Last week in the news

Bitcoin gained during this week, heading toward $40K again, but the winner of the week is actually Ethereum, who reached a new historical high at level of $1.700.  Ripple had mixed performance but is certainly moving in a positive direction, and on higher levels compared to the previous period, gaining back slowly but gradually investor's confidence. Significant positive impact is coming from the announcement of Ripple management  that SEC accusations are unfounded.

Chicago Mercantile Exchange (CME) will launch futures on ether as of February 8th, which is going to be second crypto currency traded on this derivatives exchange. Three years ago CME launched futures on Bitcoin, which was first crypto currency to be traded here. Although Bitcoin emerged as coin with most investor's confidence to store funds in order to sustain value of assets, Ethereum has leading infrastructure. Announcement that ETH can be now hedged, reflected positively on price of this currency. After several weeks of testing historically highest level of $1.400, ETH finally reached new historical highs during previous week, reaching level of $1.700.

After putting hashtag #bitcoin to his Twitter account, Elon Musk has finally publicly expressed his opinion on Bitcoin. He noted expectations that this currency will be more widely accepted by “conventional finance people”, in a conversation in app Clubhouse. Although this statement had a positive impact on the price of BTC, we treat it as much more interesting from the perspective of the future of corporate finance. Namely, there are a lot of discussions held recently on a topic of wider acceptance of Bitcoin among corporates and investors and its inclusion into corporate balance sheets. Certainly, one of the leading advocates of this are MicroStrategy Inc (MSYTR) officials. After several purchases, this company currently holds 71K of BTC in their balance sheets, as per Coindesk Research. In an interview for CNBC , Meltem Demirors, who works as chief strategy officer for Coinshares noted “In 2020 it was a risk for investors to allocate to Bitcoin, in 2021 it is a risk to not allocate in Bitcoin”.  In our opinion this conclusion summarizes potential future developments around Bitcoin. Wider acceptance of BTC by corporations and investors would certainly lead to its higher price. On the other side, we are pointing to huge risks and obstacles that currently exist around doing business in BTC. The highest risk is coming from extreme volatility of BTC price which might lead to extreme profits made through fair value presentation, but also it can lead to the same huge losses. Another question is related to regulatory acceptance of holdings of coins in books for corporates. Presentation of coins as a non-material asset in balance sheets of companies is allowed according to current reporting standards, but there is a question of taxation of such balance sheet items and its fair presentation in financial statements. In summary, last word in this segment will certainly be on shareholders and especially regulators, which we will see in the future.

Another interesting news is coming from crypto exchange Gemini, who will add new savings products to their products list called “Earn”. Savings schemes will be available only to U.S. based clients, and for crypto currencies supported by this exchanger. Crypto coins on this account would add to their holders annual interest rates of 7.4%, allowing Gemini customers to capitalize more on their crypto holdings. Current average interest rates on savings accounts in the U.S. on the US dollar are 0.05%.

Crypto market cap

Second week in a row total crypto market capitalization is heading toward new historical highs. With $1.200 billion reached during the previous week, new highs were reached, and added some additional $200 billion to the market. BTC`s price increase to $40K was led by additional $120 billion of added new capital into this coin. Total market capitalization increase was additionally supported by $120B from Ethereum Classic, $35B from ETH and $37B from Bitcoin Gold.  

Total market capitalization has been increased by some $51% since the beginning of this year. Trading volumes are still relatively high, moving around $300B to $350B on a daily basis.

Relatively small number of altcoins has been in the red zone during the previous week. Speaking in relative figures, the highest increase in market capitalization had Ethereum of almost 24% gained on a weekly basis. Increased interest for this currency is coming after the announcement from CME that it will start trading ETH futures from February this year.  Litecoin had a very good performance with an increase of 21%, while Bitcoin gained 19%, same as Bitcoin Gold.

