This Change Will Keep Momentum Rolling for Cryptos

Editor's note: Cryptos have been on a tear this year. So today, we're turning things over to our colleague Eric Wade, editor of the Crypto Capital investment newsletter. In this essay, which has been adapted from two recent Crypto Capital issues, Eric explains just how much momentum is behind the crypto market today... how a recent change is helping crypto investing go mainstream... and why this rally likely won't end soon.

Cryptocurrency investors have been waiting for this for a decade...

The U.S. Securities and Exchange Commission approved 11 bitcoin exchange-traded funds ("ETFs") in January.

The reception has been even better than many anticipated. It's one reason bitcoin has soared to highs not seen since late 2021. And a good chunk of the crypto market is following suit...

The new bitcoin ETFs saw more than $10 billion in trading volume in their first three days on the floor. They far outpaced every other ETF that launched in 2023... And they also outperformed every single ETF – out of more than 5,500 – launched in the past 30 years.

After just trading 21 days, the 11 funds amassed a total of $2.8 billion in net cash inflows... And that's including outflows of $6.4 billion after the Grayscale Bitcoin Trust (GBTC) was converted to an ETF.

This has given crypto investors a lot to celebrate. The surge of demand has pushed bitcoin past $65,000... And last month, the crypto broke above its all-time high of $69,600 from November 2021.

But the boom isn't over yet. Today, we'll look at three signals that show what's next for the crypto rally...

The ETF approvals come with several advantages. Perhaps most of all, this change is bringing a new kind of investor to the space.

It has made cryptos accessible to folks who might have no interest in using the technology themselves... but who are willing to put some money into the asset through a simple fund.

After some initial uncertainty, the market has responded well to the ETFs. The total crypto market was up 20% over the past month. And importantly, a few key measures show the rally is likely to continue.

I like to use three main indicators to gauge what's happening in the crypto market. We'll look at each of them today... the Bloomberg Galaxy Crypto Index ("BGCI"), the Crypto Fear & Greed Index, and the Crypto Volatility Index ("CVI").

The BGCI represents a basket of bitcoin, Ethereum, and eight other cryptos. It gives us a good overview of the current trend within the overall crypto market.

The BGCI is up 121.8% year over year and 41.8% year to date. That means it's following the general trend of bitcoin and Ethereum (both of which soared over the same time frames)... And that trend is "up." Check it out...

Next, let's review the Crypto Fear & Greed Index to see the broad sentiment among crypto investors. A reading below 50 shows fear in the market, while levels above 50 show greed.

Right now, the index sits at 70. Investors are still excited about the future value of cryptos as a whole... which makes sense, given bitcoin's recent highs. Take a look...

This number is down from a reading of 80 a week ago. Bitcoin has pulled back slightly from the highs we saw in mid-March. We'll have to wait and see, but the general sentiment here is optimistic – and, importantly, it shows investors aren't throwing caution to the wind, either. This is a healthy index reading for a continued rally.

Finally, we have the CVI – the crypto market's version of the CBOE Volatility Index. Investors can use the CVI to invest in volatility or hedge positions against it. Whenever the CVI rises, investors are buying options to serve as protection against sell-offs, which means big movements in price are happening.

Generally speaking, 100 on the CVI is "normal" market volatility. The CVI rises above 100 when traders anticipate greater volatility and dips below 100 when traders bet on less volatility.

In March, the CVI spiked, topping out around 86. This reflects the kind of market volatility that usually accompanies a big change in price over a short period of time. Take a look...

If the market experiences a big pullback or continues to rally, the CVI could spike in the short term. And if the market holds steady, the CVI reading should drop back down to pre-rally levels.

In short, the crypto market has officially recovered from its brutal winter... Investors are feeling greedy to a reasonable degree, volatility is climbing (but is still at healthy levels), and many cryptos are hitting new all-time highs.

We should expect more gains ahead. With the push toward crypto adoption that we're seeing around the world, plus the approved crypto ETFs in circulation, I expect the sector to continue its strong rally – despite any temporary sell-offs.

If these ETFs manage to keep the current momentum, we'll be well on our way to reclaiming a $3 trillion total crypto market cap... and possibly even more.

Good investing,

Eric Wade

Editor's note: Next Tuesday, April 9, at 10 a.m. Eastern time, Eric is stepping forward to discuss what could be the biggest day in crypto history. A once-in-four-years event is 100% guaranteed to occur on April 19... And Eric says it will spark a massive crypto rally that could deliver astronomical gains – if you know how to take advantage. Click here to learn the full story behind this crypto "reboot."

Further Reading

Cryptos have made a massive recovery after a lackluster 2023. And based on the factors playing out in 2024, it's likely that this rally is only getting started. Here are some catalysts you should watch for... Read more here.

The semiconductor sector is booming today. It recently surged double digits in only nine weeks... one of the largest rallies we've ever seen. And according to history, the gains should continue in the coming months... Learn more here.