2020 may have had its ups and downs but as we enter the final stages, excitement is growing in the crypto space as BTC and ETH continue their exciting tear. As the number-one cryptocurrency pierces the $19K mark for the first time since 2017 and ETH registers a YTD performance of more than 365%, what’s driving this impressive rally and, more importantly, is it set to continue?
Bitcoin’s Eventful 2020
Remember back in March this year when the stock markets collapsed in the face of the pandemic and BTC nosedived to the $3K range? Dark times indeed. The naysayers spoke of how bitcoin had lost its “digital gold” status. Many analysts pointed out that it was more correlated to the stock market than we previously thought. And plenty of others wondered how BTC would hold up if prices languished so low ahead of the halving.
But what we’ve seen this year from bitcoin is really just the crypto asset responding in exactly the types of market conditions it was created for. Not only did it show remarkable price resilience as the economic fallout and uncertainty from the pandemic continued but its supply getting scarcer at a time when central banks’ money printing is way beyond control creates the perfect stage for bitcoin.
People are beginning to question money creation for the first time and understand that injecting trillions of dollars into the system inevitably means that they are being taxed through rising prices and eventual inflation.
Against this backdrop, we began to see widespread institutional acceptance and buy-in from veteran traders and macro investors who finally recognized bitcoin’s worth. We saw the fundamentals improve, the hash rate increase, the infrastructure continue to be built out, behemoth players like Paypal offering crypto payment services, and publicly traded companies like Microstrategy and Square adding BTC to their balance sheets.
And the price started to breakout.
Factors Pushing Up BTC Price Right Now
It almost seems inevitable then that bitcoin would continue to climb against the backdrop of struggling fiat currency and increasing and widespread adoption.
According to quant trader Sam Trabucco referenced in Cointelegraph, beyond this increased buy-in from institutions and household names, the main factors behind this latest run are a greater accumulation by BTC whales, the inpouring of other crypto assets back into BTC, and the global macro environment.
For sure, the 2020 bull run is different from 2017. BTC may be knocking on the door of its previous ATH but it’s reached this price point not through retail FOMO. In fact, only just about now are we beginning to see interest in cryptocurrencies reawaken in the general public as the performance of bitcoin captures their imaginations once again.
More interesting is the trend of whale accumulation of BTC by large market players that don’t immediately sell – signaling that they’re bullish on the market and forming what is known as “whale clusters,” as you can see below from Whalechart.io‘s hourly map of unspent bitcoins.
The cooling down of the DeFi movement also saw Bitcoin gaining real legs as many funds that were invested elsewhere started flowing back into bitcoin. That’s a lot of increased funds coming from large players and whales as well as altcoin traders.
We’re seeing more institutional buy-in, legitimization and endorsement from big banks, hedge funds, and tech companies; large participants quickly buying up all the bitcoin dips and holding, and the wider macro market also providing the perfect conditions as investors worried about inflation start moving parts of their portfolios into bitcoin.
So, will it last? Back in February this year, Digitex asked the question of whether the halving would unleash a new bull market and concluded that, while predictions were impossible to make, it was likely that we would see a significant rally. Moreover, going by past performance in which the post-halving bull run lasted for 15 months, BTC’s price could reach its height between mid-to-late 2021.
What About ETH?
ETH too is putting in a stellar performance. Its market cap may be dwarfed by bitcoin at $68 billion compared to $355 billion but its YTD has run circles around BTC (168% compared to 365%). With ETH price recently piercing $600, Ethereum bulls are buckling up. What’s fueling ETH’s price and will it continue?
Everyone in the crypto space has been captivated by the massive interest in DeFi in 2020. With almost 7 million ETH locked into DeFi’s top protocols and the lion’s share of DeFi’s protocols built on Ethereum, the gaining momentum has certainly been good for its price. Yet, as many DeFi tokens see a cooling off, ETH is on a tear.
There has been massive speculation in the community about ETH 2.0 and some concern over whether its project launch date for Dec 1 would be postponed again. But with the news coming out just over 12 hours ago that, with only nine hours remaining, Ethereum’s deposit contract had met its threshold of 524,288 Ether, ETH 2.0’s beacon chain genesis is firmly locked for the slated date.
ETH 2.0 isn’t going to be a panacea to DeFi’s problems overnight and it will be gradually rolled out in stages. But its aim to provide scalability and sustainability as it transforms to Proof of Stake (PoS) means that it could one day have a real chance of supporting large scale DeFi applications and banking the unbanked. The outlook for Ethereum long-term is encouraging, even if it may take longer to get there than some would like.
Just like Bitcoin, ETH has also seen a growth in interest from institutions with many banding together to help forward the development of the DeFi space including major names like TD Ameritrade, Arca, and CMT Digita. Arca even achieved approval from the SEC in July to trade an Ethereum-based fund; the first of its kind and a major milestone for the whole industry.
So, will the ETH rally continue? With the official kickoff date for ETH 2.0 reconfirmed, it’s quite possible that ETH price will continue to climb; but whether it will hold interest after the first version comes out remains to be seen. It’s been forewarned on many occasions that ETH 2.0 won’t start off with PoS or a massively high TPS. But many people investing in the hype may be disappointed to find it falling short of what they expected.
That said, if this year’s bull run follows the footsteps of 2016/17, Bitcoin’s gaining protagonism in the media and increased buy-in from all types of traders from institutional to retail will see interest shining on other cryptocurrencies as well. This will serve to buoy ETH’s price and the whole crypto market cap as a rising tide lifts all boats.
Whichever way BTC and ETH go, remember that you can make money trading futures–especially on the Digitex exchange that removes commission fees and allows for highly aggressive trading strategies that let you capitalize on the smallest of price fluctuations.
Stock up on DGTX now to take advantage of the mad volatility on the top two cryptocurrencies. And don’t forget about the market maker madness event this week on our forex markets creating deep liquidity and tight bid-ask spreads. Happy trading everyone!