Hi readers, In today's newsletter, Katie Stockton of Fairlead Strategies offers a technical breakdown and bullish long-term outlook for bitcoin. Then, Jason Barraza of Security Token Market outlines what to watch out for as capital markets transfer onto the blockchain. Thanks for joining us. |
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Bitcoin's Outlook: Short-Term vs. Long-Term |
Bitcoin rounded out an exceptionally strong 2024 (up 120% yoy) with a whimper, logging the first overbought "sell" signal on its weekly bar chart since mid-April according to the stochastic oscillator, which is an indicator of trend exhaustion. The signal suggests bitcoin will remain range-bound, at least in the short term (roughly 2-6 weeks), as other risk assets (e.g., equities) continue to pull back. |
Key technical levels to watch for bitcoin: |
- Minor resistance is at the most recent high, near $108K, above which is "uncharted" territory. A breakout would be a bullish development, but the momentum does not appear strong enough to generate a breakout at this time.
- Initial support is near $87.6K, defined by the Ichimoku cloud model, which is a trend-following model based on historical prices. Recent deterioration in our intermediate-term indicators increases the chances that a pullback will deepen further, with secondary support near $73.8K, reinforced by the rising 200-day (~40-week) moving average.
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Despite short- and intermediate-term bearish signals, the long-term outlook for bitcoin remains bullish from a technical perspective following the post-election breakout in November. The breakout to new highs marked emergence from a several-month downtrend channel, and it helped long-term momentum indicators like the monthly moving average convergence/divergence (MACD) reaccelerate. Thus, a correction for bitcoin in Q1 should present an opportunity to add exposure ahead of another upleg in bitcoin later in 2025. Ethereum: resistance near $4000 is a hurdle for early 2025 Like bitcoin, ether has flashed an overbought "sell" signal, which comes after a rejection at important resistance near $4000. The "sell" signal has intermediate-term implications, supporting a corrective phase over the next couple of months. Ether also has initial support at the daily Ichimoku cloud model, near $3226, above which it has stabilized. We expect a correction in Q1 to lead to a breakdown and test of the 200-day (40-week) moving average. However, our long-term indicators still point higher, albeit less convincingly, compared to bitcoin. A breakout above the $4000 level would likely result in improved long-term metrics like the monthly MACD. |
Bitcoin vs. ether: 2024 outperformance by bitcoin gives way to volatility In 2024, bitcoin outperformed ether by 74%, a trend that can be clearly seen in the bitcoin/ether ratio. Since early November, relative performance has become more fickle between the two largest cryptocurrencies, evidenced by the wide trading range that has taken hold of the ratio. During a crypto market correction, bitcoin normally outperforms ether since it is usually deemed as "safer." However, all cryptocurrencies are likely to trade lower in absolute terms when risk assets are undergoing a correction, noting that correlations tend to go up when markets go down. Nevertheless, a bullish long-term outlook suggests that Q1 volatility may present an opportunity to add exposure with a more favorable risk/reward profile, ideally waiting for the intermediate-term indicators to turn up again. |
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What 2025 Holds for Tokenized Real World Assets |
Real world assets (RWAs). This is what the crypto natives and institutions are now calling on-chain representations of ownership in real estate, debt, equity, fund LP units, and other traditional assets. Throughout 2024, RWA tokenization grew in popularity thanks to key catalysts including: |
- BlackRock tokenizing one of its funds and investing in a tokenization company.
- Banks and asset managers graduating from proofs of concept to in-production use cases.
- Licenses being granted such as 21X under the DLT Pilot Regime, Ursus-3 Capital as the first ERIR in Spain, and Nomura's Laser Digital being licensed in the Abu Dhabi Global Market (ADGM) to name a few.
- Crypto natives are starting to understand the value of real world assets coming on-chain, with RWAs as the third most profitable narrative.
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What can we expect in 2025? This should be the year tokenization solidifies its position and transitions into the "pragmatists" portion of the adoption bell curve. With over $50 billion in RWAs already on-chain, 2025 is predicted to reach at least $500 billion (excluding stablecoins). |
Collateral mobility, yield-generating assets backed by other tokens (i.e. stable/yieldcoins and tokenized liquidity products), more complex financial products, and proven streamlined operations will drive the growth of the tokenized RWA market cap. Over time, this will increase investor preferences toward tokenized rather than non-tokenized versions, leading to further adoption and inflows. Real estate alone provides over $30 billion in value, demonstrating savings through tokenizing HELOCs, alternative financing, collateralized loans, on-chain title, funds, and more. |
Regulatory clarity Regulatory clarity remains a top barrier to adoption, but 2025 could bring significant progress. News of Paul Atkins' appointment as SEC chair, Perianne Boring at the CFTC, and David Sacks as Crypto Czar is increasing the likelihood for a clear U.S. legal framework for digital assets. This would encourage larger institutional participation, raise investor confidence, and spur further innovation in infrastructure for RWAs. The EU, Switzerland, and Singapore have already shown that stronger regulation, even a sandbox, will enhance global momentum even further. Bridging the crypto community via RWA utility/governance tokens Tokenization has caught institutional attention due to cost savings and operational efficiencies. This is observed in both trials and in-production use cases compared to their off-chain counterparts. On the crypto side, governance and utility tokens are giving holders discounted trading fees compared to non-token holders, priority access to deal flow, decision-making, and more. This is the language the crypto community speaks, which will redirect crypto and NFT gains into RWAs and encourage building dApps/ infrastructure for them. Additionally, the Trump administration's potential tax breaks on gains from U.S.-issued cryptocurrencies (utility/ governance tokens) is something investors and issuers should watch closely. 2025 should see tokenization of financial assets grow as both a narrative and application. Large banks and asset managers' adoption will yield tangible results and spark confidence to move forward with related endeavors higher up the risk curve. Tapping DeFi ecosystems will continue to propel both primary and secondary markets forward by adding utility and enabling new economic opportunities. This year will see the chasm between crypto-native communities and traditional finance start to narrow. Tokenization is no longer a future concept; it's here and will continue to grow. If you haven't been paying attention to this space, now is the time. Regulatory clarity, institutional adoption, and improved utility, among other catalysts like the Strategic Bitcoin Reserve at state and federal levels, will stimulate exponential growth and adoption. |
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