Not a Bubble After All: Crypto Market Tops $330 Billion as Altcoins Follow Bitcoin to New Yearly Highs
Bitcoin’s gravitational pull on the broader cryptocurrency market was on full display Saturday, as altcoins and tokens benefited from a fresh burst of optimism about the future of digital assets. The Wall Street Journal credits the unveiling of Libra, Facebook’s new blockchain, as the principal catalyst for the renewed buying frenzy. In actuality, there are at least half a dozen other story lines propelling the market forward.
Crypto Market Cap Crosses $300 Billion
A broad view of the cryptocurrency market reveals an asset class that was worth as much as $334 billion on Saturday, the highest since June 2018. The market cap returned above $300 billion more than 24 hours ago and has since added another $34 billion. Compared with last week, the digital asset class is up nearly $60 billion.
At $334 billion, the cryptocurrency market has recovered 234% from its December low.
Almost all of the top 30 crypto projects reported gains on Saturday. Bitcoin was the primary catalyst: The largest cryptocurrency gained a whopping 13% and returned above $11,000 for the first time in 15 months.
Ethereum (ETH) crossed $300 on Friday for the first time since August and has gained another 7.5% to $308. The developer coin could hold the key to any future altcoin rally that is independent of bitcoin. Read more: Ethereum’s Catch-Up Game Could Spark the Next Major Crypto Rally.
After months of choppy trading, XRP was eyeing a big breakout on Saturday, as the price approached $0.50 for the first time since November. XRP’s price advanced 8.5% to $0.4718.
The performance of Litecoin (LTC) was much more contained on Saturday. The LTC price edged up 2.8% to $141.51, which was enough for a new yearly high.
Bitcoin cash (BCH) peaked above $460 before backtracking later in the session. At the time of writing, BCH was holding gains of 4.3% to trade at $449.
Not a Bubble After All?
Bitcoin’s performance over the past five months has some people questioning whether its previous peak was actually a bubble. Tom Lee of Fundstrat Global Advisors made an interesting observation on Twitter Saturday: If bitcoin regains its all-time high this year, it will only be 18-20 months removed from its previous peak. That’s not what traditional asset bubbles do.
Just an observation, but if $BTC re-attains its all-time high this year, it is only 18-20 months from prior high.
When a market re-attains a high so quickly, one could argue the prior high was not a bubble after all.
— Thomas Lee (@fundstrat) June 22, 2019
The Wall Street Journal reported Saturday that investors are buying bitcoin on the expectation that Facebook’s Libra project will bring digital currencies mainstream. While the debut of Libra may have helped, crypto markets had been rallying many months before the project was introduced. It wasn’t until May that investors had definitive proof that Facebook was actually going through with Libra after all.
Bitcoin (and hence the broader cryptocurrency market) has been rising for several other reasons as well. Like previous bull markets, bitcoin’s uptrend gathered pace roughly a year before the highly-anticipated halvening event. After May 2020, the reward for mining a single block on the Bitcoin network will fall to 6.25 BTC from the current rate of 12.5 BTC. Bitcoin’s forthcoming supply shock is expected to have a major impact on price. Read Bitcoin: One Year Out from Quadrennial Halvening, Get Ready for Chaos.
A clear rise in institutional demand, as demonstrated by Grayscale’s bitcoin investment trust, the planned launch of Bakkt and the role of Fidelity as crypto custodian, has also fueled the monthslong rally. Read: Four Major Developments in Crypto This Week Suggest Bull Market is Just Getting Started.
Behind the scenes, the Bitcoin network has seen a huge spike in hash rate and developer activity, both of which are bullish signs for the future of the ecosystem.
Let’s also not forget that bitcoin remains in heavy accumulation, with unspent transactions hitting multiple record highs. Something like 60% of all BTC in circulation has not moved in over a year, a clear sign that people are buying and holding the digital asset.
And as Hacked recently pointed out, the fear of missing out (FOMO) is becoming more intense now that bitcoin has crossed the $10,000. Ironically, many retail traders who wouldn’t buy BTC below $10,000 are rushing to get in on the action now that the psychological level has been breached.
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. Charts via CoinMarketCap.