Bitcoin (BTC) Breaks Out After Weeks of Weakness
Bitcoin (BTC) rallied above $41,000 late on Monday, setting expectations for a trek to a higher tier. After weeks of weakness and doubts about whether bulls could push the asset above the $40,000 level, the gains arrived within hours.
In about three hours during late Monday trading, BTC rallied from $38,000 to above $41,000 in one rapid period of growth. The asset heads for a monthly close and has renewed the battle between bearish and bullish attitudes.
BTC quickly regained positions above $42,200, with the potential for a stronger trend in the coming hours. The rally proved durable and extended on Monday, taking BTC above $43,300 with signs of growing activity.
This time, the inflow of Tether (USDT) was relatively small, with still just above 79B tokens in circulation. The BTC direction is still held by inertia and the overall attitude is still signaling bearish and displaying fear. Uncertainty and turbulence are seen as potentially stopping any attempts for a rally.
This time, the rapid BTC move only liquidated around $10M in value, following a trend of diminishing leverage. Most of the liquidations, as much as 86%, affected short positions as the move above $40,000 was unexpected and sudden.
BTC Reacts to Ukraine Conflict News
It has been difficult to establish a correlation between news of Ukraine’s conflict with Russia and the performance of BTC. Until recently, the situation had more of a depressive effect on BTC.
However, talk of potential economic sanctions has honed the case for the importance of BTC as a store of value and an emergency tool for moving funds.
Demand for holding BTC coins has remained high, still supported by corporate buying. The Canadian ETF continues to supply its cold storage with coins, revealing mainstream interest.
Once again there are rumors of renewed large-scale buying, adding to the current trend of holding onto coins more than a year old. Despite some sales at the top and short-term holdings changing hands, BTC is now in accumulation for most wallets.
Glassnode data also show the capitulation may be complete for those that bought at the top of the market, renewing the cycle of buying from the latest dip. This time, small-scale wallets lead, with a notable uptick in addresses getting their first BTC. The new metric will not show the trends for miners or exchanges.
Despite the fact that BTC has stepped back compared to last year’s valuations, there are signs of upcoming strength. Only 15% of the BTC supply moved in the first two months of the year. Additionally, the BTC 200 day moving average is now above $20,000 for the first time in history, setting up the stage for more significant price moves.
Now, BTC has to justify its recent rally with a positive monthly close, while the BTC market cap dominance slowly expands to 42.6%.
Altcoin Protocols Accelerate Rally
Just like with other periods of growth, the rally of Terra (LUNA), Solana (SOL) and Avalanche (AVAX) proved to be the strongest.
LUNA displaced Cardano (ADA) after climbing by more than 13% to $85.47, extending the gains from the previous week. LUNA may be on track to displace Ripple’s XRP. The asset stagnated around $0.75 despite expectations of a potential relisting to Coinbase this spring.
The chief reason for LUNA’s rapid rise are recent news of a new spot market on FTX.
FTX has become the most active derivative and spot market in 2021, as the exchange was actively promoted and built up a significant international audience. The listing adds to the incentive for more buyers to get and hold LUNA with the expectation the asset is building a system of electronic money and will continue to appreciate over time.
SOL is now close to $100 also after double-digit growth in the past 24 hours. AVAX stands just under $80 with slightly slower gains. The ecosystems remain the most promising crypto assets, immediately reacting to market recovery and possibly raising hopes they were undervalued.
Token platform assets have an incentive not to sell for short-term gains, instead locking them as collateral. With this, even thin trading volumes can lift the prices of the assets, as they are exposed to influential trading pairs on the Binance exchange.
The gains in those three altcoins superseded the recovery of Ethereum (ETH), which inched up above $2,900 on Tuesday. For now, the value locked in DeFi is still just under $70B, struggling to recover from the latest correction.
ETH has continued to receive criticism of being inadequate and possibly failing to launch ETH 2.0 as promised. However, the platform still remains a settlement layer for other side chain solution such as Polygon (MATIC).
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