Editor’s Note: Vin is out of the office this week. So KingsCrowd Investment Research Manager Olivia Strobl is stepping in. We think you’ll enjoy her take on the crypto markets.
Crypto Market Musings
So much happened last week that I don’t know where to begin. Last Wednesday, the Federal Reserve bumped interest rates by 75 basis points in an attempt to curb inflation. Sound familiar? This is the second consecutive time the Fed has raised rates by 75 basis points this year. The news of the hike prompted a relief rally for both crypto and the public markets. Bitcoin shot up 7.9% in a 24-hour period from July 27 to July 28. Believe it or not, this was somewhat expected. It probably would have been a different story had the interest rate hike been higher. When you prepare for the worst and the news isn’t as bad as you thought it would be, it’s easier to find silver linings.
So are we in a recession? That depends on who you ask. Despite higher interest rates, rising food prices and general pessimism, unemployment rates remain low. Just like Vin, I too believe that the crypto bear market will be around for some time.
What Olivia Is Thinking About
If we do begin to slip into (or further into) a recession, crypto could see some historic lows. Content creators and thought leaders in the crypto space have practically made a game out of betting on bitcoin’s bottom. Barron’s reporter Jack Denton suggests that $13,000 may be bitcoin’s low for this bear run. His reasoning taps into a crucial component of the bitcoin life cycle: mining. Higher energy prices are exacerbating economic conditions and making mining operations inefficient and costly.
According to Denton’s article, a team of JPMorgan analysts concluded that mining one bitcoin at the beginning of June cost around $20,000. This dropped to $15,000 by the end of the month. By mid-July, the cost to mine one bitcoin was an estimated $13,000. If Bitcoin dips below $13,000, the majority of mining would become unprofitable. And miners would be forced to move to more efficient mining rigs in an endless cat and mouse game. Denton then goes on to explain that the “production cost of bitcoin is viewed by some market participants as the lower edge of bitcoin’s price range in a bear market.” Thus, a shift towards efficiency to protect profitability for miners could foreshadow a bear market bottom for bitcoin.
Why does this matter for investors? You should never try to time the markets. And, as Vin always says, dollar cost averaging is your best friend. But keeping track of these bitcoin bottoming predictions could offer insight into when to buy up altcoins to maximize your returns.
Want more bitcoin bottom price and timing predictions? Try crypto Twitter… just try not to get too overwhelmed.
And Finally…
Who doesn’t love a free sample? Over the last two years, popular protocols like Uniswap (UNI) and Ethereum Name Service (ENS) have airdropped free tokens to early adopters as part of a successful (albeit expensive) marketing play. Airdrops have been criticized as a tactic to replace the product-market fit that crypto projects ultimately need in the long run to be successful. But writers at The Defiant have taken stock of the biggest airdrops since September 2020, and they’ve found that the results are largely positive for the cryptos in question. ENS — a protocol that allows for custom naming of ethereum wallets and improving overall user experience — more than tripled registered names following its airdrop in November 2021. Watch out, Costco.