Bitcoin has had a favorable year in 2021 but the altcoins have dominated the market. The advent of the alt seasons this year had seen multiple altcoins rally towards new highs even when market-mover bitcoin had remained stagnant at times. This move, coupled with the growth and adoption that rocked the crypto space this year, has proven that the altcoins dominated the market on a large scale.
Altcoins Rule 2021
So many new things came out of the altcoin industry this year and have found success at the same time. Basically, the year 2021 has been one long alt season when we look at the performance of some of these assets.
Related Reading | The Year In Review: An Emotional Rollercoaster For Crypto Investors
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A lot of this growth has been driven by decentralized finance (DeFi), NFTs, and most recently, the metaverse gaining popularity among investors. These have brought to the forefront some interesting projects that have had their tokens rally because of it. Most of the time, they followed the growth of bitcoin. While at other times, these assets broke free and rallied on their own accord.
Altcoins market cap at $1.32 trillion | Source: Altcoins Total Market Cap on TradingView.com
This has led to bitcoin losing a significant portion of its market dominance to altcoins. Starting the year out at about 75% of total market dominance, it has now fallen to 38% where altcoins have continuously eaten into the pioneer cryptocurrency’s market share. Ethereum was, as always, leading this charge as it took the largest chunk of the market share.
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Memecoins also found favor in the market this year. Coins like Dogecoin and Shiba Inu grew into the thousand and million percentile, as well as “ETH killers” also making a play in the market.
Mid-Caps Take The Lead
Altcoins always showed out in the indexes with triple-digit gains for the year. Bitcoin which had a tremendous run of it this year still recorded the lowest gains being the only index that returned double-digit gains. All other indexes, the small, mid, and large cap indexes enjoyed the majority of the gains.
Bitcoin’s returns for the year only came out to 73%. While this is still vastly ahead of top investment vehicles like gold, the S&P, and NASDAQ, it still performed poorly in comparison to the other indexes.
Mid Cap Index records highest returns of 2021 | Source: Arcane Research
The Large Cap Index saw the second-lowest returns with 179%, but even it saw returns over 100% higher than that of bitcoin. The Small Cap Index made a splash with returns reaching as high as 485% for the year.
Finally, the Mid Cap Index came out as the winner for 2021 marking returns of 830%. This index consists mostly of Layer 1 tokens which had seen some of the most gains for the year, outperforming even ethereum despite its massive 485% returns for the year.
Featured image from Investment U, charts from Arcane Research and TradingView.com
One closely followed crypto analyst is bullish on XRP and thinks that altcoins are in a prime position to outpace Bitcoin (BTC).
The pseudonymous analyst known as Credible Crypto tells his 257,400 Twitter followers that XRP’s price structure looks very similar to data-sharing protocol OriginTrail, whose native token TRAC just rallied more than 300% following its recent listing on Coinbase Pro.
He expects XRP to follow a similar path to TRAC, taking the cryptocurrency back to its previous all-time high of $3.40.
“The XRP chart below is from my last YouTube video on XRP made in August. The chart next to it is another coin that I came across today that has the same structure but is one step ahead with the 5th wave already in progress. Do you see it now?”
Source: Credible Crypto Source: Credible Crypto
After Ethereum’s new breakout against Bitcoin (ETH/BTC), the trader anticipates ETH’s next leg up to kick off a new alt season.
He also notes that Bitcoin dominance has likely already topped out, further paving the way for an altcoin rally.
“ETH/BTC broke out today, closing above the key resistance zone I was watching. This is a great sign and indicates BTC dominance may have already found its top and alts may be about to steal the show, led by ETH.”
The analyst says that Bitcoin dominance dropping doesn’t necessarily mean that BTC’s price will drop.
No it just means that if BTC is rising alts will probably rise faster. We saw this in 2017 in the latter stages of the bull run as lots of new money started pouring in.
— CrediBULL Crypto (@CredibleCrypto) November 3, 2021
Taking a closer look at the top crypto asset, Credible says that Bitcoin is close to deciding whether it wants to break to the upside or continue ranging.
According to his analysis, a rejection of $63,000-$64,000 could take BTC back to major support around $58.000.
“63-64k tagged BTC. Now to see if we break out to new ATH [all-time high] or reject soon and continue to range.”
Source: Credible Crypto
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On April 14, Bitcoin (BTC) reached a $64,900 all-time high after accumulating 124.5% gains in 2021. However, a 27.5% correction followed over the next eleven days, marking a $47,000 local bottom.
The popular Crypto Fear and Greed Index reached its lowest level in 12 months on April 25, signaling that investors were closer to “extreme fear,” which was a complete reversal from the “extreme greed” level seen during the Bitcoin rally above $60,000.
This downward move from April 14 to 25 wiped out $200 billion from the altcoin market capitalization. Still, the recovery that followed could serve as a guide on what to expect when Bitcoin finally manages to exit the sub-$40,000 level.
Bitcoin price in USD, Coinbase. Source: TradingView
Altcoins posted a similar trend, bottoming at $850 billion on April 22 but fully recovering to a record $1.34 trillion high on May 10. There is no guarantee that this pattern will repeat, but there is no better source of information than the recent market itself.
