Crypto Optimists Sense Summer on the Horizon

It’s been a long time coming, but with the recent wave of global liquidity, it looks like the season is turning, at least according to Morgan Creek Digital’s Mark Yusko.

Could it be? Is this the beginning of a crypto summer, as Yusko suggests? And if so, what ever happened to spring, anyway?

A month ago, Bitcoin (BTC) experienced its latest crash, but has since rallied. In the time since, the market has gained nearly 50% in market value.

Morgan Creek Digital’s ever-bullish Mark Yusko declared to Blockworks on the weekly round-up episode of On the Margin that he believes crypto summer has indeed begun, apparently skipping spring altogether.

Asked about the cause for the current rally, Yusko explains bluntly: “Sellers are gone.”

As unlikely as it is that sellers have all packed up and left, Yusko insists that the turnaround has begun, as many additional factors in the Bitcoin ecosystem have also turned positive. The Bitcoin hash rate stands at an all-time high, as does the number of wallets with greater than 0.1 BTC. Transaction size and volume are approaching all-time highs, as well.

“All of those fundamentals,” Yusko explains, are “surfing on a wave of global liquidity.”

“China [has] printed a trillion dollars since October,” Yusko says. “Japan, another couple hundred billion. The Fed put three hundred billion back on their balance sheet. So we’ve got a trillion and a half dollars of liquidity sloshing around.”

“And it turns out people buy things that they like. And there’s a whole bunch of people that like crypto.”

Speculation over Ethereum’s Shapella upgrade

Host Mike Ippolito talks about the market implications of the recent Shapella upgrade to the Ethereum network, finally allowing ETH stakers to withdraw their Ethereum. “This has been the subject of a whole bunch of speculation within the crypto community.”

People are of two minds when it comes to this event, Ippolito explains. One argument is that “some people have had their ETH locked up in this contract for a very, very long time.” Some will need liquidity to pay their taxes, he says, so there should be “a decent amount of sell pressure,” according to this line of thinking.

But it looks like that theory might not be validated, he suggests. The flip side is that people now recognize that the Shapella upgrade is live and working as planned. “It’s not theoretical. There will actually be proof that staking contracts will be de-risked and actually, more people will end up staking.”

“That’ll be good for Ethereum’s price.”

Yusko agrees. “The data is, there’s more buyers than sellers of ETH. ETH, over the past couple of weeks, has even outperformed BTC.”

“There’s just no evidence in the markets of big liquidations.”

“I guess the caveat,” Ippolito concedes, “is that sometimes the market gets this wrong initially.”

“But definitely things are looking up for crypto.”

Keeping the Ponzi afloat

“On the other hand,” Ippolito adds, looking out into the broader economy, “maybe there is still another shoe to drop.” A strong correlation between high-risk assets – crypto and high-growth tech stocks – persists, he says, so it’s difficult to square optimism in the crypto space with a wobbly economy.

It’s really easy to get concerned when looking at current macro conditions, Yusko responds. Central bankers are “keeping the Ponzi afloat and what they decided was to turn the spigots back on.”

“You can call it whatever you want,” Yusko says. “You can call it ‘QE’, you can call it ‘not-QT’, you can call it…you know, ‘lender of last resort,’ you can call it ‘BTFP,’ whatever you want to call it, it doesn’t matter.”

“Trillions of dollars are flowing into the global economy, and that is going to push risk assets.”

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