A recent report from CoinMetrics suggests that when a new altseason starts it will play out in a way that is vastly different from the market of 2017-2018.
According to the authors of the report, the arrival of institutional investors and their interest in Bitcoin (BTC) and Ether (ETH) has fundamentally shifted the cryptocurrency market landscape. Tokens with real world utility, Layer 2 technology or attractive staking ecosystems will outperform the large cap tokens from pre-2017.
Bitcoin and Ethereum dominate but L2 tokens will catch up
Institutional inflows firmly established Bitcoin and Ethereum as the chosen Layer 1 (L1) blockchains and this is reflected in the price action of the market since Dec. 1, 2020. As shown on the chart below, the only L1 coins to outperform BTC and Ether during that period were Cardano (ADA), Dogecoin (DOGE) and Decred (DCR).
Competitor L1 blockchains from previous runs, such as Litecoin (LTC) and Bitcoin Cash (BCH), have underperformed compared to BTC and both continue to see their share of the marketcap decrease as the conversation shifts payments capacity to store of value performance.
So called ‘Ethereum Killers’ like Tron (TRX) and EOS have failed to live up to their lofty claims and are plagued with concerns regarding block producer collusion and centralized networks.
Polkadot is the main stand-out L1 blockchain that has emerged over the past few months and what sets it apart is the team’s decision to facilitate the overall growth and interoperability of the blockchain ecosystem rather than dominate it. This explains why the altcoin has rallied 85% in 2021.
Today’s successful projects offer staking and DeFi integration
Here is where this altseason begins to diverge from the last. Staking, governance tokens, and the integration of DeFi are the primary drivers in this market as users want more involvement in the growth and direction of each project.
Decred (DCR) is a perfect example of this emerging trend. Created in the image of Bitcoin with a maximum supply of 21 million tokens, the network combines PoW with PoS to allow all members of the community the opportunity to get involved and earn rewards.
A built-in governance mechanism gives token holders a direct say in the future of the project, and the release of the Decred Decentralized Exchange (DCRDEX) on Oct. 21, 2020 triggered the DCR price to rally from 11.68 to a new high of $67.80 on Jan. 8.
Cardano is making the case for its value as an L1 blockchain through the implementation of staking and discussions from creator Charles Hoskinson about bringing DeFi to developing countries once smart contract functionality is fully integrated. These developments helped propel a 100% increase in the price of ADA since the beginning of 2020.
DeFi governance tokens give investors a voice
The DeFi boom has been incredibly attractive to investors who are looking for a more hands on approach to interacting with emerging blockchain projects.
The sector is a clear driving force in the market and since Dec.1 Uniswap (UNI), AAVE, Synthetix (SNX), MakerDAO (MKR), SushiSwap (SUSHI), and Curve (CRV) have all outperformed Ether and BTC. Note that they all include staking and governance functionality.
Perhaps the 2018 bear market that followed the euphoric 2016 to 2017 rally has created a more discerning investor who wants more say in the development of the project rather than buying into the detail lacking whitepapers and lofty promises of anonymous developers.
As can be seen in the chart above, the total value locked in DeFi continues to grow and recently hit an all-time high of $25 billion, a figure larger than the market cap of many of the top projects combined.
Cryptocurrencies that offer real world use cases that meet the sector’s demands and the ability to govern project decisions have emerged as the most desirable features for today’s retail investor.
Institutions may have chosen Bitcoin and Ether as their preferred investments but the battle for Layer 2 dominance between tokens that function as Ethereum alternatives is clearly where retail investors are placing their attention and this is what will drive the next altseason.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Bitcoin extends correction as Ethereum sees ‘picture perfect’ rejection at all-time highs
Bitcoin (BTC) stayed closer to $60,000 on Oct. 22 after the largest altcoin Ether (ETH) failed to cement new all-time highs.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
ETH all-time high? Blink and you’ll miss it
Data from Cointelegraph Markets Pro and TradingView ETH/USD just match its record $4,380 on Bitstamp before seeing a harsh rejection.
Traders watched in anticipation as Ethereum appeared to follow Bitcoin to historic new levels, only to face immediate resistance and fall sharply back into a lower range.
Trader and analyst Rekt Capital called the event a “picture perfect rejection.”
At the time of writing, ETH/USD circled $4,150, preserving $4,000 as support with the exception of a flash dip which immediately followed the all-time high rematch.
