The cryptocurrency market has been concerning over the past few days, as the industry seems to be ahead of investors’ worries about the global economic situation.
Today’s market movements have already shown the virtue of patience, especially when making steadfast bets on new technology. Despite crypto assets showing resilience today and rebounding 20% from recent lows, there is still significant fear in the market.
Although the future is filled with uncertainties, especially in the short term, several key indicators suggest there are reasons to remain optimistic. Today, we delve into five compelling reasons not to press the sell button.
1. The U.S. Economy Remains Fundamentally Stable
From a macro perspective, while recent employment reports did scare the market, other economic data suggest the situation may not be as dire as that one data point indicates.
Specifically, the ISM Services PMI, which measures activity in the service sector, grew more than expected in July. This growth indicates not only job creation but also that service sector jobs are increasing as people are laid off, showing robust business activity.
Moreover, while the unemployment rate did exceed expectations, triggering the unpleasant Sam Rule, it remains close to the historic low of 4.3%, and U.S. GDP growth continues to be strong.
2. The Amount of Bitcoin on Exchanges is at a Historic Low
Another signal that can be used to gauge the market’s health is the amount of Bitcoin held on exchanges, which is at a historic low relative to its price.
This data point may reflect some bullish sentiment among retail investors and an increase in institutional holdings. If holders were prepared to sell in the short term, we would likely see these numbers spike, but they continue to trend downward.
3. Cryptocurrencies Becoming a Focal Point in Elections
As cryptocurrencies become an increasingly hot topic in U.S. elections, the market is sure to see positive developments.
Whether or not Trump‘s intention to make Bitcoin a strategic reserve asset is feasible, his support has prompted Democrats to reconsider their stance as Kamala Harris begins to oppose his campaign.
Although her camp has barely signaled support for cryptocurrencies, her recent hiring of former Binance and Alchemy Pay advisor David Plouffe suggests potential positive developments in the future.
Meanwhile, Trump continues to vocally support the industry, prompting endorsements from powerful Silicon Valley figures involved in many areas beyond cryptocurrencies.
4. The Emergence of TradFi
A deeper look into cryptocurrency shows that the level of adoption in traditional finance (TradFi) is another reason for optimism.
From Bitcoin ETFs to Ethereum ETFs to BUIDL, as more institutional investors get involved in cryptocurrencies, even through on-chain tools, the crypto market continues to make history this cycle. Additionally, this history is not only related to cryptocurrencies but also to ETFs.
BlackRock’s IBIT ETF reached $10 billion in assets under management faster than any other ETF in history. As more funds and services deploy on-chain, the tokenization of traditional assets is becoming a trend worth betting on.
5. The Industry Has Always Been Highly Volatile
For seasoned cryptocurrency investors, volatility and corrections are the norm. While this does not ease the pain, for long-term investors, going with the flow is easier than timing the perfect entry and exit points.
During bull markets, multiple drops from 5-10% declines to 40-70% major drops are normal. Moreover, market cycles are built around Bitcoin halving, with bottoms occurring about 1.3 years before and peaks about 1.3 years after.
Since we are less than four months away from the next halving, history suggests there is still a long way to go in this cycle, although unprecedented macro factors will certainly make some think this time might be different.
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