Many investors believe that altcoins consistently outperform when Bitcoin price takes off, but is that an absolute truth?
Although that has been the case in 2021, Bitcoin was the clear winner in the last quarter of 2020 as it surpassed the broader market by 110%. However, analyzing the winners from the late-April bull run could provide interesting insights on what to expect for the next rally.
Top altcoin performances from April 22 to May 9. Source: CoinCodex
Among the top-100 tokens, Ether Classic (ETC), Polygon (MATIC), Waves, and Fantom (FTM) were the clear winners. The winners were either scaling solutions or smart contract platforms, and the sector leader Ether (ETH) also outperformed the market.
80% of the worst performers were sub-$1 coins which is precisely the opposite of investors’ usual expectations. There’s a persistent myth that cheap, nominally-priced altcoins will excel during altcoin rallies, but that clearly was not the case.
Worst performance from the top-100 altcoins between April 22 to May 9. Source: CoinCodex
Timing the market is impossible
Unfortunately, there is no way to predict when the current correction will be over, and altcoins historically do not usually excel during bear trends. This means calling ‘alt season’ at the first sign of Bitcoin’s price recovery is an inaccurate strategy that can lead to financial ruin.
A general rule of thumb for an ‘alt season’ kick-off is two or three consecutive days of 30% or higher accumulated gains on cryptocurrencies with little-to-no development, including Dogecoin (DOGE), Litecoin (LTC), and Ether Classic (ETC).
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
The Korea Federation of Banks has raised alarm over the increase in altcoin trading volumes across crypto exchanges in the country.
According to a report by The Korea Herald on Monday, the banking association has asked member banks to conduct an audit on the altcoins being offered by their crypto exchange clients.
The KFB is reportedly concerned about the potential risks of banks providing account services to exchanges overexposed to altcoins.
An official of the banking association quoted by The Korea Herald explained:
“One of the criteria that we recommend is the safety of digital assets and that can be measured by the number of digital coins on an exchange. If an exchange deals with too many digital assets, it takes on more risks.”
As previously reported by Cointelegraph, there has been a noticeable pivot by crypto traders in South Korea toward altcoins. This shift coincided with a corresponding dip in Bitcoin (BTC) trading activity that had characterized the earlier part of the year, even leading to the collapse of the Kimchi premium.
Three of South Korea’s “Big Four” crypto exchanges — Upbit, Coinone and Bithumb — each list over 150 altcoins on their platforms. The KFB’s recommendation comes as BTC trading on these exchanges accounted for less than 5%, far lower than the average across other major exchanges like Coinbase and Binance.
Indeed, as of the time of writing, only Coinone has Bitcoin trading activity occupying the top two positions in the last 24-hour period. Data from CoinMarketCap shows BTC trading on Upbit and Bithumb at 4.15% and 9.13%, respectively.
Under South Korea’s real-name crypto trading paradigm, the onus is on banks to maintain strict oversight over their cryptocurrency exchange clients, hence the reason for the KFB’s warning. The banking association also wants its members to be aware of the potential money laundering risks that could be associated with the current altcoin trading explosion.
South Korea’s altcoin trading surge is yet another piece of evidence in support of the alt season market cycle narrative. Indeed, Bitcoin’s market capitalization dominance continues to decline and is now at its lowest level since July 2018.
Several major altcoins have set new all-time highs, with Ether (ETH) breaking the $4,000 milestone to deliver over 450% in year-to-date gains.
Altcoins like Ether (ETH), Dogecoin (DOGE) and Ethereum Classic (ETC) are spearheading a new alt season that seems to have taken off with a bang. Since a rising tide usually lifts all boats, there are several other cryptocurrencies that are benefiting from this growing interest in altcoins. Ether, however, may be the one generating the waves.
The price of ETH, the flagship altcoin, increased more than 65% over 30 days to finally break through the $3,500 barrier on May 6. This takes the yearly gains for the token to over 1,500%, as it was trading in the $215 range this time last year. The price surge led its market capitalization to go beyond $400 billion for the first time.
Cointelegraph asked Joshua Frank, CEO of The TIE, about the social media trends around Ether and what the cryptocurrency’s gains mean for altcoins. He answered: “Many investors consider Ethereum a proxy for the alt-coin market, and tweet volume continues to increase exponentially since July 2020. […] Tweet volume over 24 hours recorded an incredible 59,000 as Eth continues to push all-time highs.”
In percentage terms, Ethereum Classic — a continuation of the original Ethereum blockchain — has seen its value increase even more than the more popular coin of its sister blockchain. According to CoinGecko, ETC’s price gained nearly 400% in seven days to hit an all-time high of $167 on May 6. The Ethereum Classic blockchain sprang into existence after most developers migrated to the now more popular Ethereum blockchain following a hack on The DAO’s smart contracts in 2016, which cost the protocol $50 million in ETH.
The dominance of Bitcoin (BTC) has also dropped when compared with the 70% range it was resting in at the start of the year. It has been declining since, reaching a year-to-date low of 45.70% on May 6. The dominance metric essentially compares the market cap of BTC with that of all other cryptocurrencies combined.
