Bitcoin has doubled its price in less than a month, and started a year with new highs at $41.600 (currently trading at levels around $36K), while Ethereum tested a significant level of $1.200. As Bitcoin is strongly gaining in value, coin mining is also peaking. As per estimates, earnings from currency mining can be more than tippled at these prices; so many miners are increasing or re-activating their business again. How strong this trend is, can be seen in shortages in the supply chain of mining hardware. Producers are overwhelmed with pre-orders since the end of last year, hence whole production is sold out at least until the third quarter or year end, even with increased prices of some products.

ECB President Christine Lagarde is calling for global cooperation in regulation of Bitcoin, naming it a “funny business” and raising concerns that it might be used for illegal activities and money laundering. Same call has been made from G7 Group during last year, but there is still no significant reaction from world governments aside from basic know-your-customer regulation in some countries, including the EU. It seems that regulation is not a priority for governments since they are much more concerned about tax payments on crypto assets.

Switzerland's Zug canton will be one of pioneers in the field of tax collection in crypto currencies. Namely, starting from February this year, this canton will start accepting tax payments from both businesses and individuals made in Bitcoin and Ether up to 100.000 Swiss francs. Last week Swiss National Bank registered with Swiss patent office trademarks “e-franc” and “digital Swiss franc”. As reported, SIX is currently initiating digital exchange, the SDX, where e-frank is intended to be used by financial participants but not by individuals.

Reuters reported that PayPal Holdings Inc. invested in technological startup Taxbit, whose main goal is to assist crypto holders, whether individuals or companies, to easily calculate their taxes on crypto holdings. As crypto currencies are becoming more accepted, many governments in the world, including the United States, are starting to recognize holdings and transactions in crypto currencies as taxable. In this sense, Taxbit` software should provide valuable help to its users, especially if it is taken into account an increasing number of transactions which are conducted through crypto assets, including also buying and selling of goods. This however, emerged old discussions among crypto professionals, if crypto currencies can become a major means of payment in the future. Significant obstacles to this process, which are noted among professionals, are high concentration in ownership and extremely high volatility of currencies. More stability and especially predictability in the price of major coins would certainly be helpful in its wider acceptance as a mean of payment for goods and services.

Crypto market cap

First week of this year was a significant one as it was the first time in history that the crypto market reached $1.000 billion in market capitalization. Current cap is around $1.020 billion which is an increase of 28% since the end of year 2020. Trading volumes were relatively stable moving between $245B and $300B on a daily basis. Most significant contributor to total cap increase is certainly Bitcoin, although the currency lost some $60B during last week. Bitcoin Gold managed to attract an additional $39 billion, while Ethereum Classic was actually gainer of the week with some $85 billion of additional capitalization.

Last week was a bit mixed in performance of major crypto currencies. After a strong increase a week before, Bitcoin lost some 8% in capitalization during last week. Litecoin followed the flow with a decrease of 10%. After significantly lost investors confidence in Ripple, as of the end of year 2020, after Ripple officials were accused of unregistered securities offering by SEC, this currency managed to stabilize between levels of $0.2 and $0.3, which is very positive. Last week it lost 10% in cap with outflow of some $1B.  Bitcoin Gold is continuing gains as of the start of this year. Only during last week, currency gained an additional 17% in cap with an increase of $32B in nominal value. Surprise of the week was certainly Ethereum Classic with gain of 10%, or $85B.

BTC`s reversal

After a new historical high at price of $41.600 was reached, BTC entered into a modest reversal zone. Interest for BTC is heated up not only by a strong push in price, but also by significant media attention that this currency is getting, attracting large numbers of both individual and institutional investors. Some hedge fund managers are switching part of gold holdings into BTC, others are hedging against inflation; all of them are adding additional fuel to price increase. How much more funds are there to be transferred into BTC, nobody can say with certainty, but many analysts are in agreement that the price of BTC can only go higher during this year. Exactly how much higher can BTC go during this year, only the market will decide. For the moment we can only look at technical analysis with certainty.      

Although BTC price was moving in an overbought market area for some three weeks, RSI has modestly fallen below 70 during last week. The currency has clearly entered into the reversal zone, whether it is going to be long or short one, we will see during weeks to come. What the chart is suggesting at this moment is the formation of a double top, since the currency tested resistance level at $40K two times for the past two weeks. Volume of daily trades has also slowed down a bit, with daily turnover below $5B on a daily basis.  Levels to watch on the up side are $40K, and probably $50K if current resistance level is breached. On the opposite side, level of 34K as support line and where 0.786 of Fibonacci retracement stands. Next strong support level and psychological line can be found at $30K, which is at 0.618 Fibo.

ETH – is new historical high coming?

Start of the year has been quite significant for ETH as this currency finally managed not only to break long term resistance level at $800, but also next resistance at $900. During last week, ETH tested once again resistance at $1.250. Same as with BTC, charts are suggesting formation of double top. Whether ETH will finally manage to challenge historical high at $1.400 we shall see during weeks to follow. However, at this moment, RSI is moving at levels of 70, which provides an unclear view if the market is slowing down, or it will still be able to test resistance once again. Break of this line would lead the currency to a historical high at $1.400, and after that to the final new score when it comes to the highest achieved value in history. However, in case that market doesn’t have strength for this move, levels to watch on the opposite side are $1.080 at 0.786 Fibonacci, $900 (0.618 retracement), down to $800 (0.5 Fibo) which are long term support levels.

LTC – still far away from historical high

Despite recent reversal, the start of this year was quite good for LTC, as this currency managed to break long term resistance at $130 after a few weeks of struggling and to test next long term resistance at $170. Since there was no strength to break this level, the market reverted, touching $112. Currency is currently trading below level of $150. If LTC manages to break $170 in the coming days, the next level to watch would be $370, which is also the historically highest price achieved in December 2017. On the opposite side, significant levels are $130, $120 and $110.

What’s in store for altcoins

Last week was an excellent week for LINK as this coin managed to reach a new historical high at the price of $22.7. There was a strong move on the up side during the last three days which led currency to new highs and testing a strong historical resistance level at $20.

Ripple managed to recover a bit after negative news since the end of last year, and is currently trading between levels of $0.2 and $0.3. Although this is a modest move, it certainly signals that investors did not write off XRP as it was one of favourites currencies of the market.

After an incredible move two weeks ago, from $0.0046 up to $0.013, Dogecoin performed in a mixed manner during the previous week. Currency was trading between levels of $0.006 and $0.009 with relatively lower volume of trading. Whether DOGE will be able to repeat its move from two weeks ago, is about to be seen in the future period.

Cardano (ADA) is testing long term resistance at $0.38 for a second week in a row. After managing to finally break long term resistance at $0.20, ADA managed to test a new historical high at $0.38 twice in a very short time.  It is certainly one of altcoins worth watching in the future period as it has shown potential when it comes to investors interest. Historically the highest level reached was in January 2018 at $1.39, so this currency has a long way ahead to reach this level again.

After not being able to break support level at $13, NEO reverted and is currently testing short term resistance level at $25. This currency is exposing higher levels of volatility on a daily basis,  but it also has gained significant attention from investors since April last year, since the currency`s price is continuously following the trend.

Monero (XMR) managed smoothly to move above support level at $135 and to test resistance at $185. It is currently moving below level of $155, and price is still within a channel. What is important to note for this currency is that it is moving slowly and gradually in an uptrend since March 2020. Break of channel on down side would lead to long term support at $135.

After a strong push of price during the previous few weeks, when it has been moved from $0.86 up to $2,5, Theta is currently in a short correction zone, but still trading on a higher level, above $2. Short term support level can be marked at $1.70, 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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