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

In recent weeks, the crypto world has been focusing on one topic: the price of Bitcoin. After Bitcoin has been able to break away from its previous all-time high on December 16, the price of the popular cryptocurrency is constantly rising. But not only Bitcoin is the focus of investors, Ethereum, Polkadot, Litecoin and many small projects may have made strong profits in the past few weeks.

Bitcoin – These reasons explain the current rally

In the course of a strong rebound, Bitcoin once again hit a new all-time high of $34,700. It was only on December 16 that the popular cryptocurrency surpassed its all-time high from 2017. However, the fundamentals have fundamentally changed compared to December 2017, as Bitcoin is now no longer seen as a payment method of the future, but as a digital store of value. In our opinion, the following facts favor Bitcoin's rebound:

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

Increased adaptability: In terms of adaptability, a lot has also happened in recent years. However, the role of Paypal is particularly noteworthy. The payment provider’s US customers can already buy Bitcoin through the app. Square’s US customers have been able to buy and sell Bitcoin through the popular CashApp for some time.

Business Environment: We believe that another factor that is driving Bitcoin to become increasingly important is economic development. Corona still dominates economic activity, and central banks have issued trillions of dollars in new capital. To hedge against the coming wave of inflation, investors are fleeing into assets that hold their value, such as real estate, stocks, and cryptocurrencies.

Bitcoin’s scarcity: Additionally, Bitcoin’s scarcity may also play a role in the current price increase. In May 2020, Bitcoin’s rewards halved. As a result, 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 good visualization.

Short-term attack on BTC fails

For many investors, the current rise in Bitcoin came unexpectedly. Some experts even expected the price to close at $30,000. As a result, many investors established short positions. On January 2, news from Bitcoin whales believed that a sell order of more than 150 Bitcoins could break the current momentum and observe a short-term consolidation. In a few hours, the price of Bitcoin fell from $33,000 to $30,000.

However, the correction did not last, as within 24 hours, Bitcoin reached a new all-time high. In addition, the demand for Bitcoin on Coinbase was unusually high. At the same time, 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 good luck with their short positions over the past 10 months.

Are we about to see a new rally in altcoins ?

However, while Bitcoin is currently experiencing a strong price movement, the top altcoins have remained relatively calm. Previously, only Ripple was able to convince investors with a strong price increase - but the SEC complaint pushed Ripple's price back to its original level.

However, something seems to be changing in altcoins now 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 exceeded $800. At the same time, even the $900 price mark was broken. Some traders are now assuming that Ethereum has outperformed Bitcoin in January. Moreover, Ethereum may be about to usher in a new bull cycle, as the Chicago Mercantile Exchange plans to launch Ethereum futures in February this year. In addition, 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 the interest of investors in the past few days. The reason is that the price has developed by more than 80% in just 7 days. After a long period of stagnation in the price of Bitcoin, investors now recognize the potential of the project. Polkadot may become one of the leading DeFi blockchains and play a leading role as a collateral coin. Currently, more than 63% of DOT products are in collateral wallets, which is a clear statement from market participants about personal synchronization.

Finally, Litecoin’s price is also showing positive momentum. The “digital silver” has made its way into the top ten cryptocurrencies. Litecoin is above $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, as the price of Bitcoin has almost quadrupled since September – Bitcoin can’t hold up here. Further price developments for Litecoin should be exciting in the coming weeks and months.

Exciting market developments

I think the bull run has just begun. The fundamentals of all cryptocurrencies have fundamentally changed compared to 2017. Now that Bitcoin has taken the lead, other cryptocurrencies can follow suit. It is unlikely that there will be a massive exaggeration like the last bubble - after all, market participants should have learned lessons from the last cycle.

Nevertheless, altcoins can now also see record price increases. In the case of Polkadot, the project could become a pillar of the DeFi market and a direct competitor to Ethereum. However, Ethereum is also ready to start the new year with strong momentum.