In less than a week, bitcoin has gained more than 10,000 dollars in value. In the process, a certain pattern has consistently repeated itself over the past few days. This Friday, bitcoin hit a record high for the third day in a row. The cryptocurrency rose to as high as $41,780 in the afternoon, according to data from analyst firm Coinmarketcap. This means bitcoin has gained more than $10,000 in value in less than a week.
Bitcoin repeated a pattern of the past few days: first there was profit-taking, in the train of which the price fell to 37,000 dollars, then the price rallied again. “The recent setback was considered merely an entry opportunity into the market. Investors are currently moving along in seven-league boots,” commented bitcoin expert Timo Emden from analysis firm Emden Research.
It was only over the weekend that bitcoin broke through the $30,000 mark for the first time. After a setback on Monday, new records followed on Wednesday and Thursday: on Thursday evening, the cyber currency was worth more than 40,000 dollars for the first time.
It is not possible to reliably forecast how long this rally will last. Analysts at the major US bank JP Morgan even consider a long-term price target of 160,000 dollars to be possible. Rich Ross, a strategist at investment banking consultancy Evercore ISI, also sees potential for an “upward movement of historic proportions” in the cryptocurrency.
However, in a note Wednesday, Ross simultaneously described the outlook as “tulip-like,” financial news service Bloomberg reports. That’s a reference to the huge demand in the 17th century for tulip bulbs, which led to one of the most infamous market bubbles and crashes in history.
Bitcoin from $7,000 to $29,000 within a year
According to Emden, it’s not so much the latest fundamental data that’s moving the price at the moment, but irrational stock market speculation. He believes that the 50,000 dollar mark could soon be cracked and warns: “The current bull market no longer has much to do with rational investments. We don’t see anything other than pure market exaggeration at the moment.”
- The Bitcoin rally got its start at the beginning of 2020. From around 7000 euro dollars, the price rose to just under 29,000 dollars by the end of the year.
- In the process, more and more institutional investors used the cryptocurrency as an alternative to stocks and bonds and as a hedge against inflation risks.
- Additional euphoria was caused by the news that the payment service Paypal wants to enable its customers to pay with Bitcoin from this spring.
- Now the situation has changed, says Emden: “Private investors now have the reins in their hands. They are fueling the rally day by day.”
- The rise of BTC will benefit a lot of industries! Bitcoin Casinos, like the one mentioned on this webpage, are booming right now. The same is true for esports, many gamblers prefer to bet with BTC on esport events. This is huge in certain parts of the world, like Latin America (more here).
Ethereum is racing behind Bitcoin
The madness in the crypto sector knows no bounds. Bitcoin has increased nearly tenfold since its 2020 low. Now many are looking at Ethereum.
In recent months and years, cryptocurrencies have been predicted to end soon several times. But the swan song has so far always proved to be wrong. On the contrary, true to the motto “there’s life in the old dog yet”, bitcoin has recently experienced a rapid rally, repeatedly improving on its record high and gaining more than 300 percent over the course of the year. A growing number of institutional investors are establishing initial positions, as a look at the development of accounts with at least 1000 Bitcoins shows. Especially the announcement of Paypal to support cryptocurrencies in the future provided fresh momentum recently.
So far, however, the party in digital coins has been strongly limited to bitcoin, whose market share in the entire crypto universe recently rose to 70 percent. Parallels to the stock market can be seen here: while on Wall Street it was primarily the tech heavyweights that profited last year, a lot of venture capital is currently flowing into the largest coin by far in the cryptos as well. However, it is also true that second-tier stocks usually offer better returns when the environment fits. The MDax has been outperforming the Dax for years, and US second-tier stocks have also recently posted stronger gains than the blue chips. So is it worth getting in on the altcoins?
The prospects for returns are of course tempting. But more performance also means more risk. Daily fluctuations in Bitcoin in the double-digit percentage range are not uncommon; after the rally, setbacks of 20 or 30 percent would not be a surprise. This is even more true for the smaller altcoins. XRP recently provided a sad example. The long time second and third largest coin sank by more than 60 percent in the past 30 days after allegations of the U.S. Securities and Exchange Commission (SEC) against Ripple emerged. Learn more about Ripple on this site.
Ethereum performs better than bitcoin
The situation is somewhat different for Ethereum. With the jump of almost 50 percent on a weekly basis, the market capitalization climbed back above the threshold of $100 billion. The price is again gradually approaching the best value reached around three years ago at 1400 dollars.
Important to know: Unlike Bitcoin, for example, Ethereum is not a pure cryptocurrency, but a digital platform. It would be more appropriate to compare it with an industrial metal of the crypto markets. This is because developers can create their own programs on the Ethereum blockchain, so-called “distributed apps” or Dapps. Especially the decentralized financial applications (DeFi, read more here), which have been booming for months, are causing a lot of fantasy here. Unlike in the past, middlemen become superfluous for financial applications such as insurance, betting or loans. Transactions will be executed automatically once specified conditions are met. An example would be when a friend receives 100 euros provided the Dax is quoted above 14,500 points on the last trading day in January and at the same time the temperatures in Munich are below 0 degrees according to wetter.com. Such applications, even much more complex ones, can be recorded in smart contracts.
- In the meantime, Ethereum has risen to become the largest blockchain network and laid the foundation for further growth with the transition to Ethereum 2.0, which took place in December.
- The advantage: whereas previously the network’s transaction capacity was limited to around 15 transactions per second, several thousand per second will soon be possible.
- Ethereum therefore also developed significantly better than Bitcoin in the past weeks and months. The recent decision by the CME to introduce an Ethereum future on February 8 was also received positively.
No entry prices at the moment
However, those who want to gamble here should always ask themselves what is already included in the prices. Both the potential of the Ethereum platform and the switch to Ethereum 2.0 have long been known. And the introduction of the futures also carries risks: When the first bitcoin future was launched in mid-December 2017, bitcoin also nearly marked its all-time high and a long downward phase began. This is not necessarily the case for Ethereum now. However, the price has risen very strongly recently, and the flag pole is reminiscent of the initial situation three years ago. If at all, setbacks to $800 or $700 are a good opportunity to enter the market.
The final question is where you can trade Ethereum at all. In Germany, the issuer Vontobel repeatedly offers products in the certificate sector. Among the brokers, Etoro was the first in the crypto sector and has since significantly expanded the range. Continuous tradability and the avoidance of trading failures are also always important, which can be positively attested with both houses. Those who trade with leverage in Ethereum, but also Bitcoin, should always keep in mind that the leverage works in both directions and consider beforehand which losses they might want to bear. After all, volatility is likely to remain high.