Crypto’s not having the greatest day. But Cumberland, the digital assets-focused arm of Chicago-based trading-firm giant DRW, has read the market’s tea leaves, and what it’s seeing is pretty positive overall.

The firm released a detailed thread on Twitter overnight, breaking down its reasons for identifying what it describes as a “budding uptrend taking shape in crypto” right now.

With bleary eyes, Coinhead noticed the posts in its Twitter news feed late last night, Sydney time, found them interesting, went to sleep hoping CZ and SBF had patched up their spat, and woke up seeing that major news site Bloomberg had picked up on the thread.

Well, damn it if we’re not going to cover it here, too. Let’s take a look.

(Caveat: we just checked the crypto prices again on CoinGecko and they’ve actually dipped considerably since we published Mooners and Shakers earlier today, and in fact since we began this article. The entire market cap is now down more than 5% over the past 24 hours and Bitcoin has lost its US$20k mooring. Nevertheless…)

 

Is the US dollar finally topping out?

Part of the Cumberland thesis rests on the idea that the US dollar could finally be weakening, combined with what it describes as a “more constructive macroeconomic environment”.

So, does the buck stop here? The US Dollar Index (DXY) has been in an inexorable bull market of its own all year. It’s been “killing sentiment across every major risk asset class, including some severely supply-constrained commodities,” wrote Cumberland, adding:

“This rally seems to have topped out, likely the result of expectations that the Fed reverse course by mid-2023. In other words, the 5.5% market-implied terminal rate is a lot scarier when short term rates are locked 0% than when they’re hovering around 4%.”

Sven “Northman Trader Henrich, a prominent US financial analyst is also spotting a potentially weak US dollar at present.

However, in a slightly more to-the-minute update, the DXY isn’t completely playing ball today, having so far risen 0.16% back above the 110 level again.

We’ll see how the week unfolds.

 

Could a Republican-fuelled rally be on the cards?

Speaking of which, this week, the US midterm elections take place. Could a result that’s deemed favourable to crypto be considered a part of “more constructive” macro? Absolutely. Here’s why.

“In the event that Republicans do manage to take back control of the legislative branch of government, it would seem unlikely that they usher in an era of fiscal austerity,” notes the trading firm, adding: “Instead, we should expect a lean towards lower taxes, higher stimulus, and easier regulation.”

Republicans, including Senators Cynthia Lummis and Pat Toomey, have shown themselves this year to be among the staunchest supporters of Bitcoin and the crypto industry. And according to Bloomberg, if things go their way, they may soon be able to push more forcefully to “move bills that many in the industry have been asking for”, as well as place more pressure on regulators such as the SEC, to ease up on heavy-handed “investor protection” approaches with crypto firms.

Are healthier crypto portfolios a guarantee with more Republicans holding sway? Nope, and obviously most American voters have wider issues to consider, too. Nevertheless, some reports are suggesting there’s a strong chance the reds might just nab back some power in Congress later this week.

 

Ukraine conflict factors – ‘choppy equilibrium’

The Cumberland lot have made the call that the geopolitical-fuelled macroeconomic forces surrounding the Russia vs Ukraine conflict (e.g. supply chain issues and resource scarcity), which have played a huge part in the ongoing bear market for most asset classes this year, have reached a “state of choppy equilibrium”.

“In the absence of new geopolitical developments, a reduction in volatility should result in higher asset prices,” the firm boldly posits. Here’s hoping.

 

Adoption milestones

Finally, Cumberland cites the impressive level of adoption the crypto industry has been seeing all year. We’ve been noticing quite a lot of that very recently, too – Google, Meta, Fidelity, CBOE, BlackRock… the list goes on.

“Without much fanfare, crypto is racking up adoption milestones that would’ve fuelled spectacular rallies in the 2021 macro environment,” noted the firm.

“Elon/Twitter is generating headlines, but Polygon seems to have quietly raked half of web2 onto its network over the last 1.5 months.”

(Another caveat: at the time of writing, Polygon’s MATIC has taken quite a dip over the past hour, along with the rest of the crypto market. However, it’s still by far the biggest gainer over a seven-day timeframe, currently hanging on to a 23% gain.)