The start of the new year could not be better for all BTC holders. For everyone who entered the new year with a long position in BTC was certainly an excellent start of a year, since BTC is continuing its reach to new highs. This currency is currently trading above $33.000, which is 60% above the psychological level of $20.000. Many analysts agree that this increase is a boost from limited supply and decreased mining of coins, while on the other side, high demand is coming from investment and hedge funds which perceive BTC as a good hedging asset against inflation and diversification of portfolios. Sentiment of investors is additionally heated by expectations that major crypto currencies will become significant payment methods in the future.

Very important news is coming from the U.S. Office of the Comptroller of the Currency (OCC) which allowed US banks use of stablecoins for payment activities in support to innovation in real-time payment technologies. At the same time it has been stressed that banks should manage their operational, compliance and fraud risks, which might originate from use of such technology. This is a significant breakthrough for Blockchain technology as now it can be treated as any other payment system used by the US banks. The market participants perceived this news as a regulator's positive step forward in the coalition of Blockchain technology and stablecoins with the traditional banking industry, which would certainly have positive general implications on the future of crypto currencies.

Coinbase will be the next exchange to put halt on trading Ripple starting from 19th January. Currency ended last year with negative news regarding potential U.S. Securities and Exchange Commission (SEC) charges on breach of law due to unregistered offering of securities. Ripple officials are strongly opposing these accusations and have expressed their readiness to fight against them. After the initial drop in price, currency stabilized around the level of $0.20.

In the fiat world, there has not been much changes from the previous period. The lawmakers in the US agreed on a $600 stimulus package to Americans hit by the consequences of the pandemic. However, President Trump thinks that this package should be raised to $2.000. Whatever will be the outcome, many investors are preparing for the coming inflation which would be heated up by stimulus measures. Just as a reminder, during last year FED cut its reference interest rates to minimum levels of 0%-0.25% with intent to keep them at these levels until inflation “comfortably” reaches 2%. At the same time, USD is heading toward long term resistance at 1.24 against euro and 1.40 against gbp (currently trading around  1.23 and 1.36).

Good news from last week is that the United Kingdom has reached a Brexit trade agreement after heavy negotiations with the EU, in order to support trade of goods between two countries and help exporters to avoid high trade tariffs. However, the market reacted quite modestly on this news.

Anyway, the year 2021 started with very positive developments in the crypto world and its technology, and we hope that these developments will continue through the whole year. We could place our “bet” that this might be another very good year for crypto currencies and crypto traders.

Crypto market cap

Strong increase in crypto market capitalization is continuing. Although holiday time is usually quiet when it comes to markets, it is not the case with the crypto market. During holiday time, total capitalization was increased by 31 %, from $685 billion to $898 billion. Same as the week before, this increase was also led by Bitcoin with significant contributions from Ethereum , ETH Classic and Litecoin. Volume of trades is continuing to be on a high level on a daily basis. There is no indication of easing of investors interest, where certainly, positive news from OCC had some contribution.  

With the latest increase, crypto market capitalization is higher for around 380% since the beginning of year 2020, from $185 billion in January 2020 up to $898 billion in the first days of 2021.

The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies. With an increase of almost 30% in market cap, Bitcoin is certainly the most contributing currency to total crypto market capitalization. However, both ETH and ETH Classic are following strong up trends with increase of 81% and 24% respectively, which added some additional $212 billion to the crypto market. Unfortunately, the bullish trend continued for Ripple, with additional decrease of 26%.

BTC, any reversal soon?

This question we have imposed also two weeks ago, but it looks like there is still no certain answer. During the previous week the market slowed down a bit around level of $30.000, and when it looked like that there is not enough strength to break $30K level, the price peaked to $33.000. There was small price volatility on Monday, when BTC tested levels above $27K, but it didn’t seem like any significant move, since the price swiftly returned to previous levels. Analysts agree that fundamentals behind such BTC moves can be found in increased interest of hedge and investment funds for diversification and hedge of their portfolios and investments, but with the most recent increase OCC decision played a significant part.

Based on historical data and behaviour of the market, there are some important support levels, which BTC might test at some point in time.  It is interesting to see at this moment, that since the last two weeks, the BTC market is moving in an overbought zone, which implies the possibility that short term reversal might be soon in sight. In our previous weekly analysis, we have assumed that some of XRP were transferred to BTC, due to negative news about Ripple, however, this week there had not been such a case, and we have seen pure cash inflow in BTC and other currencies. Considering that the BTC market was moving around a level of $30K during the previous week, before its final breach, we will mark this level as new short term support. Next levels to watch would be $27K and $24K, and of course, a very important psychological level of $20.000. Since BTC is at its historical highs, whether the price will go further up, the market will decide.

Ethereum at long term resistance

ETH was following movements of BTC during last week, bringing additional $55 billion of new funds into the crypto market. But, certainly the most important news for the week is that long term resistance level at $950 has been broken. For a longer period of time, ETH was struggling to return on a path where historical highs can be tested again. ETH is currently testing short term resistance at $1.100. Just as a reminder, the highest historical level of ETH was in January 2018 at price $1.500. Whether ETH will have strength in the future period to break long term resistance at $1.100 we shall see in the coming week, but with current level, ETH market entered into an overbought zone. On the opposite side, levels to watch are $950, $800 down to $650 which are seen as support levels.

LTC – a move above long term resistance

During last week Litecon managed to finally break long term resistance level at $130, and continued heading toward next resistance at $170. This level has been tested only once recently. Clear break of $170 resistance would lead the currency to the next level of $230. Currently indicators are not showing that the LTC market is overbought, hence there is a good chance for LTC to test once again current resistance level. On the opposite side, long term support levels can be found at $130, down to short term support at $110 and $100.

What’s in store for altcoins

Last week Ripple continued trading on the down side, but currency managed to stabilize around levels of $0.20, regardless of more negative news coming from Coinbase exchange which will stop trading XRP from 19th January. Unfortunately, momentum for this currency is not so good at this moment, and will certainly last until settlement with the SEC.

Incredible and completely surprising performance during last week is coming from Dogecoin. Namely, in the first trading days of this year this currency had moved in price from $0.0046 up to $0.013, which is more than a double increase in price. DOGE is currently at small correction and trading at $0.009. It has been on the market since July last year with a historically highest price at $0.005, before the start of this year. At this moment we cannot be certain what was the actual cause of such price movement, but we will certainly keep an eye on this currency and its potential in the future.

Another great performance from the start of this year is coming from Cardano (ADA). It has managed to break long term resistance level at $0.20, currently heading toward new resistance at $0.37. Currency is currently trading below this level, at $0.25. NEO had modestly good performance during last week, after not having strength to break support level at $13. NEO reverted to the opposite side and currently trading around levels of $17.  At the same time Monero (XMR) is struggling around support level at $136, without any significant move on any side.

Theta had a fantastic last two weeks in performance. This currency managed to make an increase in price  from $0.86 up to $2,5, which is indeed a significant result. Currency is currently trading around $2,2.

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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