Bitcoin and Ethereum Extend Rallies – Is Crypto Summer Back? (September 28 2024)

BTC/USD & ETH/USD Key Points

• Massive stimulus announcements from China and solid US economic data have kept cryptoassets bid.
• Large inflows into Bitcoin ETFs support the bullish fundamental and technical drivers.
• Both Bitcoin and Ether extended their recent rallies, but haven’t fully shifted into a bullish trend yet.

Cryptoasset Market News

• Kamala Harris proclaimed “We will encourage innovative technologies like AI and digital assets, while protecting our consumers and investors”
• The US SEC approved BlackRock's proposal to list and trade options for its spot bitcoin exchange-traded fund. Separately, the regulator postponed its decision on allowing options trading on Ether ETF ETHA to November 10.
• Former Alameda Research CEO Caroline Ellison was sentenced to two years in prison and must forfeit the $11 billion she earned from FTX.
• Binance CEO Changpeng Zhao (“CZ”) is rumored to be released from prison this weekend.

This week’s crypto-specific news was dwarfed by macroeconomic developments (read more in the next section below) but the crypto news that we did get was once again US politics- and regulator-focused. Vice President Harris offered a potential “olive branch” noting that her administration “would encourage technologies like digital assets…” if elected, but crypto participants remain skeptical that the Democratic candidate will back up her words with action for now.

Separately, it was a game of “one in, one out” when it comes to prominent crypto figures and prison: Alameda Research CEO (and FTX co-conspirator) Caroline Ellison was sentenced to two years in prison the same week that Binance CEO “CZ” was released. As a prominent builder in the ecosystem, albeit with occasionally questionable business practices, CZ’s release figures to mean the more significant development for the ecosystem moving forward.

Macroeconomic Backdrop

The Pareto Principle states that 80% of outcomes come from 20% of causes. It's named after Italian-born economist Vilfredo Pareto (1848-1923), who first observed this phenomenon in 1895, and while it applies to many fields today, it remains as relevant as ever when it comes to the economy.

In the case of the global economy, the US and China – just two of 200+ countries – account for nearly 40% of global GDP, and both of these countries saw significant news in the last week. Starting with China, the PBOC announced an array of easing measures on Monday, then again on Tuesday, stretching from interest rate cuts to explicit measures to support the stock and housing markets. Then on Thursday, China’s Politiburo reiterated those easing measures, announcing additional fiscal support in a “double barrel” dose of stimulus for the world’s second largest economy.

At the same time, a raft of US economic data came in relatively strong, including everything from housing data to initial jobless claims to inflation (lower than expected core PCE). Taken together, these economic reports suggest that the world’s largest economy is more likely than previously assumed to be on the path to a “soft landing,” a development which, along with China’s coordinated stimulus, provided a big boost to cryptoassets like Bitcoin and Ether.

Sentiment and Flows

The sentiment gauge we watch most closely, the “Crypto Fear and Greed Index,” rose to 61 last week. Overall, it remains in the middle of its 1-year range, far from either the bullish or bearish extremes that can provide a strong contrarian signal:

Source: Alternative.me

Another way of gauging sentiment, flows into exchange-based cryptoasset investment vehicles, accelerated last week. As of writing before the release of Friday’s data, Bitcoin ETFs have seen solid inflows of 490M over the last four days. Over the long-term, inflows from “tradfi” investors provide incremental demand for Bitcoin and could help support the price.

Source: Farside Investors

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

As the chart above shows, Bitcoin is on an impressive run off its bottom in early September. The cryptocurrency has now set its first “higher high” since March, raising hopes that the cyclical bull market is resuming. While I agree the recent price action is constructive, we’ve seen similar such rallies peter out repeatedly over the past six months, so we’ll be waiting for a breakout of at least the channel top near $68K to shift the medium- and longer-term biases back in favor of the bulls.

Ethereum Technical Analysis: ETH/USD Daily Chart

Source: StoneX, TradingView

In what’s become a recurring theme this year, Ether is seeing similar but ultimately less impressive price action than Bitcoin. The second-largest cryptoasset has regained its 50-day EMA after last week’s price action, but it remains below its late August high in the $2800 area as we go to press, leaving the technical outlook neutral for now.

Bulls will want to see ETH/USD regain key previous-support-turned-resistance at $2850 to paint a more bullish picture for Ether, whereas a break below $2125 support could set the stage for a continuation toward the next level of support near $1700.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos and be sure to follow Matt on Twitter: @MWellerFX