BTC dominance usually decreases when altcoins instead dominate the interest of crypto investors. The only time the metric has ever been lower than its current level was just before the cryptocurrency market crash in 2018 when investors were desperately looking for alternatives to Bitcoin, as the flagship cryptocurrency had dropped by over 60% at the time.
Eric Anziani, chief operating officer of cryptocurrency exchange Crypto.com, explained to Cointelegraph why he believes Bitcoin’s dominance is decreasing this time: “The price action acts in tandem with investors’ psychology, dominant narratives in the space, and therefore moves in cyclical patterns.” He added further:
“As the narrative around institutional adoption of Bitcoin has tapered off somewhat, investors have begun to turn to blockchains and protocols other than Bitcoin. […] Although Bitcoin is a very sound store-of-value, the market as a whole is realizing how pivotal altcoins and their respective projects are to the future of crypto.”
This change in market dynamics is evident in the derivatives markets as well. On May 5, Ether futures volumes briefly surpassed those of Bitcoin. The futures premiums for ETH have normalized at 25%, after peaking at 45% during mid-April.
This indicates that optimism is not nearly close to its peak despite ETH pushing to new highs on a daily basis, thus signaling that there is still room for growth when prices are compared with market sentiment.
London hard fork will lead to faster DeFi growth
Ether’s price surge essentially happened after the Ethereum blockchain underwent its Berlin upgrade on April 15. The hard fork incorporated four Ethereum Improvement Proposals that were voted on by the developer community. Two of these addressed gas costs for specific transaction types, and while they reduced the costs for some types of transactions, they increased them for “op-code transactions,” which could be used for denial-of-service attacks. The other two proposals expanded the categories of transaction logic.
James Beck, director of communications and content at ConsenSys — a blockchain technology company backing Ethereum’s infrastructure — told Cointelegraph: “One of the nice effects of the Berlin hard fork was that gas prices for DEX aggregators became much cheaper. For example, using MetaMask’s swap feature is now resulting in 40,000 GWEI decrease to trade tokens.”
Ethereum is the most prominent blockchain used in the decentralized finance markets, and its price often goes hand in hand with DeFi’s growth. At the time of writing, the total value locked in DeFi is at a new high of just over $82 billion. The TVL in DeFi has been rapidly growing since the beginning of the year and has nearly doubled since the start of February. Flora Sun, managing director of Binance X — crypto exchange Binance’s developer initiative — opined on the reason for this growth:
“There’s a lot of innovation in DeFi protocols these days. In the past, lending and DEX were the main DeFi protocols, but now starting with AMM, there are various types of DeFi that meet various needs, like vaults and insurances. DeFi still offers a much higher yield than traditional finance, so naturally, it is attracting a lot of crypto liquidity.”
Automated market makers, or AMMs, are now integral to the DeFi ecosystem. As the name suggests, an AMM is an automated trading model that decentralized exchanges use instead of the order books used by traditional, centralized exchanges. When protocols use AMMs to supply liquidity pools, it means that the price of the assets is calculated by a fixed, predetermined mathematical formula based on the supply of the two tokens involved in the trade/swap.
Related:They see ETH rollin’: Why did Ether price reach $3.5K, and what’s next?
According to ConsenSys’ quarter-one DeFi report, only 1% of all Ethereum addresses are currently using DeFi platforms. Thus, the room for adoption seems to be immense as more investors look to prioritize decentralization in their portfolios. The report also reveals that in the first quarter of 2021, nearly 51% of the total fees paid were on the Ethereum blockchain — more than double those of the Bitcoin blockchain. The decentralized exchange Uniswap by itself took nearly half the amount in fees taken by Bitcoin.
Additionally, another improvement proposal for Ethereum, EIP-1559, has been greenlit by the developer community as a part of the London hard fork that’s scheduled to happen in July. Anziani further spoke on the hard fork:
“This upgrade will begin burning transaction fees, naturally reducing Ethereum’s rate of inflation. If network usage is high enough, Ethereum may even become deflationary. This is a highly bullish development that the market has just begun to price in.”
Additionally, Ether has shown a low level of global leverage across exchanges, which means that ETH holders are dealing more in spot holdings than indulging in the use of leverage to long Ether. Frank opined on what this might mean: “This indicates that holders intend to either hold Eth in their wallets and/or use Eth to interact in the eco-system with DeFi or other protocols rather than use leverage as a purely speculative play to profit.”
Other alts grow as well
Due to the growth of DeFi, alternative platforms to Ethereum, like Binance Smart Chain and Cardano, have been seeing increased adoption by DeFi protocols and decentralized applications as people seek to avoid Ethereum’s high gas fees, which have become an issue for users all around. Since the gas-fee issue has persisted for a while, BSC and Cardano have accommodated some of 2021’s DeFi growth. On the subject, Sun pointed out:
“Since BSC launched in September 2020, in 8 months, there are 500+ projects building on BSC and its ATH daily transaction volume has exceeded Ethereum’s by 450% and currently boasts of $56 billion in its DeFi ecosystem. All the projects building on top of BSC contribute to this growth.”
Binance Coin (BNB), the native cryptocurrency of both Binance Smart Chain and Binance Chain, has also quickly risen from trading in the $50 range on Feb. 1 to reaching an all-time high of $679.82 on May 3. That is a growth of over 1,200% in less than 100 days, leading BNB to rise to become the third-biggest cryptocurrency by market capitalization. According to CoinMarketCap, the token has a market cap of nearly $100 billion as of the time of writing.