ETH/USD 1-day candle chart (Bitstamp). Source: TradingView
Against Bitcoin, Ethereum fared better, with the ETH/BTC pair having bounced near lows last seen in late July.
Bitcoin could see “additional topside euphoria”
Having similarly failed to hold significantly higher levels, Bitcoin itself took an extended break as overheated markets cooled their excitement.
Funding rates were returning to normal on Friday, having reached a state reminiscient of the blow-off top from April.
Bitcoin funding rates chart. Source: Bybt
As with open interest, however, these were not as frenzied as the Q2 rush, which produced the $64,900 all-time high in place until this week.
“This means there is possibly still room for additional topside euphoria but we are at levels that are starting to stretch the market,” crypto trading firm QCP Capital commented in its latest market update.
Bitcoin Forecast and Analysis BTC/USD October 22, 2021
BTC/USD are trading at 64619 and continue to move as part of the correction and the bullish channel. Bitcoin cryptocurrency capitalization at the time of the publication of the forecast is $1,194,342,792,891. Moving averages indicate a short-term bullish trend for Bitcoin. Prices went up from the area between the signal lines up, which indicates pressure from buyers of ”Digital Gold” and a potential continuation of the rise in the value of the asset already from the current levels. As part of the cryptocurrency rate forecast for tomorrow, October 22, 2021, we should expect an attempt to develop a decrease in the value of a digital asset and a test of the support level near the 57505 area. Where again should we expect a rebound and an attempt to raise the Bitcoin rate with a target above the 74055 area.
Bitcoin Forecast and Analysis BTC/USD October 22, 2021
An additional signal in favor of the growth of BTC/USD quotes will be a test of the rising trend line on the relative strength index (RSI). The second signal in favor of this option will be a rebound from the lower border of the bullish channel. Cancellation of the growth rate and value of Bitcoin will be a fall in the value of the asset and a breakdown of the area of 52205. This will indicate a breakdown of the support area and a continuation of the fall in the Bitcoin rate with a potential target at 42055. Confirmation of the rise in the price of the asset will be a breakdown of the resistance area with the price fixing above the level of 69205.
Bitcoin Forecast and Analysis BTC/USD October 22, 2021 suggests an attempt to test the support level near the 57505 area. And further, the cryptocurrency will continue to grow with a potential target at 74055. An additional signal in favor of the Bitcoin rate rise will be a test of the support line on the relative strength index (RSI). Cancellation of the cryptocurrency growth option will be a fall and a breakdown of the 52205 area. This will indicate a continued fall with a potential target below the 42055 area.
Bitcoin Price Flash Crashes for Second Time in a Month in the US
The price of bitcoin (BTC) on Binance.US, the US-based exchange affiliated with Binance, briefly crashed to as low as USD 8,200 today – a drop of 87% – before recovering again. The crash marks the second time in a month when bitcoin prices in the US have briefly disconnected from the rest of the world.
Today’s flash crash, which was one of the most significant on a major exchange in bitcoin’s history, all happened within less than 1 minute, the BTC/USD price chart from Binance.US showed.
Although the flash crash was all over within a minute, the trading volume showed that a significant number of coins did change hands during the crash, indicating that some traders may have been able to fill orders for bitcoin at extremely low prices.
Flash crashes can happen when large market sell orders are sent to exchanges without sufficient liquidity on its order books, for instance, because a large trader accidentally placed the order as a market order instead of a limit order.
Today’s flash crash on Binance’s US exchange is the second such incident in a month in the US. On September 20, a data feed for crypto prices called Pyth that is used by some of the largest financial institutions on Wall Street showed a 90% crash in the price of bitcoin.
The feed briefly showed bitcoin at a price of USD 5,402. However, a similar price crash was nowhere else to be seen. Two days later, in a report about the incident, Pyth concluded that the abnormally low price was indeed a technical glitch, “caused by the combination of (1) two different Pyth publishers publishing a near-zero price for BTC/USD and (2) the aggregation logic overweighting these publishers’ contributions.”
Discussing today’s incident on Twitter, many traders complained about being forced by US regulations to use exchanges such as Binance.US, which has thin order books and low liquidity compared to the international version of the exchange.
No statement has yet been made from Binance or Binance US regarding today’s flash crash.
At 16:11 UTC, BTC trades at USD 63,180 and is down by almost 6% in a day, trimming its weekly gains to 10%.