Crypto waiting for a ride

Major coins are once again largely unmoved. Bitcoin and Ethereum each notched a 0.0% return over 24 hours, more or less. BTC is down 4% in the past month. ETH is down 2% during this 30-day slog.

Long-play listlessness continues even after an unexpectedly cool inflation report and amidst a stack of positive signs. For one thing, Matrixport's BTC "fear and greed" index is pointing to a bullish phase ahead. And there's an “inverse head-and-shoulders” pattern building in the combined market capitalization of altcoins.

In terms of fear/greed, the meter was running hot about a month ago – an indication of a market top – but then it swung low, signaling perhaps a sweet chariot coming forth to carry crypto home.

As for the potential of a looming "altcoin season," that's a thesis based on technical analysis by Josh Olszewicz, a crypto trader and a former researcher at Valkyrie Investments, per CoinDesk.

The inverse "H&S" supposedly is one of the most trusted bullish patterns in the market. It forms when an asset, or in this case a group of assets (total crypto market capitalization minus BTC, ETH and stablecoins), notches three distinct price troughs, with the middle trough being the lowest; that's the "low of the head" (think of Washington Irving’s headless horseman but wearing a V-neck sweater); the middle trough was etched at the end of December when altcoins’ total cap sank to $173 billion.

The left shoulder ($188 billion) was created in June 2022; the right shoulder ($177 billion) came this past June.

Stay with us. There's been a bounce from the right shoulder low, and that's the movement of which to be mindful. But this bounce has stalled for now going on three weeks. Total altcoin market cap sits at $230 billion.

According to Olszewicz, the pattern will be complete once the market cap breaks above $300 billion, which he technically envisions as being possible in the weeks ahead.

PayPal's stablecoin, PayPal USD, arrives at a time of considerable market capitalization growth for the world's largest dollar-pegged stablecoin, Tether (USDT).

USDT's market cap has risen from $68 billion at the start of the year up to $83 billion today.

As for the second largest stablecoin, Circle's USD Coin (USDC), its market cap is going in the opposite direction, shrinking from $45 billion to $26 billion during the same period of approximately seven months.

The decline is partly driven by Binance’s move in the latter part of 2022 to wean its customers off USDC as the exchange promoted its own stablecoin, Binance USD.

And this past March, Circle needed to assure investors that reserves were not imperiled by the collapse of Silicon Valley Bank at which Circle was holding $3.3 billion worth of its backing cash. The U.S. government ultimately stepped into the SVB breach, assuring Circle it would backstop the backstop.

In a recent interview with Bloomberg, Circle CEO Jeremy Allaire reveals the existence of a $1 billion cash reserve earmarked as insurance against its declining market cap and fresh competition which Allaire appears to welcome.

"It’s going to drive more and more companies into the stablecoin space,” Allaire said of PayPal’s foray. "It's great to have this new competition."

Headline (year-over-year) inflation rose 3.2% in July, higher than the 3% rise in June but less than what most economists had forecast. Stocks rallied Thursday morning into the afternoon. Crypto barely moved.

Rick Rieder, CIO of global fixed income at BlackRock, said "we are witnessing a rate of change that is encouraging."

Indeed, dreaded inflation, destroyer of wealth, is well off its 40-year highs of mid-2022.

Encouraging enough to start thinking that maybe the Fed could start cutting rates, unleashing an era of looser money thus boosting risk assets such as Bitcoin? Probably not, economists caution. That’s because inflation still remains considerably above 2%, a level the Fed has targeted.

“The Fed is some distance from cutting rates,” said Seema Shah, strategist at Principal Asset Management. “Disinflation is unlikely to be smooth and will require some additional economic pain before the 2% target comes sustainably into view.”