Cardano’s native ADA coin also leaped to a new all-time high of $1.70 on May 7. The cryptocurrency has grown more than 3,200% over the past year. Cardano has also announced various partnerships and launches over the past month. Despite this, Beck backs layer-two solutions over Cardano, saying: “More DeFi users will flock to Layer 2 networks that are Ethereum compatible. DeFi developers are looking to move their applications and users on to layer 2 in order to take advantage of lower gas fees.”
According to L2 Beat, the TVL in layer-two solutions has increased nearly twentyfold, from $38.4 million on Jan. 1 to around $718 million at the time of writing. It briefly even surpassed $1 billion in both March and April. Beck further stated:
“Synthetix and dYdX have announced they have been ardently working on integrating with Layer 2 solutions. Synthetix has been working with Optimism for months now, while dYdX recently announced that their new cross-margined perpetuals are live on Starkware’s STARK based roll-up solution. We expect this trend to accentuate for the rest of the year.”
Among the several coins seeing unprecedented gains — in addition to Ether and the native cryptocurrencies of Ethereum alternatives — the Shiba Inu-themed meme coin Dogecoin (DOGE) is the one catching the most mainstream media attention. It’s getting so much attention that it could be the leading indicator for alt season.
Related:DOGE as internet money? TikTokers and sports fans see a use case for Dogecoin
The coin broke out from the $0.06–$0.07 range on April 12 to reach its all-time high of $0.69 on May 5. DOGE is currently trading at around $0.71 and has posted year-on-year gains of over 35,000%. However, May 8 will be a critical day for DOGE, as Elon Musk’s appearance on Saturday Night Live may dictate what lies ahead for the coin and, quite possibly, impact this alleged alt season as well.
Ethereum Classic (ETC) continues to maintain its parabolic price action advance that began in late March.
Data from crypto market aggregator Coingecko shows ETC is up almost 50% in the last 24-hour trading period as of the time of writing.
Indeed, the 20th-ranked crypto by market capitalization is currently at an all-time high above $76.
Source: TradingView
The first likely reason for this current price action advance is that it is a continuation of ETC’s positive performance since the end of Q1 2021.
As previously reported by Cointelegraph, major forks like ETC and Bitcoin Cash (BCH) had been seeing significant upward moves. ETC was a consequence of the Ethereum hard fork that ensued after disagreements on the best course of action to rectify the decentralized autonomous organization debacle of July 2016.
Retail hype is also building on ETC especially as the token is available to buy on the popular trading app Robinhood. Online search volume for Ethereum Classic is on the high, according to data from Google Trends.
This current retail hype may also be attributed to Ether (ETH) smashing its all-time high and moving beyond $3,000 for the first time. Indeed, social media sentiment points to newbie ETC holders considering the “green Ethereum” a much cheaper alternative to the ETH juggernaut.
ETC has also outperformed ETH in terms of year-to-date price action gains by a factor of over three-fold.
Robinhood only supports trading of Bitcoin, Bitcoin Cash, Dogecoin, Ethereum, Litecoin and…Ethereum Classic
I think I now know where the DOGE money is going next https://t.co/wH72c7Hi6O
— Barry Silbert (@BarrySilbert) May 4, 2021
Retail traders are not the only investors keen on adding to their ETC bags as Grayscale has also been upping its Ethereum Classic ownership. The Grayscale Ethereum Classic Trust currently holds about $711.6 million in assets under management.
ETC’s positive price performance so far in 2021 also offers some reprieve for a project plagued by security issues in 2020. The green Ethereum suffered multiple 51% attacks with millions of dollars in ETC siphoned from the project.
With cryptos like ETC, BCH and Dogecoin (DOGE) printing significant price gains, the alt season narrative continues to build especially amid Bitcoin’s (BTC) current stutter. The Bitcoin market capitalization dominance is also at its lowest level since July 2018.
Since its debut in 2013, Dogecoin has continued to grow as the poster child of altcoins. As it gained popularity, it quickly became synonymous with wild price pumps because of its small value and concentrated holdings.
According to Coin Metrics, the price of Dogecoin increased by approximately 40% on Tuesday. After bitcoin, Ethereum, and Binance Coin, Dogecoin now has a market cap of $69 billion, rendering it the fourth-largest cryptocurrency.
Indicator For Alt Season
The unprecedented rise in the price of the coin has caused some investors and analysts to say that the short-term rallies are strong indicators of the alt Season.
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Doge starts altseason by the way in case you’ve forgot.
— BIG DOG (@MoonOverlord) April 16, 2021
However, this is most likely correct. After all, Dogecoin is a meme-based cryptocurrency. Over the last few years, there has been little development operation, and few of its users run a complete node. There have been 16 weekly performances higher than 30% and six of those presented 100% or higher gains.
Dogecoin historical pumps since 2017. Source: TradingView
Looking at the chart, the price increase of the coin is the norm. At the end of April, Tesla CEO Elon Musk tweeted: “The Dogefather SNL May 8,” referencing both the coin and his upcoming appearance hosting “Saturday Night Live.” Musk has said that his tweets about dogecoin are meant to be jokes.
