Market Trend 4/7 - 10/7｜BTC and ETH regain strength after ‘tourist purge’, DeFi altcoins rally, FED signals another rate hike

Over the previous week, we have shown the main reasons Bitcoin had such a massive drop - the biggest one in more than 11 years. Macroeconomic pressure from the Federal Reserve across all markets, lingering fear from the Terra (LUNA) collapse, which still has its investigations going at full speed, Celsius’ withdrawals pauses, 3AC’s going into default and more.

We established that the scenario for cryptocurrency, in general, was still quite fearful and uncertain, as it is across all financial markets at the moment. Last week, however, showed an impulsive breather of upside as Bitcoin and Ethereum hiked 10% each and DeFi projects rallied across the board.

The global climate, however, is still of great unreliability as the Federal Reserve recently announced it will continue to rate hikes following their FOMC Meeting Minutes. But the recent bullish flow in crypto does show optimism for assets in the short to medium term.


Bitcoin and Ethereum regain strength, tourists purged from assets

Despite the global markets in the red with poor investor sentiment over the past several months, crypto took the lead this week with a surprising upside strength coming from Bitcoin and Ethereum - gaining momentum side by side at a 10.5 rise compared to the previous week.

While that may seem like a quick breather against another “dead cat bounce” risk of assets bottoming out even further, a recent report from Glassnode shows that Bitcoin “tourists” - those with little experience and shortly active addresses - have been purged from the ecosystem as the strongest holders continue to accumulate.


The network activity registered by research shows Bitcoin, and consequently crypto sentiment in general, at their lowest levels of activity since the peak of the last bear market in 2018/19. In spite of this seemingly negative situation, bullish inflows like the ones witnessed this week are proven to be genuine; made by real, long-term investors that are not moved by market hype at all. Tourist investors are no longer in Bitcoin, so we now rely on strong hands to continue to move the needle.


DeFi altcoins rally


When markets are at their lowest, investments go back to their fundamentals; financial services, customer solutions, and long-term applications that solve actual issues. This general rule of thumb can be evidenced by the recent altcoin rally, which focused mostly on DeFi projects that have proven the test of time and provide users with much-needed utilities in the crypto ecosystems.

Quant is the main DeFi highlight of this week, regaining its momentum after a major market slump three weeks ago. That is followed by AAVE with its locked liquidity pools continuously growing as more markets are added to the platform. THORChain’s recent upside was an inevitable one, as the native DEX project finally opened its mainnet. Internet Computer and Uniswap also rallied due to recovery from previously overselling lows.


FED signals more rate hikes ahead


Seems like markets will remain shaky for quite a while, at least for the next few months. During the latest FOMC Meeting Minutes released - a report showing the discussion highlights of the previous FED meeting - FED Chair Jerome Powell along with other board members clearly signalled that there will be another large interest rate hike ahead, most likely again in the 75 basis points range.

Are we heading for another downside or have markets gotten used to the current economic scenario? There are does within the Federal Reserve who also support signs of finally-tapering inflation, although most members remain quite negative about the future. It’s a sit-and-wait game for those looking for clearer signs of investment, but when is it ever clear anyways?



Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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