Might the Altcoins Go on a Bull Run?

By the middle of November, Bitcoin had gained an impressive 117% for the year. Much of the bullishness driving this rally came from excitement surrounding the potential SEC approval of spot Bitcoin ETFs. Indeed, November saw the price of Ether surge 2% just on the news that BlackRock requested to list an Ether-holding ETF. And, in the background throughout the year, cooling inflation has been convincing traders the Fed must be readying to ease monetary policy, which would presumably give cryptos a boost. 

With the dramatic fall from grace of Binance’s famed CEO, Changpeng Zhao, late this year, which rounded off a year of brutal crypto clampdown in the US, is Bitcoin equipped to continue its upward push? “The recovery in crypto valuations can continue”, answers Grayscales Investments’ Zach Pandl, “if real interest rates peak and we continue to see progress toward spot ETF approvals in the US market”. 

It’s true that, in the latter three weeks of November, Bitcoin’s progress went into a lower gear, finding resistance at the $38,000 level, but many analysts are not perturbed. “The pullbacks have become less deep over the past three weeks”, said FxPro’s Alex Kuptsikevich in the final week of the month, “suggesting the building up of bullish sentiment”. In addition, technical analysis reveals a bullish thrust could be on the way. 

But what about altcoins? Will they be left behind, or will they manage to leap onto the backs of the crypto mammoths as they stalk ahead? Join us for some discussion, especially if you have an eye out to invest in crypto.

Solana and the Rest

On November 14th, altcoins like DOGE, Polkadot, and Cardano were all suddenlyhumbled by 5-7% when it was discovered that BlackRock’s XRP Trust was holding fake registration documents. Even Solana, the altcoin hero that had more than doubled its price in a month, dropped 8% in a single day. The sensitivity of the crypto market to distasteful news reports, which we probably have not seen the end of, was once again underlined.

ARK Investment Management’s Cathie Wood swooped down, however,with a helpful comment. “Solana is even faster and [more] cost-effective than Ether”, she said in an interview, giving a welcomelift to that coin. 2023 was certainly kind to Solana, with plenty of people starting to trade the coin for the first time. In fact, no coin was traded as frequently on US exchanges. SOL had come a long way from last November, when it traded at less than $10after FTX’s demise.

But, after Wood’s encouragement, came the news about Zhao. His exchange was known for being a big hub for trading altcoins, which all promptly received a beating. Binance’s own coin, BNB, dropped 6.3%; Polygon dropped 8%; and Solana fell 6%. The threat that regulatory clampdowns pose to all tokens should not be underestimated. According to Alfonso de Gortari of Mysten Labs, this is a key factor that could stand in the way of Bitcoin’s bullish dreams, looking ahead.

Not So Fast on that Bitcoin Thing

Returning to Zach Pandl’s criteria for a Bitcoin bull run: hope of a spot ETF, and an end to climbing interest rates. As to the first one, there are many strategists who say that enthusiasm for a spot Bitcoin ETF is already “baked into the price” of the coin. How much an SEC approval would inject into prices remains an open question. JP Morgan are downplaying its likely impact, calling November’s rally “rather overdone”. In their view, such a product would not draw new capital flows, but simply rechannel flows from elsewhere. They also point out that there is no reason to believe regulatory authorities will turn sweet on crypto even if the ETFs are approved.

Wrapping Up

Regarding Pandl’s hopes for dovish monetary policy, it’s worth noting that no one knows what will happen to inflation rates next year. According to CoinShares’ James Butterfill, the resurgence of inflation could keep interest rates at high levels for a long time, which would be a big obstacle for Bitcoin.

Finally, remember that Zhao’s exit from Binance is likely to resound in people’s minds as a very significant moment. Until now, he has been viewed as a sort of symbolic figure in the industry. Who knows when this wound to crypto confidence will heal?