At the same time, Mark Cuban, owner of the Dallas Mavericks basketball team, also made several posts in support of dogecoin.
“As long as more companies take doge for products/services, then Doge can be a usable currency because it MAY hold its purchasing value better than a $ in your bank,” Cuban said in a May 2 tweet. “If interest rates skyrocket or the amount spent falls or stagnates, so will Doge. Yes, a joke is now legit.”
Related article | Dogecoin Proving The Haters Wrong as Market Cap Now Exceeds Twitter
The top 693 addresses already control 79.2 percent of all DOGE in circulation. Elon Musk has been vocal in his criticism of this astounding figure. It’s worth noting that the most recent price spikes have been specifically attributed to Musk’s Dogecoin-related memes and tweets.
To argue that Dogecoin is an indicator of altcoin season, proof of such pumps must exist prior to the broader market’s positive results.
July 2020 total altcoin market cap vs. Dogecoin, USD. Source: TradingView
DOGE gained 73 percent in less than 36 hours on July 7, 2020. Although the impact only lasted three days, altcoins began to appreciate in value a few weeks later. The market capitalization of altcoins increased by 24% in just ten days, from $105 billion to $130 billion.
Early 2021 total altcoin market cap vs. Dogecoin, USD. Source: TradingView
In early-2021 incredible, an additional 182% DOGE pump that took place over the course of two days did signal an altseason. Some 36 hours later, the altcoin market cap initiated a 50% rally, boosting it to $340 billion. What was incredible about the first quarter was that on January 18, as the meme-coin hiked over 1,000%. Three days later, the altcoin market cap started a 60% rally to $560 billion.
Before concluding that the meme-driven coin is essentially a strong predictor for alt season, it’s worth noting that such results should be compared to those of other big altcoins. If Dogecoin lives up to its reputation amid a barrage of supportive press, the latest $0.61 all-time high is a sign of altcoin momentum to come.
Related article | Dogecoin (DOGE) Beats Bitcoin, Why It Could Test $0.5
Bitcoin price is diving currently, shaking up the crypto market as a whole. In addition to the correction in the top cryptocurrency by market cap, altcoins have taken an even more severe beating.
With top alts like Ethereum and Litecoin are seeing an even further drop on BTC trading pairs, Bitcoin dominance has formed a bullish engulfing candle just as a key technical indicator reach overheated status. Here’s how that could put an abrupt end to the ongoing altcoin season.
Bitcoin Price Drop Causes Altcoins To Flop
Bitcoin is the first ever cryptocurrency that an entire industry was built from since, and anything that isn’t BTC is considered an altcoin. Ethereum is currently the king of that camp, and is outpacing Bitcoin in performance since its inception.
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But due to first move advantage and just how dominant Bitcoin is, it represents more than 50% of the entire crypto market cap. The BTC dominance metric was created to measure the rest of the crypto market and its weight compared to all altcoins.
Related Reading | Following Bitcoin “Reset,” It’s “Off To The Races Again”
BTC dominance has dropped by 18% since end of 2020 highs, leaving a red streak behind. However, during today’s crypto market bloodbath, the metric began to make a comeback and has formed a bullish engulfing candle.
A bullish engulfing candle is a type of Japanese candlestick formation, that typically suggests a short term reversal is in the coming. It forms when after a sharp bearish move, sellers are overwhelmed by a sudden surge in bullish buying. It is then up to bulls to continue the reversal.
A bullish engulfing appears as daily RSI reached oversold conditions | Source: CRYPTOCAP-BTC.D on TradingView.com
BTC Dominance Reversal Could Put An End To Alt Season
Coinciding with the bullish engulfing candle pictured above, the daily Relative Strength Index fell sharply into oversold territory. If a reversal plays out in BTC dominance, whatever altcoin season that’s been going on recently, will be over.
Adding more credence to the theory of further reversal in the relationship between Bitcoin and altcoins, on weekly timeframes a hidden bullish divergence has formed, just as BTC.D touches down at the bottom Bollinger Band.
A bull div on the RSI has formed as dominance falls to Bollinger Band support | Source: CRYPTOCAP-BTC.D on TradingView.com
Divergences occur when price action moves opposite a technical indicator – in this case the Relative Strength Index again on weekly timeframes. Although daily has fallen into completely oversold levels, weekly either has more to go, or buyers are secretly showing up ready to stage a reversal.
Counter Point | Why Bitcoin Dominance Is No Longer Relevant To Crypto
If bulls can begin the comeback starting with a bullish engulfing today, and close out next week with a powerfully bullish move, a morning star doji pattern will be left on weekly charts, adding yet another signal that an extended reversal could result.
Any reversal in BTC.D, could either have Bitcoin leaving alts in its dust, or the coins crash far further than the top cryptocurrency does on its way back down. All that’s left to do, is wait and see.
Featured image from Deposit Photos, Charts from TradingView.com
Ethereum just cleanly broke above $2,000 for the first time ever, and the altcoin has been soaring since. The milestone has revived talk about an altcoin season and even a “flippening” of Bitcoin itself.
