Boiling 2020: What will happen to Bitcoin and Ethereum, the two jewels of the crown, next year?

Preface: 2020 was a boiling year. From the 312 crash to the new high of Bitcoin, from the DeFi craze to the launch of Filecoin. "One bull market can make 10 years of money", but some people also suffered contract losses and caused tragedies. We ushered in 2021 amidst the clamor, but fortunately we still have the freedom to choose.

The following is Wu’s blockchain year-end review "Boiling 2020" series 1: No matter how things change, the essence remains the same. Let’s first look at the two major engines of the industry: Bitcoin and Ethereum.

Recently, due to the SEC investigation of Ripple, all currencies except BTC/ETH have fallen sharply. These two mature decentralized cryptocurrencies have become more prominent because they cannot be regulated by the government. On the morning of the 26th, Beijing time, the price of Bitcoin broke through 25,000 US dollars, setting a new high.

2020 is coming to an end, and it is worth thinking and reviewing at this moment. Some people say that this year is a year of disaster, but hope often coexists with disaster. For the secondary market, this year is a long-awaited bull market.

The same is true for the cryptocurrency market. Bitcoin has experienced a low of three thousand and reached a new high of 25,000; the resurgence of DeFi and the implementation of Ethereum 2.0 have forced us to re-examine the value of Ethereum.

Let’s review the major events of Bitcoin and Ethereum in 2020 and look forward to the future. (The following data are all as of December 18)

According to Binance data, from the beginning of the year to date, Bitcoin has increased by nearly 218.88%, and the current price is fluctuating around US$23,000; Ethereum has increased by nearly 393.13%, and the current price is fluctuating around US$650.

Ⅰ. Black Friday, March 12

Due to the rapid spread of the COVID-19 pandemic, Western countries led by the United States underestimated the pandemic and their epidemic prevention policies were less than expected. The panic of a global economic recession spread and shook the global financial markets. No global financial market was spared and there was a consistent plunge.

The three major U.S. indexes all fell by more than 9%, triggering a secondary circuit breaker; the FTSE 100 index fell by more than 10%; and gold once fell below $1,600 an ounce.

According to Binance data, on March 12, the maximum drop of Bitcoin was 39.5%, and the maximum drop of Ethereum was 44.6%; on March 13, Bitcoin fell below $4,000, reaching its lowest point of the year at $3,782.13, while Ethereum fell below $100, falling to a low of $86.

Faced with the sudden plunge, major platform exchanges experienced server freezes and some even went offline for maintenance, causing a large number of futures investors to suffer heavy losses.

II. Bitcoin will experience its third halving on May 12

On May 12, Bitcoin experienced its third halving in history, with the block reward reduced from 12.5 BTC to 6.25 BTC. Each halving of Bitcoin has attracted much attention and anticipation, and historical trends show that the bull market of the cryptocurrency market has always been prosperous after the Bitcoin halving.

According to Binance data, Bitcoin closed at $8,810.79 that day, and is currently trading at about $23,000, an increase of more than 260%; Ethereum closed at $189.76 that day, and has increased by more than 340% to date. In addition, all major mainstream currencies have seen increases to varying degrees.

III. COMP starts liquidity mining on June 15, igniting the DeFi craze

On June 15, COMP launched liquidity mining, taking the lead in the development of the DeFi market. Subsequently, DeFi projects such as Uniswap, YFI, AMPL, and Sushiswap emerged on major trading platforms like mushrooms after rain, and the DeFi craze hit again.

Once a new DeFi project is launched, it can show its strong ability to attract money. Mainstream currencies with such high consensus, such as Bitcoin and Ethereum, are also inevitably sucked by the craze of DeFi.

Despite the short-term money-making, Ethereum is still the biggest beneficiary of the DeFi craze. Most DeFi projects are based on Ethereum to issue tokens. Ethereum, as the most common underlying asset in liquidity mining, has a high consensus and is easy to trade. In addition, the craze for liquidity mining will attract more funds to be locked in the Ethereum ecosystem, which will greatly consolidate the value of Ethereum.

According to the latest data from OKEx, the current locked market value of Ethereum is $19.20B, and the 24-hour trading volume is $1.69B, an increase of more than 10 times compared to June.

IV. Ethereum 2.0 will be officially launched on December 1

At 8:00 pm on December 1st, the Ethereum 2.0 Genesis Block was confirmed, and the long-awaited Ethereum 2.0 era officially arrived. The two biggest changes in Ethereum 2.0 are the adoption of the "beacon chain + shard chain" structure and the change of the consensus mechanism from PoW to PoS.

With the change of consensus mechanism, Ethereum mining will be more popular. The transaction volume on the chain and the computing power of the whole network have nearly doubled compared with the beginning of the year, maintaining rapid growth. On November 24, the last day of the effective pledge period, more than 300,000 ethers flowed into the deposit contract address, causing the beacon chain deposit progress to rush from 57% to 100% in one day. At the same time, the price of Ethereum broke through the $600 mark on the same day, setting a new high in 29 months, with the highest daily increase of 4.9%. It can be seen that the continued rise in the price of Ethereum has a lot to do with the advancement of Ethereum 2.0. With the value empowerment of the 2.0 era, the price of Ethereum is expected to further strengthen.

