Crypto market could see ‘pullbacks’ ahead of the holidays: Analyst
Keep an eye on liquidity into the holidays, Kraken’s Thomas Perfumo says
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We’ve been on a bit of a markets spree this week, and it’s not over yet. At the very least, we should be glad that nothing’s ever truly boring in crypto land, right?
Anyway, I caught up with Kraken’s head of strategy Thomas Perfumo to pick his brain on the markets given the volatility we’ve seen.
For Perfumo, the pullback has been in line with what he calls the “new normal” after bitcoin topped $100k.
“We’ve seen a couple of pullbacks corresponding with large liquidations of leveraged positions. This is typical consolidation behavior,” he told me.
“From observations during the past two cycles, a rally in altcoins takes hold after a run-up in bitcoin. This sparks a rotation into altcoins as investors seek to outperform in the next phase of the bull market. In the prior two bitcoin-led cycles, the market cycle peak corresponded with bitcoin market cap dominance, which is currently in the mid-50s, falling closer to 40%,” Perfumo added, backing up what we’ve been discussing here on Empire.
If we continue to see altcoins outperform, Perfumo thinks there’ll be a “pick-up in interest”
“People are on the lookout for signs that crypto services are experiencing mainstream adoption. Stablecoins have already broken prior records in terms of circulating supply and DeFi total value locked (TVL) is inching closer to peak 2021 levels. We think the combination of significant improvements to scalability this past cycle and a line of sight towards a more favorable, pro-growth agenda for crypto innovation will lead to an environment that’s ripe for crypto services to catalyze a new wave of adoption.”
But, as I wrote yesterday, it might be time to start prepping your bags for lower liquidity in the next few weeks, which is typical for this holiday period. Perfumo suggested that some of the selling might be put off till the new year as folks in the US specifically base their moves on the potential tax consequences.
“It’s certainly possible that shortfalls in liquidity could lead to higher price volatility, both to the upside or to the downside,” he said.
Speaking of next year, Perfumo’s in agreement with Canary Capital’s Steven McClurg that the cycle still has plenty of legs.
It’s not just bitcoin posting wins, he noted that DEXs and some infrastructure plays — which have received plenty of support from venture capital — are ready to post wins on the year.
However, some of the other sectors, like web3, gaming and the metaverse aren’t quite there yet. Or, if we’re being honest, are nowhere near being ready for mainstream attention outside of some exceptions (looking at you Off the Grid).
That’s not to say that there can’t be dark horses among projects yet to find mainstream attention, Perfumo said.
Either way, he’s bullish on the environment, telling me that this is the perfect recipe for innovation within the space.
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