Analyst Note: When Will The Pain Subside? Examining Signals After the Crypto Sell-Off

In Gemini’s previous analyst note, “Where Are We in The Crypto Cycle?” we looked at how macro indicators could drive crypto prices up or down over the medium to long-term. Our latest analyst note, “When Will the Pain Subside? Examining Tactical Signals After the Sell-Off” takes a closer look at how recent price price volatility, skewed distributions, and other macro-economic signals could impact cryptocurrency prices in the coming weeks and months.

The report, produced in conjunction with research firm Praxis Veritas, had a few key takeaways:

• The recent price dislocation could be a positive: The price dislocation we observed earlier this month, when bitcoin briefly dipped below $50,000, could ultimately lead to positive price performance, particularly for ether. The reason: Bitcoin and ether have started to flow out of centralized exchange wallet addresses in recent days, consistent with a coming price recovery.

• Volatility trends provide clues on price action: For both bitcoin and ether, recent one-week realized volatility spiked to 90%-100% above the two-month trailing measure. Previous spikes in volatility of the magnitude were followed by more subdued price action over a one to three-month time horizon.

• Returns are working in investors’ favors: Return distribution analysis of the last 30 days suggest that bitcoin is at its lowest in 2024, with ethereum even lower, but extreme values tend to suggest positive forward price action in the next one to three months.

• Macro-trends are still concerning for crypto: Since mid-June, we have seen a deterioration in global economic data trends which picked up pace throughout July. It remains too early to judge whether recent days’ stabilization in the data marks an end to this recent development. Continued data deterioration should increase the likelihood that crypto prices remain in a downtrend near-term.

Onward and Upward!
Team Gemini

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