Bitcoin On The Move Again, Touches USD 36K

The most popular cryptocurrency, bitcoin (BTC), just briefly touched the USD 36,000 level for the first time with a double-digit jump in a day before correcting lower. The majority of other top cryptoassets are rallying too. (Updated at 08:33 UTC: updates throughout the entire text).

Source: Adobe/DedMityay

At pixel time (08:28 UTC), BTC trades at USD 34,680 and is up by 10% in a day and 22% in a week, increasing its monthly gains to 85%. Bitcoin reached the USD 30,000 level on January 2.

BTC price chart:

Source: coinpaprika.com

And while the second-largest cryptoasset by market capitalization, ethereum (ETH), is also up (+7%, to USD 1,106), stellar (XLM) is back into the top 10 club as it rallied by 66% in a day, reaching USD 0.27. Cardano (ADA) is the second-best performing coin in the top 10 club (+27%, to USD 0.286).

Other top coins are up by 2%-5%, except XRP that is down by 2.5% in a day.

"Bitcoin has entered into a new phase of price discovery, largely driven by amplified institutional interest in the digital asset. We have not yet seen peak retail participation, as highlighted by the low search and social activity relative to 2017," Craig Russo, Director of Innovation at Polyient, an infrastructure underpinning decentralized virtual economies, said in an emailed comment.

According to him, retail participation, coupled with accelerated institutional participation, will likely continue to drive the bull market in Q1.

"Bitcoin successfully cemented itself as a legitimate asset in 2020 and will continue to be adopted across the financial industry, regardless of any positive shift in the traditional global economy," he added, warning that there will be high volatility during this bull season as the market is still very thin and there is potential for enormous volatility if BTC whales begin to dump.

Crypto intelligence platform Glassnode claims that widespread retail interest in bitcoin is increasing, with the number of address holding a non-zero amount of BTC reaching an all-time high of over 33 million. However, the number of daily new BTC addresses has still not reached 2017 levels.

"These metrics, therefore, paint a bullish picture of a market characterized by healthy, sustainable growth as opposed to hype," they added.

Also, according to popular BTC analyst Willy Woo, inventory depletion on spot exchanges has stopped, signifying the re-accumulation phase of the macro cycle is likely complete.

"Since we already know institutions are buying in large quantities, the flattening of spot inventory depletion is a sign that retail buyers are now entering in large volumes, attracted by recent price rises," Willy Woo was quoted as saying in a blog post by Glassnode.

Meanwhile, according to Konstantin Richter, CEO and Founder of Blockdaemon, the third Bitcoin halving means that BTC 300K will be minted this year, compared to BTC 600K in previous years.

"Since a significant portion of existing bitcoin is illiquid, 300K is far too little supply for the exponential demand coming from institutions and triggered by the global covid crisis (new financial assets are needed to hedge against inflation). This represents an example of the flywheel in motion--half the supply and a probable doubling in demand, which in turn drives further demand due to price increases," he said.

While BTC cycles are inherently unpredictable (regulatory changes in certain key countries could have a significant effect), according to Richter, the next big hurdle for bitcoin is USD 50,000.

"Between USD 30-50K, there may be a significant amount of asset liquidation, so I think that will be a harder number to achieve this year. With that hurdle cleared, I believe that we will see USD 100K in 2022," he said.

"If Bitcoin continues to rally at its current rate, I believe we could see a price of USD 54K around Valentine's day. We could see a higher price than this by the end of Q1; USD 74K is also on my radar. However, I have the sense a pull back from USD 54K would leave the Bitcoin price to consolidate around USD 35K," Nicholas Pelecanos, Head of Trading at NEM, said in an emailed comment.

Analysts predict that this bullish cycle might last for 1-3 years before the strong correction happens.

"Any kind of crash is likely to be outside the sphere of macroeconomics, or potentially as a result of an issue with miners or dramatic overpricing that needs correcting. Any crash we do see will not be as drastic as those that we have seen before, thanks to increased network effects and institutional involvement," Rachid Ajaja, CEO and Founder of AllianceBlock, said, adding that it is unlikely that BTC whales - those who hold enough BTC to impact price - are going to be selling any time soon. "It's unlikely that any whales will relinquish BTC liquidity until the price is closer to USD 100k+."

"With all cycles, the crash comes from the madness of the crowd, there won't be a catalyst news story, the market will just run out of buyers. ... The point being that the masses of retail money are usually the last to enter the market, and offer a warning sign of potential downturns," Pelecanos said, adding that this latest bull run is also likely to increase the prospect of a Bitcoin ETF.

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Learn more:
Current Bitcoin 'Mania' 'Unsustainable', Long-Term Target - Over USD 146K - JPMorgan
Bitcoin, Ethereum, XRP, Bitcoin Cash, Litecoin, Chainlink Price Predictions for 2021
Crypto in 2021: Bitcoin To Ride The Same Wave Of Macroeconomic Problems
Bitcoin Wheel Cannot Be Stopped
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