquidity, and stability, while enhancing broader cryptocurrency adoption. Positive market sentiment may drive up ETH prices and influence derivatives markets, though increased regulatory scrutiny could follow.

What Major Sectors Might Propell the Market in the Next Few Months?

Other than those “offline” events, there are some key trends in the crypto space in the second half of 2024 that are worth noting.

Restaking would not be stopped in the discussion

The concept of liquid restaking is becoming increasingly popular in the crypto industry. Ethereum pioneers like EtherFi are leading the way, and the entry of players like EigenLayer has shown strong market sentiment. This trend underscores the dynamic nature of the crypto ecosystem, which frequently introduces new and innovative use cases.

This concept is not limited to Ethereum; other blockchain projects like Solana and even Shiba Inu are exploring restaking as a strategy to provide additional value to their users. These innovations are part of a broader trend in which cryptocurrencies are diversifying their service offerings, potentially redefining user engagement and investment patterns within the sector.

As restaking continues to evolve, its potential impact on the cryptocurrency market could be profound.

Layer 2 scaling solutions is a key trend

Altcoins are increasingly adopting Layer 2 scaling solutions to address transaction speed and fee issues. Key technologies include Optimistic Rollups, ZK-rollups, and sidechains. These solutions enhance scalability, cost-efficiency, and transaction speeds while maintaining security. Projects like Arbitrum, Optimism, Starknet, and Polygon are at the forefront. Rising Ethereum gas prices and the need for cost-effective alternatives drive this trend, which promises better interoperability and user experience, paving the way for broader adoption in Web3, DeFi, and NFTs.

Parallelized EVMs boost Ethereum scalability

Parallelized EVMs decompose smart contract execution into parallel tasks across multiple nodes. Leading parallelized EVMs, including Sei (SEI), Canto (CANTO), Nomad, and NeonEVM (NEON), process transactions off-chain before aggregating them back on Ethereum. This enhances transaction throughput and scalability, addressing Ethereum's limitations. Sei, launched in August 2023, improves transaction management. Canto focuses on off-chain transaction handling. Nomad, though not yet launched, promises further advancement. NeonEVM integrates Ethereum DApps into Solana, boosting speed and cost efficiency. These advancements mitigate network congestion and unlock new possibilities for decentralized applications on Ethereum.

Final Words

Bitcoin's recent volatility highlights the inherent unpredictability of the cryptocurrency market. As investors navigate these fluctuations, we should consider not just the market itself but broader economic factors, such as the U.S. election and potential Fed rate cuts, or the anticipated launch of Ethereum ETFs.

Other than that, we also need to consider the advancements in technology in the industry. Technologies like liquid restaking and Layer 2 scaling solutions signal significant growth potential in the crypto space. These developments underscore the importance of strategic planning and adaptability for investors looking to capitalize on emerging trends and mitigate risks in this evolving market.

Disclaimer: Please note that the information provided on this website is intended for informational purposes only. CoinEx assumes no liability for any financial losses resulting from cryptocurrency trading. It is advised that you conduct your own research.

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