Opinion: What will happen to BTC and ETH in 2021?

Crypto Valley Live (ID: cryptovalley)

Crypto Valley Live (ID: cryptovalley)

, Author: Lukas Wiesflecker, translation: Sherrie, Odaily reproduced with permission.

In recent weeks, the crypto world has been focusing on one topic: the price of Bitcoin. The price of the popular cryptocurrency is rising after bitcoin was able to break free from its previous all-time high on Dec. 16. But it’s not just Bitcoin that’s in the spotlight for investors, Ethereum, Polkadot, Litecoin, and many smaller projects are all likely to post strong profits over the past few weeks.

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Bitcoin - These Reasons Explain the Current Rally

Institutional investor interest in Bitcoin: Large companies such as Square Inc, Mass Mutual, and MicroStrategy have purchased Bitcoin in large quantities, increasing public awareness of Bitcoin.

Increased Adaptability: In terms of adaptability, a lot has happened in recent years as well. However, the role of Paypal is particularly noteworthy. U.S. customers of the payment provider can already buy bitcoin through the app. Square's U.S. customers have been able to buy and sell bitcoin through the popular CashApp for some time.

Business environment: Another factor driving Bitcoin’s growing importance, in our view, is economic development. Corona still dominates economic activity, with central banks issuing trillions of dollars of new capital. To hedge against the coming wave of inflation, investors have fled into assets that hold their value, such as real estate, stocks and cryptocurrencies.

Scarcity of Bitcoin: Additionally, the scarcity of Bitcoin may also play a role in the current price increase. In May 2020, Bitcoin's earnings were halved. As a result, fewer and fewer bitcoins are entering the market. As demand increases, this means that the price of Bitcoin will rise. PlanB's stock-to-flow model provides a nice visualization.

Short-term attack on BTC fails

For many investors, the current rise in Bitcoin has come as a surprise. Some experts even expect gold to close at $30,000. As a result, many investors established short positions. On Jan. 2, news from Bitcoin whales suggested that a sell order of more than 150 BTC could break the current momentum and observe a short-term consolidation. Within hours, the price of Bitcoin dropped from $33,000 to $30,000.

However, this correction did not last as within 24 hours, Bitcoin reached a new all-time high. Additionally, Bitcoin is also in unusually high demand on Coinbase. Meanwhile, traders used Binance Futures to short Bitcoin. The result was a short squeeze.

Therefore, short sellers have to realize that shorting Bitcoin can really end in pain. Overall, short sellers have not had much luck with their short positions over the past 10 months.

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However, while Bitcoin is currently experiencing a strong price swing, the top altcoins remain relatively calm. Previously, only Ripple was able to convince investors with strong price gains — but the SEC complaint pushed Ripple prices back to where they were.

However, now some things seem to be changing among the altcoins as well. For example, the price action of Ethereum is worth highlighting. This is the first time since May 2018 that the price of Ethereum has surpassed $800. At the same time, it even broke the $900 price mark. Some traders are now assuming ethereum will outperform bitcoin in January. Additionally, Ethereum may be on the verge of a new bull cycle, as CME plans to launch Ethereum futures this February. Additionally, it is now clear that the number of people buying Ethereum is hitting new highs, much higher than in 2018.

However, in addition to Ethereum, Polkadot has also attracted investor interest in the past few days. The reason is that the price has developed more than 80% in just 7 days. After a long period of stagnant bitcoin prices, investors are now recognizing the potential of the project. Polkadot may become one of the leading DeFi blockchains and play a leading role as a collateral currency. Currently, more than 63% of DOT production is in collateralized wallets, which is a clear statement for market participants regarding personal synchronization.

Finally, the price of Litecoin is also showing positive movements. “Digital Silver” has made it into the top ten cryptocurrencies. Litecoin surpassed $150, reaching a price level for the first time, which was last seen in May 2018. Based on returns, Litecoin doesn’t have to hide from Bitcoin, which has nearly quadrupled in price since September — and Bitcoin can’t stay here. Further price developments for Litecoin should be exciting in the coming weeks and months.