Crypto Market Data Supports Bull Trend

Bitcoin traders have found fresh confidence in bitcoin's prospects this year, with several high-profile investors and some of the biggest Wall Street giants giving bitcoin their backing - all the result of a maturing market.

The bitcoin price, up around 30% on the last six months, has been identified as a potential hedge against inflation by experts, similar to gold—and the Winklevoss twins, who founded of the New York-based Gemini cryptocurrency exchange, use bitcoin's similarities to gold to give it a value of $500,000 per bitcoin, up 45-fold from today.

"If we are right about using a gold framework to value bitcoin, and bitcoin continues on this path, then the bull case scenario for bitcoin is that it is undervalued by a multiple of 45," the twins wrote.

"Said differently, the price of bitcoin could appreciate 45x from where it is today, which means we could see a price of $500,000 per bitcoin."

The Winklevoss twins' argument for bitcoin's continued price appreciation rests on bitcoin being "ultimately the only long-term protection against inflation."

So where do we stand with the Bitcoin price now and is it too late to buy in?

After the recent consolidation phase, analysts are predicting that the price of Bitcoin will rise above the resistance level of $US 12,000. 

Additionally, the Federal Reserve’s announcement last week about its monetary policy could have a positive effect on the price of Bitcoin. Bitcoin seems to be receiving a positive impact from the announcements made by U.S. Federal Reserve Chairman, Jerome Powell. The central bank revealed a change in its monetary policy last Thursday. Powell announced that the inflation rate will be allowed to rise above 2% annually (as we previewed here). As several important companies and personalities have stated, thus Bitcoin is further positioning as a store of value. Investors have increased their interest in the cryptocurrency to protect themselves from the inflation that will hit the dollar.

Bitcoin isn’t the only crypto that’s garnered the spotlight in 2020 though.

Since last Friday, Ethereum has increased by over 20% further padding its 2020 gains. Ethereum has been one of the brightest stars in the current bull market for digital assets, gaining 261% in 2020 compared to Bitcoin’s already impressive 65%.

The principal driver for ETH’s growth has been the enormous boom in decentralised finance (DeFi) given the majority of the DeFi networks are built on the Ethereum platform.

Most importantly, the DeFi boom has accrued value to Ethereum via greater developer interest. This dynamic can be visualised by the Total value locked-up (TVL) on DeFi, which has dramatically increased from less than $1 billion to over $9 billion in 2020.

The explosive demand for Uniswap and small decentralised finance (DeFi) tokens has created a consistent demand for ETH. On the Ethereum blockchain network, users have to utilise ETH to cover transaction fees, which is also called “gas.”

The gas costs, as a result of surging daily transactions, led users to purchase ETH to pay for network expenses. Since early June, when the DeFi market began to see exponential growth, it fuelled the buying demand for ETH.

Data from Etherscan shows that the daily transaction volume on Ethereum rose from around 420,000 in January to over 1.2 million transactions per day in August.

Despite the craze for anything DeFi and ever-increasing gas fees, the Ethereum price rally appears to have legs. 

To start with, exchange deposits – the number of coins held in exchange addresses – declined to 17.99 million ETH on Monday, the lowest level since March 11. Exchange balances have also reduced by over 5% in the past four weeks. Investors typically move coins off exchanges to their wallets when they expect prices to rally. Additionally, the recent price gains look to have been fuelled by strong hands. The top 100 non-exchange addresses have increased bags by +8.2% in just 35 days – a bullish sign. Finally, the options market, too, is biased bullish on Eth with the one-, three- and six-month put-call skews hovering below zero.

As we progress further into this bull market, it's important to keep a level head and realise that this is not "Crypto 2017 2.0". The development in the space over the last two years has been unreal and the sentiment is well and truly shifting towards favouring crypto. Crypto is beginning to realise its potential once again - Bitcoin as a store of value and inflation hedge and Ethereum as a platform for the future of finance. Not to mention the remaining hundreds of projects all solving other real-world issues using the power of blockchain. Once we factor in the ever-present risk of inflation, hyperinflation, and unravelling of traditional systems, it's not outlandish to imagine the entire crypto market cap increasing far beyond the 2017 highs.