Crypto Weekly Review: Rise of the Small-Cap Cryptocurrencies; Clientless Bakkt Raises $740 Million
Bitcoin’s gravitational pull on other cryptocurrencies is gradually weakening. This week, another contingency of small-cap cryptocurrencies rocketed higher thanks to a combination of fundamental news and improving investor sentiment. Quietly, these lesser known cryptocurrencies pushed the market within 2% of yearly highs.
The rise of the small caps is important for several reasons, not the least of which is the aforementioned ‘decoupling effect’ between bitcoin and its peers. Basically, greater price independence between and among cryptoassets is a bellwether for a more sustainable market. As crypto winter drags on, investors need to start focusing on coins with real value and use cases. This means venturing beyond the top-ten.
Crypto Markets Approach Yearly High
The cryptocurrency market capitalization peaked near $142 billion on Thursday, its highest in nearly a month and within close proximity of the yearly peak. By Friday, most of the top 20 cryptocurrencies had reported weekly gains, with small caps like Tezos (XTZ) and Ontology (ONT) leading the rally.
Tezos spiked 71% this week after hardware wallet Bitfi confirmed it was adding XTZ to its list of supported cryptocurrencies. In an official Twitter post, Bitfi called Tezos a “very important smart contracts platform that delivers features that others cannot.”
Ontology’s native token surged more than 31% to extend its meteoric climb through the crypto market rankings. Now ranked 17th by total market cap, Ontology has jumped 14 spots this year. The enterprise blockchain solution decided to forgo the lucrative ICO model when it launched in 2017, opting instead to use free airdrops. That decision appears to be paying dividends now given the excitement surrounding the platform.
Among the more popular cryptocurrencies, Cardano (ADA) and bitcoin cash (BCH) were the week’s top performers. As far as Cardano goes, the native ADA coin jumped 17% this week following a successful ‘technical hard fork’ that puts the protocol on track to complete its next development phase. ADA is still valued at less than 6 cents.
Bitcoin cash rose nearly 14% during the week to reach a high near $160. The rally has cooled right around that level, as predicted by Hacked on March 16. If the price is able to push north of this level, then a re-test of the yearly peak ($175) is likely.
Bitcoin on Firm Footing
Bitcoin’s bullish case strengthened this week as the price pushed beyond a key psychological level. As Hacked reported Thursday, the bitcoin price traded above $4,000 on most major exchanges and even went as high as $4,141 on Bitfinex.
Although the rally has stalled, bitcoin continues to be on the right side of momentum, according to the relative strength index (RSI). Price action has also improved, with BTC pushing well north of the 50-day moving average. The leading digital currency has gained 2.4% over the past week, bringing its market capitalization north of $71 billion.
Despite the sustained push to the north, upside remains trapped below the December high tracking between $4,200 and $4,300. The bulls have shown a reluctance to trade above those levels even as trade volumes reached yearly highs. This may partly stem from the derivatives market, where smart money is shorting bitcoin at that level. Also read Bitcoin and Derivatives: Why $4,200 is So Critical.
Bakkt Goes Big
Despite not having any clients, Intercontinental Exchange’s Bakkt cryptocurrency platform has raised $740 million in Series A funding, a sign that investors are betting big on the new initiative designed to take bitcoin mainstream. The information was disclosed to crypto news outlet The Block via anonymous source.
The quoted figure is more than four times higher than the reported $182.5 million haul Bakkt raised at the end of last year. More than a dozen high-profile investors and venture capital firms contributed to the new startup. Some of the names included Boston Consulting Group, Goldfinch Partners, Alan Howard and Microsoft’s Horizons Ventures.
“Our work today is centered on driving institutional access for digital assets, along with merchant and consumer uses, and we’re already expanding on this vision, collaborating with great companies like Starbucks in these efforts” – Bakkt CEO Kelly Loeffler (December 2018).
Bakkt was supposed to launch its bitcoin futures operation in December but a series of regulatory hurdles has pushed that date back. With high operational costs, the platform needs a huge influx of volume to generate meaningful returns for its investors. The platform’s backers are betting big that physically-settled bitcoin futures and crypto payments represent a huge revenue opportunity.
Bitcoin futures have already proven to be popular, as evidenced by the rapid growth of BitMEX, a leading derivatives platform. A private email from CME Group also showed record uptake in bitcoin futures at the start of 2019.
The Week Ahead
The path out of crypto winter is paved with obstacles, but there are tangible signs that the worst of the bear season has passed. At $140 billion, crypto markets have recovered $40 billion from their December lows. A gradual decoupling between bitcoin and its alternative peers suggests market participants are using greater discretion when deciding which projects to back.
While Bakkt’s entry into the crypto arena has been significantly delayed, the amount of institutional money flowing into the project has surpassed expectations. Rest assured that the company’s backers are expecting to turn a handsome profit on the new crypto venture, which means they believe in the business case and in the long-term value proposition of bitcoin. For investors, this information should give them greater perspective when managing short-term fluctuations with long-term expectations.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.