And while that’s unlikely to happen, technical analysis of the ETHBTC pair could suggest that one full Ethereum will soon be worth nearly half a full Bitcoin. Here’s a closer look at the bottoming pattern on the trading pair that could spark the first true altcoin season since 2018.
Face That Facts: Ethereum Riding DeFi High, More Bullish Than Bitcoin
The cryptocurrency market has matured over the last several years. Bitcoin is now being widely adopted by institutions as a hedge against inflation. Ethereum, once the playground for ICOs and fly by night altcoins, has now become a hotbed for value, generated from various DeFi projects, NFTs, stablecoins, and more.
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As well as Bitcoin is doing, it is Ethereum that is blossoming into an enormous ecosystem, and things are only going to be better when scalability is finally addressed properly.
Related Reading | Ethereum Bullish Retest Offers “Once-In-A-Lifetime Opportunity”
Rising fees have been a costly side effect of the DeFi explosion, but is also a sign that Ethereum is the place on the blockchain that everyone wants to be. To get in, you’ve got to pay the price of popularity.
The demand for ETH gas required for each and every transaction has helped the altcoin outperform even Bitcoin. But according to technicals, one full ETH could be worth around half a BTC, and then some.
Breaking above resistance could cause fireworks on the altcoin/BTC ratio | Source: ETHBTC on TradingView.com
How Adam And Eve Could Birth An Altcoin Season
The chart above of the ETHBTC trading pair shows a massive Adam and Eve double bottom structure. Based on the measure rule, the target of the sizable pattern would result in a move to the 0.7 range on the ratio.
That means, that each Ether token would be worth roughy 70% of a full BTC. At current Bitcoin pricing, that would send Ethereum to $42,000 per ETH.
Related Reading | Before And After: The Ethereum Fractal You Have Got To See
A more likely scenario, is that due to how crowded Bitcoin is for a trade right now, the top cryptocurrency sees a strong correction, while Ether prices continue to dominate for the time being.
The same applied measure rule would take ETH to the neckline of the "Eve" | Source: ETHBTC on TradingView.com
For those skeptical about the validity of such a claim, the above chart displaying the measure rule target of a head and shoulders pattern almost perfectly lines up with current all-time high resistance on the ratio.
The pattern confirming, would take Ethereum to the neckline of the larger Adam and Eve structure on the Bitcoin pair. A further breakout there, could result in enough upside momentum for Ethereum to achieve halfway status to Bitcoin at the very least.
A breakout of the neckline should also solidify the chances of a greater crypto market altcoin season.
Featured image from Deposit Photos, Charts from TradingView.com
Ethereum’s new highs pulled the rest of the DeFi space with it, but gas fees may hamper future growth.
Bitcoin has traded sideways since hitting all-time highs last month, giving space for an alt season among various DeFi tokens.
NFTs are back on the rise with Hashmasks taking center stage. Thankfully, an NFT index has just launched capturing several popular projects in one token.
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This week’s edition of wNews dives into why Ethereum and DeFi are currently surging. More importantly, though, the space was again faced with staggering gas fees reminding newcomers that it’s a whale’s game.
Portfolio size aside, Bitcoin traded sideways this week after a rather volatile January. Data suggests that dip-buying is the current trend despite a steep correction on the cards. Still, new all-time highs are likely to arrive before that happens.
Finally, an emerging NFT index saves investors time and effort when trying to ride the digital collectibles trend. Froth nor not, this project offers exposure to some of the most popular NFT tokens in the space.
All that and more, below.
Ethereum Goes All The Way
The major headline this week was the meteoric rise of Ethereum. As ETH breached$1,600, recording a new record high for the second time this year, various DeFi projects followed closely.
Etherean moon bois took to Twitter to celebrate the “inevitable.”
ETH is less than 6% the value of gold
Room to grow I’d say
— Ryan Sean Adams – rsa.eth 🏴 (@RyanSAdams) February 4, 2021
The surge’s reasons are myriad, but Nansen founder and CEO,Alex Svanevik, cited two in particular. “Ethereum has solidified its position as the number one blockchain for decentralized finance, putting the ‘Ethereum killers’ narrative to sleep,” he told Crypto Briefing.
“There’s also strong evidence of retail inflow, which can be seen across metrics. January, for instance, had the highest amount of active Binance depositors since 2018, according to data from Nansen.”
Alongside ETH, Aave (AAVE), UMA Protocol (UMA), and SushiSwap (Sushi) also entered price discovery. The moves from these smaller tokens and their dominance in the DeFi sector suggest an entirely different kind of alt season. In 2017, for instance, tokens like Cardano (ADA), Tezos (XTZ), and Ripple (XRP) all mooned despite their lack of utility at that time.
The altcoins of yesteryear lacked clear use cases and convenient user interfaces for the here and now. DeFi tokens are much different.
Aave offers real utility in its bank-like savings and lending arrangement. UMA has created a rather sprawling design space for synthetic assets. And Sushi, well, theupgrades have been myriad,and it even boasts deeper liquidity for some pairs than its counterpart, Uniswap.
There’s also been a few important bits of news that have fueled these tokens’ growth.
