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Bitcoin,  Ethereum,  Markets Report,  Opinion

Markets Report: Bitcoin grinds upwards as ether hits new all-time high

Success for ether comes amid warnings that a return to vertical price action is likely a long way off

A new week and a new Bitcoin—a quiet weekend passes and leaves the largest cryptocurrency shooting higher towards $40,000.

After breaking $30,000 support late last week, fears of a fresh bearish retest have been left unfounded as Monday produces new upside. What’s next?

“Very cheap” Bitcoin explores trading corridor

The mood among Bitcoin traders was bearish going into Saturday, thanks mainly to a sell-off produced by a combination of factors including miner outflows and good old-fashioned fear, uncertainty and doubt (“FUD”). 

The latter focused on the issue of a security compromise which many took to mean that a Bitcoin user had succeeded in spending their coins twice—a so-called “double spend” transaction after a 51% attack—for the first time in history. This was nonsense, of course, but the resulting panic led to a cascade of selling which even involved one new institutional buyer. 

The hype soon faded, however, and against a backdrop of well-known strong hands adding to their positions, price action steadied over the weekend.

Another brief trip lower saw BTC/USD bounce at $31,000, leaving lower levels intact. Monday, meanwhile, has so far been characterized by gains for Bitcoin — at press time, spot markets focused on $34,500, their highest levels since January 21.

“All-in-all, #Bitcoin at $33,000 is still very cheap compared to the potential future value,” popular trader Michaël van de Poppe summarized on the day. 

In a sign that a return to the vertical growth of the start of year is far from near, however, Van de Poppe forecast that altcoins would beat Bitcoin to the limelight, but that even that would be months down the road from now.

“Most likely roadmap for me at this point: – Close to a temporary top on majors. – Correction through February/beginning March. – Massive altseason through March-August. – Next heavy run on $BTC last part of the year. Allocate wisely,” he tweeted.

A low-time-preference mindset likewise prevails throughout much of the analytic community at present. After events over the Christmas and New Year period, “slowly but surely” appears to be the preferred approach as Bitcoin continues to consolidate in its wide $10,000 trading channel.

For fellow trader Josh Rager, however, signs are there that Bitcoin’s overall strength remains intact despite recent retreats.

“Bitcoin finally broke below the 21 EMA (21-day exponential moving average) on the daily this past week after riding above since Oct,” he told Twitter followers. 

“Price is currently retesting the 21 EMA and a break and close above $34k on higher time frames would be a great start. And would showcase this as a bear-trap before more upside.”

BTC/USD recovers from last week’s fallout. Source: TradingView

Naysayers target institutional interest

In investment circles, a divergence in narrative versus action is becoming more palpable this week. 

Prognoses from mainstream financial circles remains risk-off on Bitcoin, with JPMorgan strategists on Friday highlighting reduced interest in the Grayscale Bitcoin Trust (GBTC) as proof that a temporary top in the big institutional buy-in was firmly in. 

“At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out above $40,000,” a note quoted by Bloomberg reads.

At the same time, Grayscale has been adding to GBTC like never before, new CEO Michael Sonnenshein linking to a regulatory document showing 35,159 BTC ($1.21 billion) raised on Friday.

Even for a cautious JPMorgan, institutional interest forms a watershed moment for Bitcoin’s status as an asset compared to three years ago as the first derivatives products hit the market.

“There is little doubt that the institutional flow impulse into bitcoin is what distinguishes 2020 from 2017. And there is no better metric to capture this institutional impulse than the flow trajectory of the Grayscale Bitcoin Trust,” the bank said earlier in January.

Ether gains outpace market

Outside Bitcoin, altcoin markets are calm this week, with one notable exception. Ether, the largest altcoin by market cap, hit new all-time highs on the day, climbing to $1,475 on the back of weekly gains which total more than 15%.

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Anthony Bevan is a journalist focusing on disruptive finance and cryptocurrency, along with the changing face of the market as Bitcoin gains mainstream adoption. Journalists covering cryptocurrency for Modern Consensus May hold positions in some of the currencies they write about.