Despite Nasty Headlines, Bitcoin’s Relentless Surge Continues; Can Altcoins Keep Up?
Bitcoin’s momentous rally touched new yearly highs on Friday, as the largest cryptocurrency continued to see steady accumulation despite a raft of negative headlines that include a $40 million Binance hack, possible litigation against Bitfinex and a bitcoin-bashing Democrat who thinks digital assets should be banned.
For the first time since the rally began, bitcoin and its altcoin peers are diverging wildly. With the exception of Ethereum (ETH), all major coins registered weekly declines, with some even posting double-digit drops.
Bitcoin: $6,000 and Beyond
Bitcoin’s price reached a significant milestone this week by clearing $6,000 for the first time since November. During the depths of crypto winter, a return to this psychologically and materially important level seemed highly unlikely – at least, in the short term.
The milestone was officially reached late Wednesday or early Thursday, depending on your time zone. Bitcoin cleared $6,000 swiftly en route to new highs north of $6,100. On Friday, that rally continued, with BTC’s average price peaking at $6,353.80, according to CoinMarketCap.
For the week, bitcoin has gained more than 9%. Over the past 30 days, prices are up nearly 20%. Since 2019 began, we are looking at a price gain of 64%.
Bitcoin’s performance has far exceeded that of its altcoins peers. As a result, it now accounts for 58% of the overall cryptocurrency market. That’s the highest level since September.
Altcoins Struggle to Keep Up
Large-cap altcoins were the primary architects of the early crypto rally, with the likes of Litecoin (LTC), bitcoin cash (BCH) and Binance Coin (BNB) doubling, tripling and even quadrupling in price through the first four months of the year. But things have changed in recent weeks as these and other coins faced a downward correction. This is not unsurprising given the pace and intensity of the previous rally.
With the exception of bitcoin, Ethereum and bitcoin SV (BSV), all major cryptocurrencies registered weekly losses. Double-digit declines were reported in some cases, with Stellar (XLM) and Cardano (ADA) falling more than 10%.
Excluding bitcoin, cryptocurrencies lost more than $3 billion in market cap this week. They are presently valued at $80.7 billion.
The overall market cap, which includes bitcoin, peaked at $193.5 billion on Friday, a new yearly high.
Binance Hack: The Aftermath
The crypto rally took a brief pause earlier this week after Binance, the world’s largest digital asset exchange by volume, confirmed that a group of hackers successfully stole $40 million worth of BTC from clients’ hot wallets. Binance CEO Changpeng Zhao (CZ) was very frank about the matter in a series of Twitter posts, where he admitted to glaring infrastructure weaknesses that would be resolved immediately.
Binance has pledged to “significantly revamp” its security following the attack, which includes making major changes to the “API, 2FA, and withdrawal validation areas,” CZ wrote in a blog post on Friday.
Binance Coin, the exchange’s native token, took a beating following the security breach. The coin fell more than 17% for the week and is currently trading below $20.
U.S. Democrat Wants to Ban Cryptocurrency
Crypto investors were startled on Friday by headlines that a Democratic Congressman was urging his colleagues to consider a blanket ban on digital assets. Brad Sherman of California wants to introduce a bill to “outlaw cryptocurrency purchases by Americans, so that we nip this in the bud.”
The remarks were delivered on Thursday during a meeting of the House Financial Services Committee.
In Sherman’s view, crypto advocates support bitcoin because they want to disempower the United States on matters ranging from foreign policy to tax collection enforcement.
“So whether it is to disempower our foreign policy, our tax collection enforcement or traditional law enforcement, the advantage of crypto over sovereign currency is solely to aid in the disempowerment of the United States and the rule of law,” Sherman said.
Crypto is a sticky subject for U.S. regulators but not usually for the matters Sherman discussed. Regulators have come down hard on initial coin offerings (ICOs) because issuers were trying to sidestep securities regulations by claiming these assets are not investments. To date, the only digital assets that are not classified as securities are bitcoin and Ethereum because they are “sufficiently decentralized,” according to the U.S. Securities and Exchange Commission.
Things to Consider
Some analysts like to argue that bitcoin isn’t in a bull market, but rather a prolonged accumulation phase. The difference largely boils down to semantics at this point.
Since bottoming in December, bitcoin’s price has more than doubled and the cryptocurrency market as a whole has appreciated some $93 billion from its low. Market sentiment has clearly shifted, and this was well understood as early as January.
While the path of least resistance appears to be higher at this point, traders shouldn’t discount the strong possibility of major shakeouts in the coming months. This is perfectly normal and consistent with bitcoin’s previous cycles (bullish, bearish or otherwise). For long-term investors looking to capitalize on the four-year cycle, these price fluctuations won’t matter much. After all, if you are looking at a 20x or 50x return, there’s no sense getting lost in the weeks of daily price action.
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.