Bitcoin is up roughly 32% from the June 18th low. Ethereum is up about 73%. Bitcoin dropped to $17,700 and Ethereum to $890. Prices are currently around $23,000 and $1,510.
You probably already know this.
But what exactly is responsible for this recovery? What narrative explains the rally?
First off, narratives are just stories that we tell ourselves to make sense of price movement. Occasionally there are powerful fundamental shifts that logically drive price, but most of the time, narratives are simply folklore and old wive’s tales that we share to make sense of our sporadic human emotions.
Remember Wall Street Bonuses? Chinese New Year? China Bans? India Bans?
All false narratives used retroactively to explain price movement.
The dominant narrative of this drawdown was initially amorphous - the idea that “things suck” and “things are breaking” sent prices below the previous cycle’s highs. Then we saw some fundamental shifts, namely the contagion from Luna to Celsius, 3AC, and Voyager. Prior to these implosions, crypto was already in a corrective phase, cooling off from 2020 hype and caught in macro headwinds.
So why exactly did price recover 33% and 75% from last month’s lows?
I think the honest answer is that the recent rebound can fundamentally be attributed to… a whole lot of nothing.
What do I mean?
When things are really bad, a slowdown of bad news or period of no news is often interpreted as “good news.” Bitcoin literally set a record by printing red candles 9 straight weeks in a row. Ethereum had 11. To say that a technical bounce was overdue is the understatement of the century. Assets were wildly oversold and the prior sell off was relentless. Relief was inevitable, if not delayed.
A renewed rally does not require good news, but it certainly helps. What good news do we have to work with (other than the Ethereum merge)? Will buyers continue to outpace sellers? Do cheap prices count as good news? Hopes of Celsius, Voyager, 3AC, and Luna righting their wrongs are certainly not driving price. We are still in the midst of a looming global recession, a potential housing correction, historic inflation, and aggressive rate hikes. Our only “good news” is predicting that the carnage will stop sooner than later, not that it has stopped.
Just because we had a strong technical bounce does not mean the bull market is back on track. A bull market requires buyers outnumbering sellers for an extended period of time, not just a couple of weeks. It’s going to take more than a technical bounce and the absence of bad news to be sure of a “turnaround.”
The bottom very well may be in. I am inclined to believe this is the case. But that does not mean we are back in a bull market. We could be down here a while.
I’m still skeptical.
