Crypto Psycho: Will Yesterday’s Rally Hold?

Even the crypto naysayers have to admit, yesterday’s price and volume action was a welcome relief.  For the rest of us, it was pretty awesome. Early in the day, the naysayers were quick to point out how the momentum was limited just to Bitcoin; altcoins were said to be lagging.

But those negatives were quickly erased as the buying picked up across the board with CoinMarketCap showing green lights all over the place.  Yesterday still did not eliminate the negative technical signs. This morning CNBC was quick to headline: “Bitcoin breaks above key $8,000 level but it’s not out of the woods yet, technical analyst say”.

Their point is well taken. With the exception of that wonderful period in April, there has been lots of damage to investor confidence this year. That takes time to repair so it would be a good sign if crypto prices hold their ground for a while.  Psycho wounds are hard to measure but they are powerful forces.

So I believe if yesterday’s rally can just hold, especially in the face of shaky and vulnerable global stock markets, this will be a green light for investors.

Negative Headlines: Nothing New

The negative CNBC headline is nothing new.  Technicians have been talking about overhead resistance practically all year.  The other side of the news from MarketWatch was: “On the heels of bitcoin’s comeback, San Francisco-based fund applies for crypto index ETF”.

And from CNBC came: “Bitwise joins the race to launch SEC-regulated cryptocurrency ETF”.  

So why should an investor like yourself place greater importance on this news than the cautious warnings of technical analysts? For one thing, as the mass media giant points out, “Bitwise is joining a growing flock of companies looking to launch the first exchange-traded fund cryptocurrency.” This is evidence that the future of cryptocurrencies, as seen by financial professionals, is worth taking the risk of developing mechanisms for public investment.

Getting To Be Banking Buddies

We all remember the infamous words of JPMorgan Chase CEO Jamie Dimon about how people who invest in Bitcoin are stupid.  Part of that remark related to the real threat of cryptocurrencies. Smart money is finding ways of working together.

Yesterday we mentioned how the big Wall Street investment bank Goldman Sachs had put a chunk of their dough behind payments startup Circle.  The fintech company operates its peer-to-peer payment network using the same blockchain technology that underpins Bitcoin. Circle’s new USD Coin is meant to solve a key problem in digital currencies’ use case: Volatility.

All this is cool but the most interesting part is Goldman’s efforts is to obtain a banking licence with Circle.  And Goldman is not alone. Other payments companies are quietly making similar moves. TenX is just one of several.  These folks issue both physical and virtual debit cards. To make them compliant with regulators, cryptocurrencies are converted to fiat currency moments before the purchase of goods and services.

This is a brilliant technique to accelerate mass acceptance.  However, it is only the beginning. Once they become buddies with the banking industry, look for Circle, TenX and others to disrupt the biggest duopoly, MasterCard and Visa. The two companies together process more than $8 trillion in transactions a year, so the stakes are enormous.

Draw Your Own Conclusions

If you have been holding on to any crypto this year, you have good reason to be cynical.  From this side of the argument, I see an important shift in war between the financial establishment and the interests of crypto investors. For lack of a better term, call it a shift in crypto psycho.  As difficult as it is to measure, it is happening. This is a good thing.

Featured image courtesy of Shutterstock.

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.