V. Entry of Institutional Investors

According to the latest data from qkl123, the BTC-Grayscale Trust holds 570,855 coins, and the ETH-Grayscale Trust holds 2,939,940 coins. Since the first purchase in June, the average daily increase in BTC-Grayscale Trust is about 2,970 coins, and the average daily increase in ETH-Grayscale Trust is about 15,310 coins. During the same period, the number of newly mined coins for BTC fluctuates between 1,000 and 15,000 to 25,000 coins per day.

In response to the negative impact of the epidemic, countries have implemented loose monetary policies. The flooding has accelerated the depreciation of fiat currencies, and mainstream cryptocurrencies led by Bitcoin and Ethereum, which have natural anti-inflation properties, have entered the field of vision of institutional investors. In addition to the Grayscale Fund, there are also traditional financial giants such as MicroStrategy (NASDAQ listed), Square (payment giant), Stone Ridge Holdings (asset management company), and PayPal (cross-border payment platform) that have announced the purchase of Bitcoin or other mainstream currencies. And with the growth of the Grayscale Trust Fund and the entry of traditional financial giants, more and more professional investors, wealthy people, and institutions are buying Bitcoin through the Grayscale Trust Fund, and even realizing arbitrage in the secondary market of US stocks.

The entry of institutional investors, especially giants of traditional financial institutions, sends a positive signal for mainstream cryptocurrencies led by Bitcoin, which will greatly enhance investor confidence.

2021 Bull Market Prediction

There is no doubt that we are now in a bull market cycle. There is no top in a bull market, and it is always difficult to predict the future. Below we will use some on-chain indicators to determine the current position, and compare it with the previous bull market to determine the future space.

I. BTC-MVRV Ratio

MVRV, the ratio of market value to realized value, is used to show the peaks and recessions of price cycles, helping investors discover the degree of deviation between Bitcoin's market value and realized value.

The current reading of the BTC-MVRV indicator is 2.83, which is about 60% of the highest level in 2017. The corresponding Bitcoin price still has nearly 4 times of room to reach the peak of the bull market in 2017.

II. BTC-VWAP Ratio

VWAP is an alternative to realized price when determining the average price the market pays for a token. This indicator can be used to find market tops and bottoms, with the global VWAP indicating the highest and lowest points in the macro cycle.

The current reading of the BTC-VWAP indicator is 2.57, which is about 58% of the highest level in 2017. The corresponding Bitcoin price has nearly 3.5 times the space from the peak of the bull market in 2017.

III. BTC-RVT Ratio

RVT is an abbreviation for the "Realized Value to Volume Ratio" and is a derivative of the MVRV ratio. RVT creates a useful signal for macro market tops and bottoms and can also be used to determine the stage the market is in between these two transition points.

The current reading of the BTC-RVT indicator is 0.0343, which is about 29% of the highest level in 2017. The indicator judges that the current price is still at the bottom and is very optimistic about the future price. The corresponding Bitcoin price has nearly 29.9 times the space from the 2017 bull market peak.

IV.BTC-Mayer Multiple

The Mayer Multiple is calculated by dividing the price of Bitcoin by the 200-day moving average of the price. It measures the current price of Bitcoin against the long-term historical price trend (200-day moving average), and it highlights situations where Bitcoin is overbought or oversold over a longer time frame.

The current reading of the BTC-Mayer Multiple indicator is 1.86, which is about 49% of the highest level in 2017. The corresponding Bitcoin price has nearly 11.5 times the space from the peak of the bull market in 2017.

V. BTC-Realized HODL Ratio

A high ratio indicates an overheated market and can be used to time cycle tops.

The current reading of the BTC-RHODL indicator is 4417, which is about 4.6% of the highest level in 2017. The corresponding Bitcoin price has nearly 13.6 times the space from the peak of the bull market in 2017.

Ⅵ.ETH-Jiang Zhuoer 60-day cumulative increase

"60-day cumulative increase" means that when a bull market reaches the end and market sentiment is fanatical, the bubble is serious, and the short-term currency price increase exceeds the speed at which new entrants and new funds enter the market, the bull market bubble will burst and a bear market will begin.

The current reading of ETH-Jiang Zhuoer's 60-day cumulative increase indicator is 57.04%, which is about 35.7% of the highest level of the 2017 bull market. The corresponding Ethereum price is nearly 2.7 times away from the peak of the 2017 bull market.

VII.ETH-Mayer Multiple

Measure current overbought or oversold conditions using the indicator's long-term historical trend.

The current reading of ETH-Mayer Multiple is 1.78, which is about 52% of the highest level during the 2017 bull market. The corresponding Ethereum price has nearly three times the space to reach the peak of the 2017 bull market.

The current major on-chain indicators show that the prices of Bitcoin and Ethereum still have a lot of room to rise in the future, but it should also be noted that the current speculative bubble is much smaller than in 2017. In 2021, there is reason to believe that more traditional institutions will deploy mainstream cryptocurrencies led by Bitcoin. (Special author: K Editor: Wu said blockchain)