Crypto Dump Incoming: 3 Hidden Reasons

Crypto could see some volatility in the immediate future. There’s lots of things that affect our markets indirectly behind the scenes that are on the move.

Japan, US Government, Market structure issues for alts, Stocks and Commodities rising but crypto isnt. More volatility could be on the way due to 3 of these important factors. Today, we dig into them. And by the way, we will also be looking at some important factors that are bullish for the market, too right after this one.

Possible US Govt Shutdown AGAIN

Prediction Markets like Kalshi and Polymarket are predicting a 77-80% chance the US Government shuts down again on Saturday. In case you have not been watching, ICE, the law enforcement arm of US immigration has been in many clashes with the public especially in the US city of Minneapolis, Minnesota. The shooting of a protesting nurse there is igniting lots of new controversy.

The Senate Democrats are blocking the passage of a funding bill that funds operations for ICE and the Dept of Homeland Security due to their positions against ICE’s actions. If they don’t come to an agreement, the government will shut down again. And that’s bad for our markets, generally. The last time, gold and silver held up ok, and we will talk about these in a second.

But BTC, ETH, and alts did terribly with Bitcoin and ETH down around 33% and alts down even more. It’s important to remember that possible does not mean absolutely or 100%. Yet, you should understand that this could happen and what kind of volatility may come to our markets if it does.

Shutdowns did happen 3 out of the last 5 times it was possible. So we may avoid this. As you can see in this tweet here, there are some options to avoid this without full agreement on the current bill as it is written. No one knows, but prepare for volatility leading into this decision on Friday and Saturday and what could happen into early next week based on if the parties make a deal or not.

Lack of Market Liquidity

Although QT which takes liquidity out of the market ended in early December, we have not seen the flush of liquidity into the market that we’ve been expecting. This is especially true for the retail market. Crypto ETFs are still crushing and getting LOTS of inflows. And while that’s good for us generally, it is also sucking up a lot of the total liquidity in the market. They have A LOT more money than retail does.

What this means is the market may separate even more severely between the 3 categories of Bitcoin, Major Alts, and Everyone Else. Bitcoin will do fine. Many of the major alts, esp if they are in the top 25 by market cap have ETFs that are actively investing in them. Avalanche’s new Van Eck ETF and SOL, Sui, LINK, ETH, and others have anywhere from 1-10 ETFs that invest actively in the project on behalf of institutional investors.

Then look at this chart from Binance. After a couple of big spikes in November at $37 and $40 billion per day, volume has dropped A LOT. It’s now in the $5-17 billion daily trading range. So that’s a decline of anywhere from 50% minimum to as much as 80% depending on which days you look at.

Retail volume on exchanges is dropping. And this matches the drop in retail interest. Retail lost faith on the big October 10th liquidation and has mostly not come back yet. If retail does not come back, there will not be enough buyers to stimulate a bull market. It’s as simple as that.

Now that said, there are some great opportunities in the highest quality projects. These are what you are should be looking for as buys right now. But ONLY if you have the patience to wait and to buy quality.

Gold & Silver

I’m sure you’ve noticed lately that gold and silver are ripping. There have been times in recent years when gold and Bitcoin move up together when people are looking for assets that avoid too much “market risk”. But that’s not happening now.

Tom Lee, who runs the most aggressive Ethereum DAT or Digital Asset Treasury co, presents a theory that gold and silver and sucking out the liquidity and interest in crypto. The reason why is they are ripping and crypto is not. People are feeling FOMO about not investing in these metals and are diving into it now. It’s an interesting theory and there is more activity around gold and specifically silver than there has been in YEARS.

Lee does say that BTC and ETH fundamentals are strong and price should catch up. And we agree. But price is lagging growth and fundamentals now. And Lee thinks this interest in precious metals is why.

So what do you think? Do you think we will see more volatile times ahead? Or more trading ranges like we’ve been in for January? Let us know with your comments below.

Disclaimer

The information provided by Altcoin Buzz is not financial advice. It is intended solely for educational, entertainment, and informational purposes. Any opinions or strategies shared are those of the writer/reviewers, and their risk tolerance may differ from yours. We are not liable for any losses you may incur from investments related to the information given. Bitcoin and other cryptocurrencies are high-risk assets; therefore, conduct thorough due diligence. Copyright Altcoin Buzz Pte Ltd.