Crypto Market Analysis: 24th August 2020
Equity markets closed on an all-time high of 3,389.78 on Wednesday, surpassing the record of 3,386 set on February 29th. Despite this, doubts remain about the global economy, with the Federal Reserve’s meeting minutes highlighting concerns on the pandemic’s continued impact. Meanwhile, the FTSE All-Share and STOXX Europe 600 also suffered a dip. It was a mixed week for crypto, with pushing the $12,000 level and some altcoins taking a few step backs, following their recent race forward.
Simon Peters, market analyst: Bitcoin breaking through the $12k barrier
It was a solid week for crypto in general, with bitcoin leading the charge. A couple of weeks ago, I touched on the moment that bitcoin broke through $12,000 before dropping back down. A similar event occurred last week, but this time bitcoin kept its head above the surface to grab a few more lungs of air before sinking to $11,700. Without meaning to strain the nautical analogy, was this a watershed moment?
Perhaps. But it’s important to note the low level of bitcoin currently on exchanges, which creates less selling pressure – the last time we saw such a level was in November 2018. This is probably a case of retail investors taking profits from the last few months and placing them in other asset classes.
If we see another push towards $12,000 and bitcoin is able to remain above that level for an extended period of time, then investors should look to $14,000 as the next resistance level. There is clearly an appetite to talk about the cryptoasset again, as evidenced by a recent full-page advert in the Financial Times and Grayscale’s own broadcast spots on key US news channels.
David Derhy, crypto commentator: Altcoins retracement now a regular occurrence
Time and again we have seen altcoins fly at a million miles per hour before experiencing a retracement back the way they came. Last week was no exception, with top-performing coins such as Chainlink taking a few steps back after having taken a hundred steps forward. Given that it hit $19 last week, it’s understandable that it would fall back. Despite this, I still view it as overvalued. Don’t get me wrong: I’m still more bullish than Zeus Capital, but I see an appropriate value as something below $8. It is clear to me that the huge run we saw over the last few weeks was because of investors getting a serious case of FOMO. We could also see a continuation of the retracement as we come out of summer and people return to their normal lives. Perhaps they’ll take some of the profits they’ve realised in altcoins – to reiterate, Chainlink and ADA are up 850% and 293% respectively! – and move them into other asset classes or use them on real-life expenses.
Even those at the very top of the crypto food chain recognise that it is important to take profits sometimes, as they are aware of the excitement that comes in the industry and are cautious not to be carried away with it. This is even true if the excitement relates to their own projects! For example, in 2017 Vitalik Buterin sold a portion of his Ether at $700.
Simon Peters, market analyst: Bitcoin reserves drop – hodlers gonna hodl
In other news, Bitcoin exchange reserves fell to a 21-month low, according to Glassnode data.
This clearly suggests a hodling mentality and is definitely a bullish indicator in my books. There is an interesting contrast between retail and institutional investors here. Whilst retail investors are clearly content with holding their bitcoin, institutional investors are looking to buy. Given the Fed’s recent comments on yield curve control (caps and targets are not on the horizon), perhaps they are looking at diversifying the inflationary hedge parts of their portfolios.
At the risk of sounding like a broken record, it is pleasing to see further institutional investment in bitcoin. I expect it to be one of, if not the overarching themes of cryptoasset investment in the medium to long term.
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