With recent parabolic moves, the cryptocurrency market is purely speculative at this point.
That said, we’re in a perfect macro environment for such bubbly speculation.
Central banks have been supplying the world with easy money by suppressing interest rates and printing billions of new money every month (via buying bonds and/or equities) for years.
Global liquidity (the availability of money) has been abundant to say the least.
This creates the perfect environment for asset bubbles.
As long as this liquidity is there, one can ride the rising bubble.
So keeping an eye on global liquidity is key.
If liquidity tightens, this usually means that credit conditions are getting tighter (harder or more expensive to borrow money).
And when global liquidity starts to disappear, volatility follows.
And when volatility rises, the market begins to reprice risk.
The repricing of risk leads to lower demand.
Lower demand means less buyers to sell risky assets to.
And less buyers in a momentum-driven market like crypto, leads to more sellers.
And the more sellers, the bigger the plunge in prices. Which causes all the cryptobulls to panic and try to cash out all at the same, causing prices to plunge even deeper.
So it’s really up to the central bankers to decide whether they want the bubble to pop (by tightening/normalizing) or shoot for the moon!