The Nasdaq 100 index rose 32% in the year's first half, showing its best performance in the last 40 years. This time last year, we were following the news of the layoffs in the tech industry. And some analysts suggested it would take years for the tech industry to recover. Likewise, after the 2000 collapse, it took 14 years for the technology index to reach its previous level. Although the Nasdaq 100 index did not match the level achieved in November 2021, the situation differs from 2001.
So why did this happen? Doesn't history repeat itself? The speed of technological development requires us to move away from the view that history repeats itself. Despite the high-interest rate environment, tech stocks made a historic rise. The rise is still limited to big technology companies, but if the optimism continues, the shares of other companies will also get their share from the rise.
The S&P index finished the year's first half with a 16% increase. The S&P index has risen 25% since last fall's low. Despite rising interest rates, there was no sign of a recession in the US. Could a recession occur in the coming period? Will the rate hikes continue? I predict that the FED will not increase an additional interest rate, and the US economy will not enter a recession. (Futures pricing shows that the Fed will raise interest rates with a 90% probability at the next meeting.)
Crypto In The First Half
Analysts predicted that Bitcoin could perform strongly in the year's first half. Likewise, Bitcoin increased by 85% in the year's first half. Ethereum's 64% increase came as a surprise to analysts. Other altcoins, on the other hand, showed a mixed outlook. Hive, for example, rose 27% in the first half of the year. A significant part of this increase took place in January.
When will the fund inflow to small and medium-sized cryptocurrencies take place? The answer to this question depends on the actions of the FED. In a scenario where the FED ends interest rate hikes, networks like Hive will also start to be in demand. Moreover, tiny liquidity will be enough for small-scale coins to rise.
Liquidity
Liquidity conditions have a significant impact on pricing. Coins other than Bitcoin and Ethereum are particularly affected by liquidity. In the chart below, the blue line shows the total crypto market cap, excluding Bitcoin and Ethereum. The red line is the Fed net liquidity indicator. The monetary expansion initiated by the FED in 2020 due to Covid enabled the altcoin rally to begin. When liquidity started to decrease in 2022, the price of altcoins began to decline. In the chart, we see that, first of all, liquidity has started to move. Altcoin prices follow liquidity.
Despite the flat liquidity in the autumn of 2017, the price of altcoins increased. Observing this situation in more detail on the Bitcoin chart is possible.
The bull market of 2017 took place at a time when liquidity was flat.
TL;DR
The disaster scenarios written for the year's first half did not materialize. On the contrary, Nasdaq and Bitcoin recorded historical gains. Now it's time for altcoins. For altcoins to rally, liquidity must at least remain flat. For this, the FED needs to be convinced that inflation is falling. FED officials also know inflation is falling but do not want to accept this fact. Because enthusiasm in the markets may harm the fight against inflation, they rein in the market with verbal guidance and want to ensure victory over inflation.
For ten days, Bitcoin has been hovering above 30k, a critical support/resistance level. Ethereum is just below the $2000 level it hit in the summer of 2022. The Gary Gensler storm in the market has passed. In fact, the idea that Gensler's anti-crypto actions hurt investors was widely supported.
The positive news is gaining more ground in the crypto media, and the number of analysts making optimistic forecasts has increased. However, it is a fact that the recovery will be painful, especially on the altcoins front. At the end of last year, those who dared to buy Bitcoin earned close to one hundred percent returns. Now it's time for altcoins. Those who sell their bitcoins with the right timing and switch to altcoins will multiply their profits. Of course, nothing is guaranteed in the crypto market. In any case, the second half of the year will be exciting!
Thank you for reading.
Cover Image Source: Midjourney App