In recent weeks, the crypto world has been paying attention to a topic: the price of Bitcoin. After Bitcoin was able to break away from its previous all-time high on December 16, the price of the popular cryptocurrency is rising. But not only Bitcoin is the focus of investors’ attention, but Ethereum, Polkadot, Litecoin and many small projects are likely to have made strong profits in the past few weeks.
Bitcoin – these reasons explain the current rebound
In the process of a strong rebound, Bitcoin once again hit a record high of $34,700. It wasn’t until December 16th that this popular cryptocurrency broke through its highest level in history since 2017. However, compared with December 2017, the fundamentals have undergone a fundamental change, because Bitcoin is no longer regarded as a future payment method, but a way of storing digital value. In our opinion, the following facts are conducive to Bitcoin’s rebound:
Institutional investors’ interest in Bitcoin: Large companies such as Square Inc, Mass Mutual, and MicroStrategy have purchased large amounts of Bitcoin, increasing public awareness of Bitcoin.
Enhancement of adaptability: In terms of adaptability, many things have happened in recent years. However, the role of Paypal is particularly noteworthy. U.S. customers of payment providers can already buy Bitcoin through the app. Square’s US customers have been able to buy and sell Bitcoin through the popular CashApp for some time.
Business environment: We believe that another factor that drives Bitcoin to become more and more important is economic development. Corona still dominates economic activity, with central banks issuing trillions of dollars in new capital. In order to hedge against the upcoming wave of inflation, investors have fled and entered assets holding their value, such as real estate, stocks and cryptocurrencies.
The scarcity of Bitcoin: In addition, the scarcity of Bitcoin may also play a role in the current price increase. In May 2020, Bitcoin’s earnings were halved. Therefore, fewer and fewer bitcoins are entering the market. As demand increases, this means that the price of Bitcoin will rise. PlanB’s inventory-to-flow model provides a good visualization.
The short-term attack on BTC failed
For many investors, the current rise in Bitcoin is unexpected. Some experts even predict that the price of gold will close at $30,000. As a result, many investors have established short positions. On January 2, news from the Bitcoin Whale believed that a sell order of more than 150 Bitcoins might break the current momentum, and a short-term consolidation was observed. Within a few hours, the price of Bitcoin dropped from $33,000 to $30,000.
However, this correction did not last, because within 24 hours, Bitcoin reached a record high. In addition, Bitcoin’s demand for Coinbase is also unusually high. At the same time, traders use Binance Futures to short Bitcoin. The result is a short squeeze.
Therefore, short sellers have to realize that short Bitcoin will really end in pain. In general, the short positions of short sellers in the past 10 months have not had much luck.
Are we about to see a new round of rebound in altcoins?
However, although Bitcoin is currently experiencing a strong price fluctuation, the top altcoins remain relatively calm. Previously, only Ripple was able to convince investors with a strong price increase-but the SEC’s complaint pushed the price of Ripple back to its original level.
However, now some things seem to be changing in altcoins. For example, the price trend of Ethereum is worth highlighting. This is the first time that the price of Ethereum has exceeded $800 since May 2018. At the same time, it even broke the $900 price mark. Some traders now assume that Ethereum performed better than Bitcoin in January. In addition, Ethereum may be about to usher in a new bull market cycle, because the Chicago Mercantile Exchange plans to launch Ethereum futures in February this year. In addition, it is now clear that the number of people buying Ethereum is reaching a new high, which is much higher than in 2018.
However, apart from Ethereum, Polkadot has also attracted investor interest in the past few days. The reason is that the price has developed more than 80% in just 7 days. After the price of Bitcoin stagnated for a long time, investors now recognize the potential of the project. Polkadot may become one of the leading DeFi blockchains and play a leading role as a collateral currency. Currently, more than 63% of DOT products are in mortgage wallets, which is a clear statement from market participants about personal synchronization.
Finally, the price of Litecoin also showed a positive trend. “Digital silver” has been among the top ten cryptocurrencies. The price of Litecoin exceeded $150, reaching the price level for the first time, and this was the last time it appeared in May 2018. Based on returns, Litecoin does not have to avoid Bitcoin, because the price of Bitcoin has almost quadrupled since September-Bitcoin cannot remain here. In the coming weeks and months, the further price development of Litecoin should be exciting.
Exciting market development
I think the bull market has just begun. Compared with 2017, the fundamentals of all cryptocurrencies have undergone fundamental changes. Now that Bitcoin has taken the lead, other cryptocurrencies can follow suit. It is unlikely that there will be a massive exaggeration like the last bubble-after all, market participants should have learned from the last cycle.
Nevertheless, altcoins can now also record price increases. Taking Polkadot as an example, the project may become a pillar of the DeFi market and a direct competitor of Ethereum. However, Ethereum is also ready to start the new year with strong momentum.