Why crypto prices are pumping higher today as the macro outlook darkens

by Arthur · September 27, 2022

The cryptocurrency market has risen by 4.5% in the last 24 hours, with its total cap at $1.012 trillion. This rally ends a largely negative seven days for the market, which fell as low as $939 billion last Thursday, meaning the current level represents a 7.5% gain in prices.

For the most part, bitcoin has been responsible for today’s boost, with the native cryptocurrency rising 7.5% at one point from its 24-hour low. On top of this, a number of major altcoins – notably Terra Luna Classic (LUNC), Terra (LUNA) and Uniswap (UNI) – have posted above-average gains, helping to push the market’s overall cap higher.

At a time when stock markets continue to fall amid the negative macroeconomic outlook, the jump in cryptocurrency prices may superficially seem like a mystery. However, given that many coins have likely fallen as far as they reasonably can (barring some sort of cataclysmic market or economic event), it is arguable that the top coins now have nowhere to go but up.

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Why crypto prices are pumping higher today

Looking at BTC’s rally above $20,000, this was mainly driven by an increase in spot volumes, with traders and investors likely to move to acquire the original cryptocurrency on the cheap. And as is generally the case with the cryptocurrency market, when bitcoin makes a big move, it acts as a signal to much of the rest of the market.

In fact, of the top 100 cryptocurrencies by market capitalization (excluding stablecoins), only 14 are in the red in the last 24 hours:

Algorand (ALGO) – down 2.2%
Stellar (XLM) – down 2%
Chain (XCN) – down 1.9%
Bitcoin SV (BSV) – down 1.8%
Composite (COMP) – down 1.8%
Osmosis (OSMO) – down 1.4%
Evmos (EVMOS) – down 1.1%
Cosmos Hub (ATOM) – down 1.1%
Radix (XRD) – down 0.9%
Pax Gold (PAXG) – down 0.8%
Ripple (XRP) – down 0.7%
Helium (HNT) – down 0.4%
ApeCoin (APE) – down 0.3%
DeFi Chain (DFI) – down 0.1%

These are hardly big drops, and with coins like LUNC and LUNA up 41% and 16% respectively in the last 24 hours, the market as a whole has seen an increase in value.

It can be argued that the main reason why crypto prices are pumping today is that they were simply due to an upswing sooner or later. Looking solely at the technical indicators for many of the major coins, their relative strength indices had been too low for too long, signaling that they were oversold and in need of a positive upward correction.

This is confirmed, for example, by bitcoin’s price chart. Here we see that the RSI (in purple) had been close to 30 for much of late August, and with a brief jump in early September, had stayed around 40 or just below.

What this tells us is that traders had grossly undervalued bitcoin in relation to the recent price action and that there was value to be gained by buying it up at such a discounted price. In fact, more than a few analysts have argued that the market is “oversold on all fronts,” and that it was due to a “reversal”.

From a purely technical, chartist perspective, bitcoin’s recent rally also coincided with a bullish divergence, which is when prices fall to a new low while an oscillator (such as the RSI) fails to make a new low. Simply put, bitcoin fell yesterday to a low of around $18,700, but the RSI started rising, a sign of incoming bullish momentum.

This bullish divergence was confirmed – at least for now – by the earlier movement of the day. And just as BTC has been severely undervalued lately, so have most major coins with good fundamentals, from ethereum (ETH) and solana (SOL) to polkadot (DOT) and uniswap (UNI).

As such, crypto prices pumping higher today can be seen as a correction to excessive pessimism.

LUNC, LUNA, UNI and other special cases

Some altcoins have outperformed their average over the past 24 hours, with LUNC, LUNA and UNI leading the pack, at least until a few hours ago.

Terra Luna Classic (LUNC) had recorded a jump of 72% between a low of $0.00018478 yesterday and a high of $0.00031905 today, only for it to fall back to $0.00027565 not too long ago. Similarly, Terra (LUNA) recorded a slightly less impressive 36.6% gain between yesterday’s low of $2.05 and today’s high of $2.80, before falling to $2.57, meaning it has now effectively fallen by 3% during the last 24 hours.

Despite such falls, uniswap (UNI) is currently notching a 15% gain in the last 24 hours to $6.58. This is an increase of 20% in one week, and an increase of 8% in the last 30 days.

All three of these coins have their own specific reasons for beating the market so comfortably. As for LUNA and LUNC, each of these coins benefited from Binance’s announcement yesterday that it would burn all transaction fees taken from trades involving LUNC.

In UNI’s case, the rally appears to have coincided with a demo of Uniswap running on the Internet computer, giving it a fully decentralized front end (as opposed to the site running on a centralized domain server like Cloudflare or AWS). It is not clear if this is responsible for the bulk of UNI’s gains today, given that this is only a demo, but the prospect of a fully decentralized Uniswap is certainly bullish for DEX.

Other big movers include ethereum name service (ENS) and neo (NEO), each of which has its own particular reasons for running out of the market. Ethereum naming service partnered with Coinbase the last week on web3 usernames for the stock exchange’s users, while Neo announced a new outreach team that will proactively promote awareness and use of its network.

That said, these are relatively modest reasons for the rally, and do not fully explain why such coins have seen large increases today. Instead, it bears repeating that most of these coins make up for being so heavily undervalued and oversold.

This is especially the case with LUNC and LUNA, at least in the sense that these coins were apparently almost dead just a few months ago. With Binance’s announcement yesterday, the market realized that these two alts still have some life left in them yet, and that they may have written them off prematurely.

Much the same applies to UNI, ENS and NEO, all of which have fallen faster than the market average in recent months (eg NEO recorded an 84.5% drop from its November 2021 high on Monday). So it makes perfect sense for them to recover a bit by enjoying above-average gains, given how cheap they are.

The future

When considering the question of how crypto prices might pump in the context of falling stock markets and the negative macro outlook, it’s important to remember the role the cryptocurrency market has historically played in the broader global economy.

That is, due to its highly speculative and volatile nature, crypto has often acted as a clock for (tech) stocks, undergoing movements that will be repeated later by more traditional markets. Indeed, BTC’s rise to its current ATH of $69,044 in November 2021 was a foreshadowing of the S&P 500 and Dow Jones breaking their own records in January 2022.

Similarly, cryptocurrency prices began to fall before stocks, with BTC seeing a 50% rise from its November high as quickly as January 23. At this point, the S&P 500 was ‘only’ 8% off its record high.

The point here is that crypto moves before the stock market. For this reason, it is tempting to argue that today’s positive data signals the first beginnings of the turnaround in not only cryptocurrency prices, but also stock prices and the broader global economy.

Of course, with so many things still uncertain, today’s good news may be short-lived. But with indicators remaining at rock bottom for so long, surely it must only be a matter of time before the market witnesses sustained growth,