Markus Thielen, the Head of Crypto Research and Strategy at Matrixport, has hinted at a potential pre-Christmas rally with Bitcoin leading the charge.

This anticipation comes amid a backdrop of macroeconomic shifts that could set the stage for a significant surge in crypto prices, which Thielen describes as the “Santa Claus squeeze.”

Thielen’s analysis is rooted in recent market movements where some altcoins began to outperform Bitcoin, suggesting a momentum build-up that could translate into substantial gains.

Macroeconomic Indicators Fueling Crypto Optimism

This concept of a “Santa Claus squeeze” in the crypto market, a term coined to describe the seasonal rally often seen in equity markets, is not new. Thielen, in his Deribit Insights report, noted that Bitcoin has historically seen an average rally of 23% during the festive months of November and December.

This trend, coupled with last week’s performance where alternative cryptocurrencies gained an edge over Bitcoin, lends credibility to the forecast of a year-end rally, according to the Head of Crypto Research and Strategy at Matrixport.

Notably, the potential for a “Santa Claus squeeze” is underpinned by several macroeconomic indicators that Thielen has identified. Thielen points to a trio of events that collectively signal an interest rate peak, setting a conducive stage for risk assets like cryptocurrencies.

The US Treasury’s pivot towards “slowing the pace of issuing longer-dated debt” is the first sign Thielen identified,  implying expectations for a decline in interest rates, which historically benefit growth assets such as tech stocks and, by extension, digital currencies.

Adding to the mix is Federal Reserve Chair Jerome Powell’s “dovish” tone at the post-FOMC meeting press conference. His statements have been interpreted as a potential halt in rate hikes, with the possibility of cuts in 2024, bringing a dose of positiveness into the markets.

For context, during the conference, Fed Chair Jerome Powell discussed the balanced nature of inflation risks, referencing the term “symmetric” twice, which suggested a tone of accomplishment in the Federal Reserve’s efforts to reduce inflation. Additionally, Powell expressed his view that a recession is not on the horizon.

Furthermore, a less-than-stellar US nonfarm payroll reported last Friday suggests a “weakening labor market,” according to Thielen, reducing the chances of aggressive rate hikes in the future.

Bitcoin And Ethereum: A Potential Rally In Sight?

Drawing parallels with the past, Thielen recalled Bitcoin’s response at the end of the last Fed rate hike cycle in January 2019, which saw the cryptocurrency’s price rally by approximately 400%.

While Thielen tempers expectations for a repeat of such dramatic gains, the Head of Crypto Research and Strategy at Matrixport anticipates that Bitcoin and some other altcoins the analyst calls “higher beta crypto assets” could see considerable growth in the coming years.

The Head of Crypto Research and Strategy at Matrixport backed this bullish outlook further by the potential approval of a BlackRock spot Bitcoin ETF, which could act as a catalyst for a more widespread crypto rally.

Thielen’s observations extend beyond Bitcoin in another report. He notes the Ethereum ecosystem’s nascent signs of recovery, evidenced by increasing revenues and ETH’s resilience in holding the crucial support level of $1,550.

The analyst also noted the outshining of Ethereum and other altcoins over Bitcoin, a shift reflected in their growing market dominance and trading volumes. The perpetual futures funding rate for both Bitcoin and Ethereum is also on the rise, mirroring a more confident stance among traders.

So far, Bitcoin is only up 1.3% in the past week and 0.3% in the past day, while Ethereum has recorded a higher gain of 5% in the past 7 days and 1% over the past 24 hours. BTC currently trades at $34,987 and ETH  at $1,897 at the time of writing.

Featured image from Unsplash, Chart from TradingView

---

Filed under: Bitcoin - @ November 6, 2023 9:00 pm