Bitcoin (BTC) Above $48,000: How Far Will This Rally Go
Bitcoin (BTC) rallied strongly in the new week, breaking above $48,000 on signs the leading asset may become a tool for storing value. BTC has now broken above its levels a year ago, with the potential for a rally extending above $50,000.
The hike to that level was short-lived, and BTC slid down to $47,642.41 on Tuesday.
Keeping up the pace of the rally and holding above $47,000 will turn the first quarter into the green. The current BTC price is already at a one-month high, preparing for a green close for March. BTC still faces bearish attitudes, but some positions get attacked more actively. At the most extreme, the current price hike is viewed as potentially leading to a new all-time high.
BTC usually makes its big price moves in a short time span, with the recent appreciation possibly sending prices for a peak and some backtracking. BTC smashed through resistance levels easily, taking the next tier with relative ease.
The latest climb was also underscored by significant demand for actual coins, while futures markets still worked toward liquidating shorts. Still, there are remaining short positions, betting on a short-lived rally.
BTC dominance also inched up to 42.1%, while Ethereum (ETH) staged its own rally above $3,400.
DeFi Tokens Rally Immediately
Talk of using BTC as a reserve led to a stronger rally for the three tokens most involved with DeFi and collateralized stablecoins. Terra (LUNA) rallied above $112, with Solana (SOL) breaking above $100 again. Avalanche (AVAX) moved up above $95 again.
Those three ecosystems build up value through locked assets, with little incentive to sell. Improved algorithms also avoid the cascading liquidations that previously affected DeFi protocols.
Waves (WAVES) also expanded to $38.38, rising more than 22% in a day. The Waves protocol itself holds a certain amount of BTC as wrapped tokens. But the WAVES asset is also being used as collateral within DeFi protocols, boosting its value.
Filecoin (FIL) and Internet Computer (ICP) also took a ride along the BTC rally, adding 22% to their respective price in the past day. Altcoins have continued to appreciate, especially those that lagged behind. With more liquidity available, some of the newly minted tokens end up propping up the price of smaller projects.
Is BTC Adoption Accelerating
BTC has received significant criticism, especially during its latest dip closer to $30,000. But wallet growth shows a trend of adoption over the years. BTC is currently at the early stages of Internet usage, and may serve to grow the new ecosystem of games and DeFi projects.
Most of the latest big-scale wallets were also created in the past three years, both for exchanges and corporate buyers. A recent wallet created on March 6 was filled with nearly 20,000 BTC over the course of 10 days. Other wallets with only a few transactions have accrued stashes above 24,000 coins. Those big-scale wallets have not been identified to belong to exchanges.
At the same time, exchanges are seeing an exodus of coins, while another 700M in Tether (USDT) were injected into the market. The supply of USDCoin (USDC) actually fell in the past week, down to 51B tokens.
Right before the rally, the mix of exchange flows showed more BTC taken off the market, with predominant inflows of ETH and USDT.
Terra’s stablecoin, however, added another billion tokens in seven days, boosting demand for LUNA and its market value. UST is swapped for USDT and BTC, and is highly active on Binance, FTX, KuCoin and Coinbase. There are expectations for even more UST to be minted, especially if Terra protocol builds its promised $10B BTC collateral.
How Far Will the Rally Go
In the short term, BTC may manage to break out to $52,000, based on chart performance.
At these higher prices, accumulation may diminish, while futures markets may be headed for more volatility at the end of the month.
Futures Markets Boost Open Interest
Open interest on Binance is now above $4.7B, with growth on most major exchanges. BTC open interest is now on par with levels from last September that preceded the BTC all-time high.
BTC futures have picked up the pace since a low on January 18, rising from $14B to $16B with an upward trend.
It was the futures market which caused the rapid price move, squeezing out short positions. BTC has moved in similar patterns before, attacking certain price levels with significant short position accumulation.
Because the recent rally was linked at least in part to attacking short positions, there are expectations for some backtracking to under $46,000.
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