As the cryptocurrency market has been sideways for three weeks, this article explains the rising momentum of BTC and other five major cryptocurrencies

Text | Cheng Zhipeng

Produced by | Mars Finance (ID: hxcj24h)

Recently, mainstream currencies, led by BTC, have shown a slight fluctuation. Starting from February 8, the price of BTC began to rise sharply, from the then $3,300 range, to the highest of $4,202 on February 23, and then fell like a guillotine, ending the upward trend. Since then, the price of BTC has hovered between $3,650 and $3,950 for three consecutive weeks.

The sluggishness of BTC market has led to a strong wait-and-see attitude in the market, but judging from the trading volume of mainstream coins in February, BTC still has the opportunity to rise, and even usher in a small bull market, the reason for which has been verified in historical market conditions. Other mainstream coins still have the opportunity to rise with Bitcoin even if the fundamentals are not optimistic.

BTC

February saw the highest BTC trading volume in a year, with BTC trading pairs generating nearly $206.37 billion in volume over the past 30 days. The increase in volume was due to BTC's price rising to $4,000 in mid-February before retreating in sideways trading. BTC trading volume increased 34% month-on-month.

From the perspective of market performance, the maximum increase in BTC price is only 25%, while its transaction volume is 200 billion US dollars. Considering the substantial increase in transaction volume and the fact that it is the largest transaction volume among all digital currencies, the increase seems relatively weak. However, from another perspective, this is a good thing for BTC.

The reason why BTC's trading volume increased significantly but its price did not rise significantly is that many traditional investment institutions formed a chip replacement effect in the process of gradually intervening in BTC. Therefore, BTC's trading volume increased by 34% but did not form a rapid rise in the market.

Two points need to be explained in detail here: First, how can we judge that many institutions are involved in BTC? Second, why did the intervention of institutions not immediately increase BTC?

According to Coindesk data, venture capital in the blockchain field increased by 257% year-on-year in 2018, reaching a total amount of US$3.1 billion for the whole year.

The overall digital currency market was in a bear market in 2018, especially in the three major Chinese-founded exchanges, Binance, OKEX, and Huobi. More than 99% of new projects broke their issue prices and fell sharply, and many projects even went to zero. However, zero-coins did not sweep many institutional investments, but rather harvested leeks in the secondary market. Many institutional investment projects were not even listed on exchanges, so the influence of investment funds is still there and is waiting to be exerted in the future market.

In addition, at the end of 2018, Nasdaq first confirmed that it would launch BTC futures in the first half of 2019. This event actually has a greater long-term impact on the BTC market. Bakkt, a digital asset exchange launched by Intercontinental Exchange, has completed a financing of US$182.5 million. The settlement model of this exchange has a greater impact on the spot market. If it goes online, it will also have a certain impact on the liquidity of BTC. Recently, JPMorgan Chase issued the Morgan Coin, and rumors that Facebook may issue coins have also attracted the market's attention to digital currencies, so the number of traditional financial institutions entering Bitcoin has increased.

As for why BTC did not start to rise after the institutions intervened, but was in a market of shock and wash, on the one hand, the reason is that BTC chips are relatively dispersed, and it takes a long time for institutions to intervene. The more important reason is that it is not yet the best time to pull up.

From the historical market, each time BTC production is halved, a round of price increase cycle will start one year before. Specifically, in November 2012, BTC production was halved for the first time, and the number of BTC generated per block was 25. In November 2011, the price of BTC had already bottomed out and started a wave of increase. In July 2016, BTC production was halved for the second time, that is, the number of BTC generated per block was 12.5. In August 2015, the price of BTC had already bottomed out.

History has proven that as long as this matter begins to enter the foreplay, BTC will rise!

According to the historical market trend, the next BTC block will be generated in May 2020. It is expected that between the end of April and May 2019, the price of BTC will bottom out again and start a wave of rise, which will be a good time to buy.

ETH

ETH has traded $104.46 billion worth of Ethereum in the past 30 days, with monthly trading activity reaching a 2018 high. ETH trading volume increased by 34.40% month-on-month.

From the previous market performance of ETH, the maximum increase in February was 70%, and the increase in ETH's trading volume was not much higher than that of Bitcoin. On this basis, if we observe the market trend of ETH, there is a sense of price-volume divergence. That is, the current price has risen sharply, but the trading volume has not matched it.

The biggest problem facing ETH is that its largest application scenario is ICO, and the bear market in 2018 objectively declared the failure of the ICO model. Due to its lag problem, it is less competitive in the DAPP field than public chains such as EOS and TRON, so the space for value investment is limited.

