Last week in the news
After a small correction down to $17.600, Bitcoin headed to a new historical high of $24.000 on Saturday. However, the previous week was marked more with general sentiment of economists and investors about problems in the real economy, which increased interest in Bitcoin is putting it in the spotlight.
During last week USD reached its lowest levels since April 2018. It seems like interest in USD is a bit lost and investors are seeking alternative investments to safeguard their funds, while waiting for the US stimulus package to be announced with aim to support an economy hit by a pandemic. Gold is heading toward recovery from $1.800 since the beginning of December, reaching almost $1.900 during last week. At the same time, S&P 500 gained some quite modest positive influx. While analysts are noting positive market sentiment due to forthcoming aid measures which would help companies to cover losses from this year and save jobs, there is an increased number of economists speaking about the current equity bubble. Namely, results of stimulus measures might be questionable, as there is still no increased sentiment of investors to put company funds into new investments which would end up in the real economy in this way. As it is evident from previous stimulus packages in the EU and the US, many of these were used to buy-back company’s shares, which in return had consequences of increased share value, supporting the equity bubble. This fact is one of major concerns of many economists that might happen again, and also the reason why the highest government measures in history had only limited effects. Whoever is right, the fact is that the new US Government will have a lot of challenges during next year when it comes to the local economy, as well as many other countries in the world.
In fiat world, old stories continue. US President Trump has put blames on authorities in Switzerland regarding currency manipulation. For many years, Japan was in the spotlight of the US aside from China for the same reason. It seems like issues with fiat currencies are a never ending story of some sort of perceived manipulation. It is more than evident that the sustainability of the old system, introduced after WWII is reaching its end and Bretton Woods needs to be either improved, or replaced with a completely new system. With current running deficits world-wide, a return on Gold standard is impossible without significant currency devaluations or depreciation in many countries in the whole world.
So, what does all above mentioned have to do with crypto currencies?
The fact is that Gold had always been safe-haven for investors during any crisis period, saving value of assets from depreciation and inflation. However, new economic thought is switching more and more views to the crypto world in dealing with potential solutions to current issues. What is currently evident is investors lower interest in investments in Gold, aside from equities and commodities. There are hedge fund managers noting that they have decreased positions in gold and increased position in Bitcoin at the same time. Reuters is noting that larger investors looking at Bitcoin to hedge against inflation in local countries which current stimulus measures might generate. This is one of normal investors reactions if we take into account that only this year Bitcoin made 170%. Can any other asset compare with this increase in value? There are however, other investors who perceive BTC as only a speculative asset. For the moment majority investors agree that it is good for diversification of portfolio, while keeping their risk appetites under control. Anyway, BTC is here and it seems that it will be here for a long time. What we know for sure is that higher adoption of Bitcoin and crypto currencies in the future will drive its value to higher levels.
Crypto market cap
Strong increase in total market capitalization during last week is the direct result of increased investors interest in Bitcoin and other altcoins whose price is following a positive correlation with the price of BTC. As of the end of the week, total market capitalization reached a level of 660 billion USD. Volume of trades had also peaked during the previous week, and was still trading on relatively higher levels.
Since the beginning of this year, crypto market capitalization has increased around 260%, from $185 billion in January up to $660 billion in December.
The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies. Although BTC leads in price and market cap, the gainer for the last week is certainly Litecoin, whose capitalization increased by 51%, followed by Bitcoin Gold with 37% increase. Third place in the previous week belongs to BTC.
BTC, where are you heading?
After a small and very short correction at level of $17.000, Bitcoin reached new historical high price at level of $24.000 during last week. Whether we are going to see some short term price correction in the near future, or the price will continue to go even higher from this level, analysts are not fully in agreement, but what could be noted is that the majority of them are on a bullish side. Rational behind such views are recent developments among retailers which are considering to include payments in major crypto currencies in their business. Such developments are certainly having a positive impact on the increased interest for BTC and other major coins. Short term support level can currently be spotted at level of $19,500. Based on technical analysis of historical price movements, drop below level of $19.500 could end at levels above $17.000. However, moving in the opposite direction would lead to new historical highs. What is ahead in the coming week will impact where BTC will end up this year. As the Holiday season starts coon, the last week of December is usually quiet at all markets.
ETH has a long way to new highs
In line with the increasing BTC price, Ethereum ( ETH ) followed almost the same price move, from level of $535 up to $670. However, what is different when it comes to comparison with BTC, is that price increase is much slower, which is why ETH is still far away from reaching its historical highs at level of $1.400, where currency stood in January 2018. But, on a positive side, current level of ETH is only short term resistance level. Much more important level is standing at $800, which is long term resistance. Break of this level would help ETH to finally reach a level from January 2018. Interestingly, RSI is still not showing that the market is on a clear overbought side. Based on technical analysis, it seems that ETH currently doesn’t have strength for such a move, however, a test of this level in the near future would not come as a surprise. On the opposite side, the level of $535 could be much easier tested, as long term support level.
By looking at a global crypto market picture of the previous week, it could be easily concluded that Litecoin is the actual winner of the last week. Recently, this coin managed to gain the interest of the investors community, which increased its price significantly since the beginning of this year. A move during last week from $78 up to $120 was a gain of 53% in value. Highest move among all other major cryptos. However, we have to take into account that $120 is a point of long term resistance. Can LTC go even higher? With RSI currently not providing any clear sign that the market is overbought, absolutely there is space at least to next long term resistance at $170. In the opposite direction, levels of $110 and $100 could be noted at short term support levels this currency might test.
What’s in store for altcoins
Ripple is still on the road where investors don't have a clear picture where this currency is headed. But what is actually positive about it is relative stability in price, in which sense, it represents a good asset for diversification of portfolio, since the volatility risk is relatively lower from other altcoins. Last week performance was in line with general market developments where price moved from $0.45 up to $0.60.
NEO, a new star among investors as a major competitor of Ehtereum, surprisingly, did not gain investors interest during last week`s strong push of altcoin prices. Price was moving from $15 up to $18, not even close to resistance level at $25. Whether this level will be tested in the coming week, is about to be seen, but at this moment, Ethereum is beating in performance its major competitor. On the other side, it should not be overlooked that since the beginning of the year this currency gained 500% in value, which is astonishing performance.
During last week Cardano (ADA) was not moving higher from support level of $0.17. Based on technical analysis it seems like there is no strength in currency to break this level as volumes of trade were relatively lower.
Overall it could be concluded that the previous week was a very interesting one when it comes to developments in the crypto market. What is interesting to see at the week-end among many altcoins is that RSI is not moving in the overbought zone. This increases confidence that next week will bring more interesting developments before the year ends, especially for altcoins. We will keep close watch on those.
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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