5 Reasons Not to Dump Your Crypto Bags

It's been a scary couple of days in crypto as the sector has seemed to front-run investor fear around the state of the global economy.

Today's market action has already shown the virtue of patience, especially when it comes to unwinding deep conviction bets in new technologies. While crypto assets have shown resilience today and are bouncing upwards of 20% off of this most recent rout's lows, there's still plenty of fear in the market.

While the road ahead is uncertain, especially in the short-term,  several key indicators suggest reasons for continued optimism. Today, we dig into 5 compelling reasons not to smash the sell button. 👇

5️⃣ Largely Stable U.S. Economy

To start with macro, while the recent job report certainly scared the market, other economic data shows that conditions may not be as dire as this one data point suggests.

Specifically, the ISM Services PMI, a measure of activity in the services sector, expanded in July more than was expected. The growth it showed was beyond just job creation, meaning not just an increase in service industry jobs as people get laid off, indicating strong business activity. Further, while unemployment rates did come in higher than expected, triggering that pesky Sahm Rule, they still remain near historic lows at 4.3%, with U.S. GDP growth also continuing to look strong. 

4️⃣ Bitcoin on Exchanges at Historic Lows

Another signal that can be used to gauge the health of the market is the amount of Bitcoin held on exchanges, which has reached historic lows relative to price. 

This data point likely reflects some bullish sentiment among retail as well as deeper holdings among institutions. If holders were ready to dump in short order, we would likely see these numbers spike, but they continue to trend downwards.

3️⃣ Crypto as an Election Focus

With crypto becoming an increasingly hot issue in the U.S. election, positive developments could certainly be ahead for the market. 

Regardless of the feasibility of Trump’s intentions to make Bitcoin a strategic reserve asset, his endorsements have prompted the Democrats to reconsider their position as Kamala begins her campaign against him. Despite few pro-crypto signals from her camp, her recent hiring of David Plouffe, a former advisor to Binance and Alchemy Pay, hints that positive developments may be ahead. All the while, Trump continues to get loud about the industry, prompting endorsements from powerful Silicon Valley figures who touch plenty of sectors beyond crypto.

2️⃣ TradFi Keeps Coming

Digging into crypto, the level of adoption within traditional finance (TradFi) is another reason for optimism.

From Bitcoin ETFs to Ethereum ETFs to BUIDL, crypto has continually made history this cycle as institutional investors venture more and more into crypto, even through onchain vehicles. Further, this history is not just related to crypto, but ETFs overall with Blackrock’s IBIT ETF reaching $10B assets under management faster than any other ETF in history. As more funds and services get deployed onchain, the tokenization of traditional assets is becoming a trend worth betting on.

1️⃣ This Industry Has Always Been Volatile

For seasoned crypto investors, volatility and corrections are par for the course. That doesn't make them any less painful, but for long-term investors, it's easier to ride the wave than time the right entries and exits.

Multiple drawdowns, ranging from 5-10% dips to severe 40-70% drops are normal during a bull market. Moreover, market cycles have been structured around Bitcoin’s halvings, with bottoms occurring roughly 1.3 years before and peaks following about 1.3 years after. As we’re less than four months out, history would suggest that the cycle still has a ways to go, though an unprecedented macro equation certainly makes the argument that this time could be different.