Bitcoin and Ethereum both cross milestones, and the rally will continue

According to Bitpush terminal data, Bitcoin is above $50,000 and Ethereum is close to $4,000. As cryptocurrency prices rise, global stock markets also rebounded, indicating that investors' risk appetite has increased.

Ethereum, the world's second-largest cryptocurrency by market value, hit $4,000 on Friday for the first time since May. ETH has gained about 20% over the past week, extending its outperformance relative to Bitcoin.

“Bitcoin wants to join the party, too,” Martha Reyes-Hulme, head of research at digital asset prime brokerage and exchange Bequant, wrote in an email to CoinDesk.

“Bitcoin’s dominance has already fallen to 40% and will likely wane as investors turn to other areas of the market and focus more on use cases rather than pure store of value,” Reyes-Hulme wrote.

Ulrik Lykke, executive director of digital asset hedge fund ARK36, wrote that if Bitcoin fails to break through the $50,000 resistance level, the price of Bitcoin could reverse to as low as $40,000.

Bitcoin is up about 70% so far this year, compared with a gain of about 20% for the S&P 500. Gold and bonds have produced negative returns so far this year.

Volatility in both stocks and cryptocurrencies has been relatively low over the past few months, in part due to expectations of continued monetary policy easing.

On Friday, the U.S. added 235,000 jobs, well below expectations for 725,000 jobs. The job losses reinforced expectations that quantitative easing (QE) could continue longer than expected, boosting asset prices. Bitcoin and stocks moved higher shortly after the jobs report was released.

After remaining flat in August, Ethereum’s realized volatility has started to rise again. At the same time, the cost of buying short-term ETH options is also rising, which could indicate overheating.

According to options data provider Skew, a large number of call options positions were found when ETH broke out of a one-month range above $3,400. Technical charts show that this rally is in overbought conditions, although it is down compared to August.

The chart below shows that ETH front-end risk reversal, which is the difference in implied volatility between similar call options and put options, has shifted strongly in favor of put options.

“With the pace of this move gathering speed, it would not be surprising to see a big mean reversion to the upside,” crypto trading firm QCP Capital wrote in a Telegram message.

According to one measure of bitcoin’s “supply shock,” the price of each bitcoin should be at least $55,000.

In a tweet on Sept. 5, analyst Willy Woo emphasized his “conservative” price estimate for BTC/USD.

While Bitcoin has yet to secure $50,000 as firm support, on-chain indicators have been more firmly bullish for some time.

Now, the so-called “supply shock valuation model” has joined its ranks, giving a conservative price estimate of $55,000.

“From a supply and demand perspective, investors who don’t plan to sell are the demand side, while investors who are willing to sell are the supply side,” Willy Woo explained in a blog post last month.

The valuation model also uses an algorithm to compare supply and demand conditions similar to the current situation to produce a fair price estimate.

Bloomberg said in its Crypto Outlook report that Bitcoin will soon reach the $100,000 mark, with analysts calling this the “path of least resistance” and Bitcoin becoming a global reserve asset.