Previous week was marked with higher volatility on the crypto market.  Bitcoin gained additional 6% in market capitalization, followed with Ethereum who gained almost 10%. Certainly , the winner of the week is Ripple, after positive news, with an increase of 48% in market cap. The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies.

BTC no strength for new highs  

As of the weekend BTC once again tested resistance level at $40K, but soon reverted to $37K still without strength to break the historically highest level. This move was supported by an increasing number of well known investors who are publicly speaking in favour of BTC like Elon Musk, even Ray Dalio recently joined the club.

After not being able to break support level at $30K within the last two weeks, BTC reverted to the up side, reaching resistance at $40K once again. However, if we take a closer look at charts, this move indicates an emerging technical analysis formation called Neckline. This formation indicates that some short term price reversal might be ahead in the coming period, but with RSI currently moving below 70 it might indicate that BTC might continue to move around current levels for a few days until we see clear testing of next support level. That level would be $34K. In case that this support is breached, the next level to watch would be $30K, which is 0.618 Fibonacci and historically significant level. On the opposite side, the level to watch is $40K.

ETH  finally new ATH

Very successful week for Ethereum, as currency finally managed to reach a new historically highest level at $1.700. This move is coming after very positive news announced by CME which will start trading ETH futures from February 8th. Since the beginning of this year ETH is moving in an uptrend, and have tried on several occasions to break previous highest level at $1.400. RSI is currently moving close to 70 so it might be expected some short term price correction. Next very significant level to watch on downside is $1.400 which is historical support. If this level is broken, $1.250 would be the next one to watch, where also 0.618 Fibonacci stands.

XRP trading on a higher grounds

During the previous week XRP was trading on a higher ground from the previous period. Currency moved between levels of $0.35 up to $0.50. Very shortly the price reached a level of $0.73, after news that Ripple officials were entering into a legal fight with the SEC. It was certainly positive for XRP but very soon currency returned to previous trading levels. At the beginning of February RSI reached a clear overbought zone, so we are expecting that there might be short term price correction during this period. Level of $0.5 is long term resistance level. If broken on the up side, the next significant level is at $0.75. On the opposite side, it might be expected that currency will test $0.38 as current resistance level, down to $0.3.

What’s in store for altcoins

LTC also managed to reach higher grounds during the previous week. After some time, short term resistance level at $130 has been broken, so currency headed toward next resistance at $170. No strength to break it, and LTC entered into short term reversal. There is some probability that LTC might test support level at $120 once again in the coming days, before it makes a move to higher grounds and tests resistance again at $170.

Modestly but steadily LINK has reached a new highest price after reaching new historical high at $25 during two weeks ago. Last week, LINK reached a new high at $27, and reverted soon after to test once again short term support level of $23. RSI still does not provide a clear signal that an overbought zone is reached, so what is in store for LINK in the near future is about to be seen.

A lot of developments has been around Dogecoin during the previous week, after Musk`s comments about this currency at app Clubhouse. It boosted DOGE to new historical highs at levels of $0.07 where it is currently trading. However, as it is clearly moving in an overbought zone, some short term reversal might be expected in the coming period.

During the previous week Cardano (ADA) was boosted to new highs since January 2018, at a level of $0.70. It moved significantly from $0.40 up to $0.70 within the last three days. ADA is currently at half way to reach historical high at $1.4. RSI around 80 clearly indicates current overbought zone.

NEO was also traded higher during the previous week, starting from level of $20 and finishing week at level of $26. There is some probability that currency might once again test support level at $20 before final reversal to higher grounds.

Monero (XMR) managed to break resistance at $135 and was moving during last week between levels of $140 up to $155. RSI is around 50, so there is no clear indication regarding potential reversal.

Theta is continuing to move in a channel formed since the beginning of this year. Resistance level at $2.5 has been tested once again during the previous week. Levels to watch on down side are $1.7 as short term support line, down to $1.5.

Disclaimer: This article provides exclusive views of the author. It does not in any sense represent a suggestion for trading.

This Market Analysis has been published by a staff writer at XBTFX.

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