Svanevik reminded that both Uniswap (UNI) and Aave wereincluded in Grayscale’s recent filingfor new trusts. This allows traditional investors to “make direct bets on the DeFi sector,” said the Nansen CEO.
Unlike the 2017 altcoin wave, users can easily measure how all of these protocols are doing this time around.Bobby Ongof CoinGecko told Crypto Briefing:
“There seems to be a rerating of DeFi projects as these projects continue to attract large whale users during this crypto bull market. Total Value Locked in USD terms on many DeFi projects has continued to increase as a function of increasing crypto prices. The Price/Sales ratio for many of these projects continues to be low and fundamentally attractive to traders.“
The rise in this batch of tokens also added fuel to the ongoing index wars happening in DeFi. The largest combatants include DeFiPulse (DPI), Indexed Finance’s DeFi Top 5 Tokens Index (DEFI5), PowerPool (PIPT), and Synthetix (sDEFI).
All indexes enjoyed double-digit gains over the past seven days, but sDEFI took the crown with a whopping 59.7% rise in the same period. In the last 24 hours, DPI leads with a 15% rise.
Whichever index investors are holding, all of them are winning big.
Index comparison of sDEFI, DEFI5, and DPI. Source:CoinGecko
Unfortunately, those looking to buy any of those tokens were left out in the cold. Soaring gas prices amid the flurry of mooning tokens made even simple token swaps extremely expensive. Ong cited this as a major threat to Ethereum as “DeFi is now only constrained to large whales who can afford to pay the high gas fees and is no longer welcoming to beginners.”
Thus, as growth mounts, so too do the barriers to entry.
In the past, high gas prices havecrushed whole businesses. This time around,some firmsare cutting over to new networks before overhead becomes dire.
Ethereum gas prices from Jan. 1, 2020, to Feb. 4, 2021. Source:Etherscan
There are very few workarounds to this issue in the immediate. Ong recommends that newcomers keep a close eye on gas prices, and make their move once it drops. Zooming out, however, moments like this make Layer-2 solutions and alternate blockchains hugely enticing.
Experiment: Write the best possible 1-tweet pitch for your “ETH killer” of choice.
– Polkadot
– Avalanche
– Solana
– Tron
– Cardano
– EOS
– NEO
– RSK
– Algorand
– Tezos
– NEAR
– Flow
– Cosmos
– DFINITY
– Hashgraph
– Binance SC
Will hide all replies except the best one for each.
— Eric Wall 🟨 (@ercwl) February 3, 2021
Optimism PBC and its Layer-2 solution are enjoying the most traction as of late, particularly in the DeFi space. Already, Synthetix, Uniswap, and Chainlink have tapped Optimism for their scaling needs.
There’s still a long road ahead, but these developments have been promising for said Ethereans.
This isn’t the only solution, of course, and Svanevik added that each solution is in a neck and neck race to onboard users. “I expect to see the L2 ecosystem flourish around Ethereum and that some of the heaviest gas consumers like Uniswap will migrate some portion of their usage there. Having said that, L2 adds another level of complexity to the Ethereum user experience, which is already quite convoluted,” he said.
Alongside these developments brews a key debate: Will Layer-2 arrive before an alternative blockchain overtakes Ethereum?
The list of competitors is long, but Ong only has his eyes on two protocols: Solana and Polkadot. He said:
“Other Layer 1 blockchains in my opinion do not have a chance at challenging Ethereum. I am expecting several Ethereum DeFi projects to also be available on Solana soon and it will be exciting to see how both Polkadot and Solana will compete against Ethereum.”
None of this has yet settled, of course.
Unfortunately, the biggest winners until a key winner emerges will be users with large portfolios. Only those who can afford the high cost of operating within Ethereum will truly enjoy the bounties of the booming DeFi space.
Market Action: Bitcoin (BTC)
Elon Musk changed his Twitter bio to “#Bitcoin” early morning Friday last week.
Endorsementfrom the world’s richest man caused a major upswing in the price of over 15% to the weekly high of $38,600. Besides Musk’s shout out, BTC’s recent price action was also due to a massive$3.5 billion options expiration.
Bitcoin has continued to trade in a horizontal range between $38,800 and $29,013. The mid-line of the range at $33,500 is acting as a crucial resistance and support level.
Bitcoin price chart. Source:Trading View
The weekly high of $38,600 and theall-time high of $42,000are the most crucial Bitcoin resistance levels.
The on-chain flow of old coins versus daily transaction volume suggests that Bitcoin has averted large-scale profit bookings from early investors.
The dormancy flow, which measures the ratio of old coins moved to the daily on-chain volume, reached the overbought threshold early in January. The metric has been useful in identifying generational tops and bottoms in BTC price.
The graph took a negative turn at the resistance as profit booking slowed.
Bitcoin dormancy flow. Source:Glassnode
Currently, it suggests that Bitcoin may undergo a correction similar to 2019 when BTC price dropped from $13,800 to lows of $7,000—a 50% correction.
The derivatives market dominates Bitcoin trading, specifically longs. This is another worrying signal for the market. The open interest for Bitcoin futures, combined at regulated and non-regulated exchanges, is nearing its peak of $13.1 billion. Currently, the open interest is$12.2 billion.
