Week by numbers
During past seven days, the cryptocurrency market has moved sideways without a clear direction. Cryptocurrency prices rose over the weekend, peaking on Monday. Following this, prices dropped back close to the levels seen a week prior.
The price of Bitcoin, the largest cryptocurrency, rose by about one percent, while Ethereum, the second-largest cryptocurrency, increased by approximately two percent. The combined market value of other cryptocurrencies (excluding the largest stablecoins) rose by about three percent.
With Bitcoin's somewhat weaker performance compared to the broader market, Bitcoin's dominance fell by about half a percent. Due to Ethereum’s relatively strong performance, ETH/BTC ratio, which has been in long downtrend, rose by just over one percent.
Given the general market trend first moving up and then down throughout the week, there was a notable dispersion in alt-coin price changes. Among tokens in Kvarn X's trading selection, the biggest weekly gainers included Uniswap (UNI, +22%), Fantom (FTM +13%), and the meme coin WIF (+11%). The largest weekly declines were seen by Immutable X’s IMX token (-7%), MakerDao’s MKR token (-5%), and Cosmos’ ATOM token (-3%).
How deep downtrend?
In September, the cryptocurrency market saw a sharp rise that took Bitcoin to a high of over $66,000. This was a significant milestone, as it surpassed the local top seen in August, marking the first "higher high" in over six months. This has raised hopes among crypto investors for the start of a new upward trend after more than half a year of gradually declining prices.
At the end of September, the uptrend turned downward. At the end of last week, we saw a brief price spike, but this turned out to be merely a "pullback," with the downtrend soon continuing.
Where Is the Next Local Bottom?
The fact that prices declined after a new “higher high” is not inherently a negative sign or reason to dismiss the possibility of a new uptrend. Currently, there is significant interest in seeing how low this downward trend will go i.e. where the next local bottom might be. In this newsletter, we examine three potential levels for Bitcoin's price and how each of them should be interpreted.
Above $53,000: A Clear Indication of an Uptrend
Finding a local bottom above $53,000 would be a very strong signal for the cryptocurrency market. After the August low of $49,000 and the September low of around $52,500, it would form a second consecutive “higher low,” strongly supporting the interpretation of a new uptrend.
A particularly strong signal for a new uptrend would come from finding a bottom above the trendline connecting the last two lows. In dollar terms, this would mean a bottom around $56,000-$58,000 range. However, even without respecting diagonal trendlines, anything above $53,000 would clearly support an uptrend.
$49,000-$53,000: Room for Interpretation
If we were to see Bitcoin price drop below $53,000, the next noteworthy level would be August’s $49,000. A bottom forming between $49,000 and $53,000 would leave room for different interpretations.
Crypto analysts have slightly divergent views on whether the $53,000 mark in September should be considered a local bottom (interpretation 1), or if it was just a “dip” in the uptrend that began in early August (interpretation 2).
According to interpretation 1, the next local bottom below $53,000 would create a new “lower low,” effectively invalidating the hypothesis of a new uptrend. Interpretation 2, however, would argue that the previous local bottom was August’s $49,000, and anything above this level would create a new “higher low,” supporting the outlook for a new uptrend.
Below $49,000: The Downtrend Continues
If a local bottom between $49,000 and $53,000 allows for some interpretation, a drop below $49,000 would leave little room for doubt. In this case, it would represent another “lower low” and would extend the downtrend that began in March.
The crypto market is thus at an intriguing juncture. The direction of the market in the coming weeks and the level of the next local bottom will largely shape the interpretation of the larger trend and heavily influence sentiment across the sector.
Our interpretation at the moment is that the most likely scenario would be the first option, with a local bottom supporting a continued uptrend above $53,000. We will continue to monitor the situation closely and keep you updated, so stay tuned!
Gold and PAXG
One of the most intriguing assets over the past 1.5 years has undoubtedly been gold. Known as the traditional “safe haven” for investors, the price of gold has risen nearly 30 percent since the beginning of 2024. From the beginning of 2023, the price has increased nearly 45 percent.
Gold prices have been driven up by aggressive gold purchases by several central banks, rising geopolitical tensions, particularly in the Middle East, and general investor preference for safety. Currently, we do not see clear catalysts for change in these factors, so we believe gold prices have good potential to continue rising.
An interesting way to invest in gold is through PAXG, one of the newest additions to the Kvarn X trading portfolio. PAXG is a stablecoin issued by Paxos, with its price pegged to the physical gold ounce price. Paxos guarantees the PAXG token’s value by pledging to redeem PAXG tokens with physical gold.
As gold prices have risen, PAXG’s price has also increased significantly, and in 2024, it has outperformed many well-known crypto tokens.
Besides its recent strong price performance, PAXG’s advantage is that its price drivers are truly separate from the rest of the cryptocurrency market. PAXG offers the opportunity to diversify a crypto portfolio and improve the risk-return profile of one’s crypto holdings.
PAXG offers investors an interesting way to gain exposure to gold price changes. Unlike physical gold, it does not require arranging physical storage, and unlike gold-based securities, it can be traded 24/7. For investors interested in gold, PAXG is a worthwhile option to consider for organizing one’s gold investments.
Please note, however, that none of the above is intended as a recommendation to invest in PAXG tokens, gold, cryptocurrencies, or any other asset.
The material contained in the Kvarn Pulse is produced solely for the purpose of marketing communication. Any information conveyed through Kvarn Pulse should not be construed as an offer or an invitation to make any purchase or sale decisions, or as an encouragement to make investment decisions about any investment object. Copying or borrowing the content of the newsletter without Kvarn's express permission is prohibited. The information presented in the newsletter pertains to the situation prevailing at the time of writing, and the information may or may not have changed. Kvarn Capital Oy does not guarantee the accuracy or completeness of the information contained in the newsletter or referred to in the newsletter.