However, according to a report published by Delphi Digital, a digital asset research company in New York, ETH's 90-day beta coefficient relative to BTC has reached 1.5. In recent times, ETH has generally followed the price trend of Bitcoin. For most of the past 18 months, ETH's volatility was greater when BTC prices fell than when BTC prices rose. However, ETH's beta coefficient began to increase when it rose. This means that if the market rebounds, ETH may rebound more than BTC.

This speculation is not without reason. When the market was rising, ETH's increase was obviously higher than BTC. In short, although the commercial value of ETH has been getting lower and lower, it does not affect its increase when it rises and falls with BTC. Of course, it may also fall more sharply.

EOS

In February, EOS was the fourth most traded cryptocurrency for the fifth consecutive month. $33.22 billion worth of EOS was traded in the past 30 days, with trading activity up 54.75%. February was EOS’s strongest trading month since May 2018.

EOS's previous rise was also very strong, with an increase of more than 120% from a low of 2.1 to a high of 4.5. From its fundamentals, although EOS has more application space than Ethereum, it also has a huge shortcoming, that is, the high cost for DAPP developers to use EOS. In 2018, many public chain projects entered the blockchain industry, and they will gradually start to launch the main network in 2019. As they begin to gradually expand the market, if EOS still cannot make better achievements in cost issues, its competitiveness will become weaker and weaker in the future.

Judging from the market changes, the price of EOS is also converging with BTC, but the beta coefficient seems to be higher than BTC. Therefore, EOS may also deviate from fundamentals and follow BTC's surge and plunge.

LTC

Litecoin (LTC) was the fifth most traded crypto asset in February, with $32.85 billion worth of Litecoin traded. LTC’s volume increased 93.58% month-over-month, making it the strongest trading month since Q1 2018.

The trading volume of LTC increased significantly in February. Compared with other mainstream currencies, this increase is quite significant and deserves special attention.

In fact, LTC was the leader of the overall rise in the digital currency market in early February, and the rise of LTC led to the rise of the entire market. The reason for the rise of LTC is that in a blog post on February 7, the non-profit organization Litecoin Foundation revealed that it was negotiating with the privacy-focused developer Beam project to provide extension blocks on the Litecoin network. To upgrade Litecoin to a privacy coin.

In addition, Litecoin is expected to halve in August 2019. Its block reward will be reduced from 25 LTC to 12.5 LTC. As the output is halved, the mining cost rises, while the chip supply speed decreases. The reduction in supply may lead to an increase in price, so the returning funds choose to join Litecoin, thus stimulating the rise.

The privacy coin trend is the direct reason for Litecoin's rise, and the expectation of future production cuts has some help to the market, but it is relatively weak. In the subsequent LTC rise, although the trend is also similar to BTC, it has set a new high in the future market and the trend is stronger.

This situation has a lot to do with the previous sharp increase in LTC trading volume. In the previous article, when we analyzed BTC, we emphasized the view that BTC has institutional involvement. LTC has similar properties to BTC, but its market value is smaller and it has not received much attention before. If we use the stock market as an analogy, LTC is a second-tier blue chip stock and is easily favored by institutions. Therefore, LTC will continue to attract money in the future.

BNB

BNB entered the top 20 within a year, with a trading volume of 2.84 billion US dollars in February. Although the trading volume is not at the top, BNB, as a platform currency, is worth paying attention to recently. The reason is that Binance Exchange has achieved great success in raising funds for projects through the IEO model. IEO (Initial Exchange Offerings) is a token issuance based on the exchange. The token skips the ICO step and goes directly to the exchange. The IEO model ties the interests of the exchange and the project, requiring the exchange to ensure that each project launched must be high-quality and reliable, otherwise the price of its own platform currency will be greatly affected.

The Binance IEO model is currently very successful in the market, and many exchanges want to imitate it. However, the biggest weakness of the IEO model for exchanges is that if the launched projects experience a sharp drop in prices, it will be difficult to continue. Some exchanges may not have malicious intentions to cut leeks, but the launch of contract trading has attracted a large number of speculative traders, increasing market instability. Therefore, although the IEO model is good, it does not have the conditions for a user group to be copied. Binance did not open a contract business before, and most of the users gathered were value-oriented and had relatively stable trading behaviors, so it was able to support the development of the Binance IEO model, which brought great competitive advantages. Therefore, BNB also has great growth potential and deserves continued attention.

Conclusion

Taking stock of the possible changes in the future market of these five major mainstream currencies may not provide the most direct support for immediate transactions. Such an interpretation cannot allow investors to guess whether the market will rise or fall in a short period of time. More importantly, if the logic of market transactions gradually becomes clear, the direction can be clear, and the value growth can be determined in a longer period of time, then short-term market changes will no longer have a significant impact on investors' psychology and behavior. If you want to continue to be bullish in the future, you can have a reasonable and reliable reason. The more you click, the better!