The momentum of spot buys at global platforms like PayPal, Cash App, andthe institutional addition of BTCmust continue to avoid a deeper correction. According to lead Bitcoin analyst atSIMETRI,Nathan Batchelor, this appears to be precisely what is happening. Batchelor told Crypto Briefing:
“On-chain data surrounding BTC looks very solid at the moment. Dips are being bought up aggressively and the technicals for Bitcoin look to have improved considerably over the recent days. I would not be surprised to see $42,000 taken out before a meaningful pullback occurs.”
Market Action: Ethereum (ETH)
Ethereum’s native cryptocurrency, ETH, broke above the bullish ascending triangle pattern, targeting a price of $2,100.
ETH/USD daily price chart. Source:Trading View
The support levels for correction are at $1,400, $1,200, and $1,050.
The number two cryptocurrency has performed better than Bitcoin since the correction from all-time highs.
Crazy thought, but you would’ve made more selling $BTC to $ETH than btc to usd at the local 41k top.
Crypto/crypto if you want to play cycles.
Crypto/fiat up only.
— Su Zhu (@zhusu) February 2, 2021
ETH gained 133% from the year’s start, reaching a peak of $1,700. In comparison, Bitcoin surged 45% in the first week of January and has stalled below since.
BTC/USD and ETH/USD price chart. Source:Trading View
Ethereum’s use for DeFi has caused a surge in the network’s fees. The median gas price for Ethereum transactions is225 Gwei, more than $100 at press time.
While the above trend may cause the retail DeFi crowd to look for alternative platforms, Ethereum’s median transaction volume of $1,050 indicates that it is still the preferred network among high-volume investors.
In other news, futures contracts for Ethereum willgo live on CMEon Monday, allowing American traditional finance investors to bet on Ethereum.
Many see the CME debut as a clear top for ETH, much like BTC in 2017. Still, some believe otherwise.
I don’t expect a crash after the launch, as it happened in 2017. For two reasons. First, the market is now more mature, the macro is different, and there are different players involved. Second, $ETH remains a high beta asset. $BTC determines the market direction, $ETH follows.
— Alex Krüger (@krugermacro) February 3, 2021
The price action of the number one and two cryptocurrencies in the coming week will help set the tone for the rest of the quarter. Batchelor of SIMETRI reported:
“Ethereum does appear to be targeting $2,400 after bulls triggered a massive cup and handle pattern on the higher time frames. Only a series of daily price closes under the $1,400 level would cause technical traders to question the validity of the ongoing breakout.”
Crypto To-Do List: Invest in an NFT index fund
For those who’ve been following the crypto space closely, you’re probably already aware of at least some of what’s happening in the NFT market.
Celebrities likeLogan Paul,Soulja Boy, andMark Cubanhave now begun experimenting with on-chain digital collectibles—and that’s in the last few days alone.
Before that, the industry saw Carl Coxannouncethat he would be tokenizing his music on Ethereum, Rick and Morty’s creatordropped a collection, and Beepleraiseda record-breaking $3.5 million from his “Everydays” collection.
Sorarehastappedsome of the world’s best soccer players for its fantasy game as well. They’ll be available as tradable NFTs. These are just a few recent examples of the NFT craze. These digital artworks have long played an ancillary role in the Ethereum ecosystem.
Firstly, social status was determined byCryptoPunks, and now people are changing their Twitter avatars to match theirHashmasks.
Whatever one may think of this corner of crypto—overhyped, overpriced, groundbreaking, the future of art, or maybe a combination of all of these—it can be overwhelming to keep up.
Like many other areas of crypto, finding an NFT to invest in on Rarible or OpenSea is a full-time job of its own. And if investors are looking for a piece in a Nifty Gateway drop, they’d best be sure that they have a fast finger ready (the most sought-after pieces sell out instantly).
Fortunately, there’s now a way to gain exposure to non-fungible tokens without going through the hard work involved with investing in the assets themselves. It’s made possible by a new platform called NFTX.
NFTX creates ERC-20 tokens that are backed by NFTs. These tokens have different qualities to NFTs—they are fungible and composable.
The tokens are known as funds, and anyone can create one.
There are already funds available for various types of CryptoPunk, Axies, CryptoKitties, and Hashmasks.
The funds fall under two categories:
D1, which are backed 1:1 by an NFT contract.
D2, which are Balancer pools for combining D1 funds.
In a blog postintroducingthe project, NFTX said its “current mission is to become a DeFi black hole for NFT assets.”
The project launched last month and included the release of theNFTX token. Now trading at around $106.51, the token will be used to govern the protocol’s future.
Though it’s still early for NFTX, plans include adding a liquidity mining program this year.
As with any nascent crypto project, there’s no guarantee of success. But if it does achieve its goal of becoming a liquidity vacuum for all major NFT contracts. Based on the indexes that are already available now, it’s already making solid progress.
In a space where future value is so hard to determine, NFTX could be the best way of getting started.
That’s all for this week’s edition ofwNews, readers. Stay tuned for next week’s dispatch.
Disclosure: At the time of writing, some of the authors of this feature had exposure to ETH, AAVE, BTC, UNI, and POLS.
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The same applied measure rule would take ETH to the neckline of the "Eve" | Source: ETHBTC on TradingView.com
