On December 8th, exactly a month ago, Bitcoin was hovering around $ 18,700. Many analysts debated whether the flagship would be able to maintain its bullish momentum and break its all-time high near $ 20,000. Well, how quickly things have changed since then, because in just 30 days, Bitcoin (BTC) has repeatedly scaled to new ATHs, even surpassing the $ 41,000 mark.
Over the past seven days, BTC has seen a respectable growth of around 41%, with the digital asset seeming to be breaking new ground with each passing day. However, this has made investors increasingly nervous as there are many who receive instant flashbacks from the 2018 crash that caused most cryptocurrencies to crash sharply within a few days.
In this regard, Michaël van de Poppe, contributor to Cointelegraph Markets, believes that while 2020 was an amazing year for crypto, everyone should be preparing for a “healthy correction” in the near future. For many, however, this is a once in a lifetime opportunity as there are more and more budding crypto enthusiasts who want some of the action now, and not just Bitcoin. On this matter van de Poppe said: “The higher Bitcoin goes, the more money comes into the market and more money can flow towards Altcoins.”
What is causing BTC to rise?
The reasons behind Bitcoin’s momentum are many, starting with the fact that the industry as a whole was in a sustained bear market through 2018 and 2019, but despite the slumps, the accumulation never really stopped.
Another often-overlooked narrative relates to the recent halving of BTC, as historical data keep suggesting that the value of the leading digital currency takes a strong upward trend roughly four to six months after each cycle – something that happened this time around too .
In addition, the digital asset seems to be on the right track with the stock-to-flow model created by Dutch institutional investor PlanB. According to the S2F model, scarcity is used as the defining metric to quantify Bitcoin value. While most people use the setup to assess the future valuation of BTC, PlanB claims that the S2F model can be used in relation to gold and silver as well as other assets.
#Bitcoin stock-to-flow model on track .. like clockwork pic.twitter.com/x7o8mwbzj7
– PlanB (@ $ 100 trillion) January 7, 2021
Ben Zhou, CEO of Cryptocurrency Exchange Bybit, confirmed that it was the “institutional inflow that fuels Bitcoin,” adding that there is now some consensus, or at least peer pressure, in certain corners of the institutional world to have Bitcoin around them Portfolio: “Of course, those who have a younger clientele feel the need to increase their exposure to BTC.”
Omar Chen, CEO of the ZB.com exchange, believes that institutional purchases have only served as a catalyst for Bitcoin and have not been the main driver of the positive momentum. He told Cointelegraph that investors from both the traditional and crypto sectors are actually looking for alternative safe havens, pointing to gold and its rally at the start of the COVID-19 pandemic:
“As people and institutions learn more about its properties and benefits, Bitcoin has become another oasis of choice for money. Combined with the recent negative news about COVID-19 vaccines, investors are increasingly losing confidence in traditional finances and the global economic recovery, making the bullish case for Bitcoin even louder. “
Are Altcoins inextricably linked to BTC?
As Bitcoin continues to march, even surpassing the $ 41,000 threshold, there’s no denying that the surge has also caused a number of prominent altcoins to hit new heights. In that regard, Ether (ETH), Stellar (XLM) and Cardano (ADA) have seen significant gains of 70%, 128% and 70% respectively over the past week.
But will the financial fate of the top 10 altcoins in the market always be tied to Bitcoin? So far, the value of ETH and Litecoin (LTC) has continued to show a strong correlation with BTC when the latter observe major market movement. However, ether can flourish as an independent asset, despite not yet topping its 2018 ATH of $ 1,448.
Thor Chan, CEO of Digital Asset Exchange AAX, said the term has changed over time, although the term “alt-season” is often used when ether or other altcoins begin to rise. He pointed to the 2017 market when it all had to do with an explosion of innovation related to initial coin offerings and with people “getting rich as soon as possible”. Since then, he believes the market has developed strongly: “Now altcoins growth is more about portfolio diversification, risk management and realignment as traders realize their Bitcoin profits.”
It’s worth noting that most altcoins, aside from a few like ETH, are still largely off the radar of institutional interest. However, with Bitcoin being advertised the way it has been before, many medium-sized to large investors might consider ETH and other prominent alts as potential candidates for the next wave of adoption. In this regard, Jay Hao, CEO of Cryptocurrency Exchange OKEx, highlighted Cointelegraph:
“It is natural that there will be a certain spread to other cryptocurrencies, with Ethereum as an established and long-term project in the industry being the first. While BTC is easily the strongest brand awareness, Ethereum has not gone unnoticed and is used by the biggest FSIs like JPMorgan and Santander. “
He also noted that Ether has very strong fundamentals and as a result has attracted the interest of serious institutional investors such as TD Ameritrade and Arca Labs. Additionally, Ethereum is the platform of choice for many cryptocurrency projects and is behind the enormous DeFi momentum that has increased seriously over the past year.
Hao believes that while Bitcoin has effectively received the green light like ether to some extent by institutional investors, the same cannot be said for all other cryptocurrencies: “I don’t think we can say with confidence that the Alt Die Season will be as big or as long as the previous one as most of the institutional dollars are still flowing into BTC. “
Is the crypto hype real?
While the narrative of “Bitcoin is a bubble” hasn’t played out yet, there are still those in traditional finance who keep repeating the statement as a mantra in hopes that their anti-crypto sentiments will eventually come true.
For example, renowned economist David Rosenberg told Bloomberg just last month that he believes Bitcoin is in a bubble and investors don’t understand how the offering works, adding, “Everyone seems to believe we will hit that 21 million The delivery restriction is limited, but there really is nothing in the log to suggest that once we hit that limit, the supply of Bitcoin cannot go up. “
Related: New Bitcoin price highs revive old misconceptions about BTC and crypto
As one wise man once said, “Facts don’t care about your feelings,” as underscored by the fact that the crypto industry is seeing unprecedented institutional demand for Bitcoin, especially with the entry of many major players such as MicroStrategy, Guggenheim, SkyBridge Capital, Square and PayPal in the room. In addition, the Office of Currency Auditors recently approved U.S. banks to treat public blockchains as another form of settlement infrastructure and allowed banks to offer custody services for digital assets.
When it comes to altcoins, the world’s largest financial derivatives exchange, the Chicago Mercantile Exchange Group, has finally announced its plans to launch a new ETH futures product in early 2021. Because of this development, traders will have the opportunity in February to speculate on the future monetary valuation of Ether with a fully regulated setup.
The offering, known as the CME CF Ether Reference Rate, will help bring crypto to a wide variety of investors, traders, and investors, allowing for better pricing and, ultimately, greater acceptance in institutional circles.