- Bitcoin should outperform Ethereum if inflation picks up, said Nick Cawley, strategist at DailyFX.com.
- Rising prices benefit Bitcoin more than Ethereum, as the latter is not as strong against inflation.
- Cawley shared five altcoins he watches, including highly touted Ethereum rivals.
Months after predicting that Bitcoin and Ethereum would hit new all-time highs, Nick Cawley, a DailyFX.com strategist with two decades of experience trading fixed income products, sees more slow but steady gains for the two largest cryptocurrencies.
Cawley’s reasoning is threefold, he told Insider in a recent interview: The crypto sentiment remains positive, adoption rates among major investors are rising, and the technical setups on the token charts suggest that their uptrends are on the move.
A case in point is a series of higher lows for the 20-30 largest cryptocurrencies, Cawley said, suggesting that when weaknesses, investors buy dips rather than panic selling.
“From a trading perspective, ordinary sell-offs get bought back pretty quickly,” Cawley told Insider. “It seems that the market is looking for sell-offs in a way. Some people are actually looking for sell-offs, maybe to get longer, to increase their longer-term stocks.”
But Bitcoin’s inflation hedge potential gives it an edge over its competitors
Inflation, which hit a three-decade high in the US in October, “has its clutches in the market,” said Cawley. Many investors tried to buy gold and certain stocks in order to position their portfolios accordingly. Others rushed to buy Bitcoin, which is up over 46% since October 1.
The original cryptocurrency was touted as an inflation hedge because of its limited supply – something Cawley described as the token’s “unique selling point”. If inflation is rampant and lasts longer than government officials anticipated, Bitcoin is likely to outperform other assets.
“Forget everything that is said in the US about ‘temporary’ inflation,” said Cawley. “That word has been used for the past six months and US inflation is at a 30-year high. So inflation is ingrained right now and it doesn’t look like it’s going to go down anytime soon. ” Bitcoin is and has proven to be an efficient safeguard against this. “
Some cops have argued that Ether, the native token on the Ethereum blockchain, could also act as an inflation hedge due to a protocol introduced in August to limit the supply of the coin. Cawley said he wasn’t buying that argument despite being a fan of the token.
Investors, like Cawley worried about inflation, should stick with Bitcoin to hedge against higher prices, he said, especially because it has a more promising tech setup than Ether, which he said has “faded”. The DailyFX.com strategist wrote in a November 8th note that Ether is set for more volatility when entering “uncharted waters”[s]. “
Five altcoins that you should keep an eye on despite foam formation
Bitcoin and Ethereum have become the entry-level drugs to the digital asset market. Once viewed as wildly speculative, Bitcoin is now viewed as “the boomer’s coin” because its price volatility is so subdued compared to smaller cryptos, Liz Young, director of investment strategy at SoFi Technologies, told Barron’s.
The success of Ethereum inspired would-be “Ethereum killers,” while the popularity of Dogecoin, a joke mark named after a Shiba Inu dog, sparked the creation of the aptly named Shiba Inu coin. Many of these so-called “hype coins” are pumped, disposed of and forgotten at some point.
“There will be coins that have the ‘shooting star’ effect and then suddenly fade and probably never be seen again,” said Cawley.
Some see this crypto craze as light-hearted fun that, with a little luck, can lead to some serious money. Others warn that the trend is a tell-tale sign of an ever-widening speculative bubble, caused in part by the Federal Reserve’s decision to cut rates to zero and flood the markets with cash.
“[Investors are] willing to take risks because they – especially younger people – want to return capital in a low interest rate environment, “said Michael Sidgmore, co-founder and partner of Broadhaven Ventures, in an interview with Insider.
Sidgmore acknowledged that there is some “hysteria” in today’s crypto market, but added that there is also a lot of innovation – an opinion endorsed by Cawley. The DailyFX.com strategist said that investors are increasingly investing in the stories of the possibilities of cryptocurrencies and have less of a “casino” mentality than they did a few years ago.
Cawley named five altcoins that he is closely monitoring, although he cannot officially recommend cryptocurrencies or stock price forecasts for them.
Solana (SOL) and Cardano (ADA) are price-stable Ethereum competitors that Cawley said he is still interested in. Proponents say the two projects can be effective, if not superior, additions to Ethereum as they offer lower fees and faster transactions. Another Ethereum rival, Cawley, said he was watching is avalanche (AVAX), a network that, according to Cointelegraph, can also outperform the larger network in terms of transaction executions per second.
Two smaller, lesser-known cryptos that Cawley said have cheap tech setups are Hedera (HBAR) and Algorand (ALGO). Both aspire to be platforms that host decentralized applications.
Those five tokens had strong starts this year, but Cawley said that reflects their potential – not an upcoming crypto bubble. In any case, nobody is known to him.
“There’s nothing in sight right now anyway that should be overly worrying,” said Cawley. “With the inherent, of course
of cryptocurrencies you can never say never. “
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