Three Factors Promising Bitcoin and Ethereum new highs

Three Factors Promising Bitcoin and Ethereum new highs

 

Collapse in April-May

Consolidation and recovery

Return to the midpoint

Three Support Factors for Cryptocurrencies in Early September

New highs by the end of 2021

Investors in cryptocurrencies have been on a roller coaster in recent years — this fast-growing asset class is characterized by sharp price fluctuations and increased volatility. The rise of Bitcoin over the past decade has given the term “bull market” a new meaning. Ethereum, the second largest cryptocurrency, is also rushing up.

Cryptocurrencies reflect a libertarian philosophy in which control over money is transferred from the hands of governments, central banks, monetary regulators, supranational and private financial institutions to the hands of individuals. Prices are determined solely by market orders for purchase and sale.

Opponents claim that cryptocurrencies do not have true value and are used for black deeds. However, this criticism is most likely motivated by a desire to preserve the status quo. After all, state power is based on control over money. The ability to increase or decrease the money supply is a key source of power.

Cryptocurrencies are a logical and rational result of technological progress. Blockchain technology, which increases the speed and efficiency of transactions by storing ownership information in the block chain, forms the basis of fintech.

Cryptocurrencies reflect the trend towards globalization, as they do not know borders and are interchangeable. The value of fiduciary currencies is based on full trust and recognition of the countries issuing them. The value of cryptocurrencies is determined solely by market participants setting prices. While the monetary policy of governments may affect the value of fudicial currencies, it does not affect cryptocurrencies in any way.

Judging by recent market developments, Bitcoin and Ethereum may rise to new highs in the coming weeks and months. The total market capitalization of cryptocurrencies as an asset class may reach a new peak by the end of 2021.

Collapse in April-May

Bitcoin futures reached a record high of $65,520 at auction on April 14 — the day when the IPO of the crypto exchange Coinbase Global (NASDAQ:COIN) took place on NASDAQ. Specific events have pushed cryptocurrencies to new highs in recent years.

When futures trading started at the end of 2017, the leading cryptocurrency rose above the $20,000 level for the first time. As the Coinbase Global trading platform promotes higher liquidity and more efficient order execution, its listing has pushed Bitcoin to new highs.

BTC/USD — weekly timeframe BTC/USD — weekly timeframe

Source of all material graphs: CQG

The weekly chart clearly shows the correction of Bitcoin to a minimum of $28,800 per token in the week that began on June 21.

The second leading cryptocurrency took longer to reach the maximum, but, like Bitcoin, it fell to a minimum at the end of June.

Ethereum Futures — weekly Timeframe Ethereum Futures — weekly timeframe

As seen on the weekly chart, Ethereum futures rose to a high of $4,406.50 in mid-May before falling to a low of $1,697.75 in the week beginning June 21.

Bitcoin and Ethereum lost more than half of their value when their parabolic rally turned into a crushing fall.

Consolidation and recovery

From May to the beginning of August, Bitcoin consolidated, “digesting” strong price fluctuations. Futures then traded mainly below the level of $40,000 per token.

BTC/USD – daily timeframe BTC/USD – daily timeframe

The daily chart reflects consolidation with a tendency to decline, which lasted until the end of July.

Ethereum Futures – daily Timeframe Ethereum Futures – daily timeframe

Ethereum consolidation was not so long — futures were trading below $2,440 until the end of July.

 

Return to the midpoint

Over the past two weeks, both cryptocurrencies have recovered. The midpoints of the Bitcoin and Ethereum trading ranges since the highs of April and May are at $47,160 and $3,052,125, respectively. As of the end of last week, Bitcoin was trading at $48,000, and Ethereum was trading at $3,220. Both cryptocurrencies corrected the previous drop by 50%.

 

Meanwhile, on August 23, Bitcoin rose above the $50,000 level for the first time since mid-May. Ethereum at auction on August 9 exceeded $3,000 per token for the first time since May 17, and on August 23 reached a maximum of about $3390.

Three Support Factors for Cryptocurrencies in Early September

Despite the fact that the market capitalization of cryptocurrencies by the end of last week again exceeded $ 2 trillion, the “bulls” were again at the helm. Three factors point to the growth of Bitcoin, Ethereum and many others out of 11,460 existing cryptocurrencies.

  1. Inflationary pressure continues to increase due to the Fed’s soft monetary policy and fiscal stimulus from the US government. Even if the central bank starts to wind down the quantitative easing program, the government will soon probably approve infrastructure and other spending worth trillions of dollars. The widespread rise in asset prices is a positive factor for cryptocurrencies.

 

  1. The trust and recognition of fiduciary currencies continue to weaken. People trust the government less and less. The governor of New York State recently resigned under disgraceful circumstances. The governor of California faces a repeat election in mid-September. Opinion polls indicate a drop in the level of support for the Biden administration after a series of mistakes.

 

Adherents of cryptocurrencies share a libertarian ideology that returns control of the money supply from the hands of governments to the hands of individuals. In conditions of falling confidence in the dollar, euro and other reserve currencies, cryptocurrencies are becoming an alternative.

 

  1. The withdrawal of American troops from Afghanistan cannot be called anything but a disaster. It took 20 years, trillions of dollars, four presidents and many human lives to replace the Taliban with the Taliban. Tens of thousands of people, or maybe more, are trying to escape from this brutal regime, and the deadline is this week, August 31.

 

Many leave with nothing. Those who are lucky enough to have savings in cryptocurrencies can take their capital with them on a flash drive or get access to it abroad, for which only a secure password is needed. Cryptocurrencies know no borders and have become ideal tools for the export of capital.

 

The collapse of the Afghan government and the return to power of the Taliban (the movement is banned in Russia) mean the defeat of the United States and its NATO allies. The people remaining in the country were in mortal danger. This event has serious geopolitical consequences and can play into the hands of China and Russia.

 

China plans to return Taiwan, which it considers part of its sovereign territory, to its composition. Russia can use the imaginary foreign policy and military vulnerability of the United States as a reason to increase its influence in Ukraine and other countries of the former USSR.

 

The hostile regimes of North Korea and Iran are likely to take advantage of the current situation to commit provocations against the United States and allies in the coming months and years. To top it all off, Afghanistan has once again become a potential breeding ground for terrorism. As a result of the terrorist attack last week, more than ten American soldiers and dozens of civilians were killed in the country.

 

Those who fear political changes and upheavals in their countries will probably be inclined to consider cryptocurrencies as a way to protect and transport their capital in turbulent times.

New highs by the end of 2021

According to my expectations, Bitcoin, Ethereum and cryptocurrencies as an asset class will update their highs by the end of 2021. However, there are risks for these volatile assets.

 

At the cybersecurity summit with the participation of American technology companies and financial institutions, held at the White House on August 25, corporate heads asked the president to take tough measures against cryptocurrencies. Digital currencies have become a favorite monetary tool among hackers and extortionists.

However, the role of cryptocurrencies as a tool for the export of capital in our dangerous world may override all efforts aimed at controlling the global crypto space. The export of capital, it seems to me, has become one of the most convincing arguments in favor of keeping at least part of your savings in digital currency.