Bitcoin has lost much of the weekend’s stellar gains as relatively cheap alternative cryptocurrencies catch up with the crypto market leader.
At around $ 29,000 in print, Bitcoin is down over 13% in 24 hours, according to CoinDesk 20 data. Prices have dropped well over $ 4,000 in the past two hours after hitting a record high of $ 34,347 on Sunday.
“Bitcoin has a badly needed reset. After a period of increased leverage and higher [perpetual] A brief consolidation at these levels is required in funding rates for all derivatives platforms, ”Matthew Dibb, Co-Founder and COO of Stack Funds told CoinDesk.
Trader and analyst Michaël van de Poppe said a correction was overdue after the overextended vertical move.
The cryptocurrency surged $ 5,000 to over $ 34,000 in the first three days of 2021, after rising over 165% in the final quarter of 2020. The $ 30,000 breakout came along with large outflows from the Coinbase Pro exchange, a sign that institutions are buying the cryptocurrency, according to some analysts.
“Most likely the money will shift from Bitcoin to Altcoins, or only temporary profit-taking will lead to a drop in prices,” Poppe told CoinDesk. Investors may have turned some money from Bitcoin into relatively cheap, well-known alternative cryptocurrencies such as ether, star, chain link and litecoin. These coins have outperformed Bitcoin in the past 24 hours.
Ether, the second largest cryptocurrency by market value, rose to a 35-month high of over $ 1,150 early Monday and is currently trading near $ 920, a 24-hour gain of 11%. At press time, Litecoin is changing hands at its highest level since April 2018, and Bitcoin cash is trading at an 11-month high.
Ether rose 30% in early European trading hours before being dragged down by Bitcoin. Other coins have also reduced profits but are still outperforming Bitcoin.
Dibb predicted a continued rotation of capital in ether and other altcoins as Bitcoin slows down. However, the options market data shows that investors expect Bitcoin to remain very volatile in the short term.
Bitcoin’s implied one-month volatility, which measures investors’ expectation of how volatile an asset will be over the next four weeks, has soared to nearly 100%, its highest level since March 2020, according to data source Skew.
Bitcoin implied volatility
“Bitcoin’s implied volatility has hit a ten-month high as options traders believe key price movements will continue over the past ten days, with BTC soaring well over $ 34,000,” said Sui Chung, CEO of CF Benchmarks said.
However, analysts expect Bitcoin slumps to be short-lived. “Our thesis remains extremely optimistic with a target of 40,000 BTC by February,” said Dibb.