Crypto Market Expected to Experience Pullbacks Before Holiday Season
This is a segment from the Empire newsletter.
Market Insights
The crypto markets have experienced notable volatility. Thomas Perfumo, Kraken’s head of strategy, discussed recent developments, noting that pullbacks are typical after significant price movements, such as Bitcoin surpassing $100k.
Perfumo stated that historical trends show altcoin rallies follow Bitcoin increases, leading to a rotation into altcoins as investors seek better returns. Currently, Bitcoin's market cap dominance is in the mid-50s, trending towards 40%, which aligns with previous cycles.
Increased altcoin performance could indicate rising interest in crypto services. Perfumo highlighted record-breaking stablecoin circulation and DeFi total value locked (TVL) nearing peak levels from 2021. Improvements in scalability and a favorable regulatory environment are expected to foster adoption.
Liquidity and Future Outlook
As the holiday period approaches, lower liquidity may lead to increased price volatility. Perfumo suggested that some selling activity might be deferred until the new year due to tax considerations in the US.
Looking ahead, both Perfumo and Steven McClurg from Canary Capital believe the current market cycle has substantial potential. Beyond Bitcoin, decentralized exchanges (DEXs) and infrastructure projects are well-positioned for success, although sectors like web3, gaming, and the metaverse still face challenges in gaining mainstream traction.
Despite these challenges, there may still be promising projects yet to gain attention. Overall, Perfumo expressed optimism about innovation within the crypto space.