This article was written exclusively for Investing.com
- Collapse in April and May
- Consolidation and recovery
- An approach to the midpoints
- Three factors supporting cryptocurrencies in early September
- Highest highs in late 2021
In recent years, the burgeoning asset class of cryptocurrencies has provided market participants with a wild and volatile journey. The rise of in the last decade has given a new meaning to the term bull market. El, the second largest cryptocurrency, has also been a bullish beast.
Cryptocurrencies reflect a libertarian philosophy that takes the power of money away from governments, central banks, monetary authorities, and supranational and private financial institutions to give it back to individuals. The prices come only from the offers and demands of the market.
Recent price developments could mean that bitcoin and ethereum will hit new highs in the coming weeks and months. The market capitalization of the overall asset class could reach new highs by the end of 2021.
Collapse in April and May
They hit all-time highs at $ 65,520 on April 14, the day the Coinbase (NASDAQ 🙂 Global cryptocurrency market went public on the NASDAQ. The new highs for the cryptocurrency have been driven by the events of recent years.
When futures burst onto the scene in late 2017, the leading cryptocurrency rose above the $ 20,000 level for the first time. Since Coinbase is a liquidity and execution-enhancing trading platform, the listing pushed the price to its latest highs.
Source of all charts: CQG
The weekly chart highlights bitcoin’s correction to lows of $ 28,800 per coin during the week of June 21.
For its part, the second most important cryptocurrency took longer to reach its maximum, but like bitcoin, it registered lows at the end of June.
The weekly chart shows that ethereum futures hit highs of $ 4,406.50 in mid-May before hitting lows of $ 1,697.75 during the week of June 21.
Both bitcoin and ethereum more than halved in value as parabolic rallies turned into steep falls.
Consolidation and recovery
From May to early August, bitcoin consolidated and took in the wild price action, trading the price mostly below the $ 40,000 per coin level.
The daily chart illustrates the consolidation with a bearish bias until the end of July.
Ethereum’s consolidation was shorter, with the price hovering below the $ 2,440 level until the end of July.
An approach to the midpoints
In recent weeks, both cryptocurrencies have recovered. The midpoint of the bitcoin and ethereum trading ranges since the April and May highs is $ 47,160 and $ 3,052,125, respectively. At the end of last week, bitcoin was at the $ 48,000 level, and ethereum was at $ 3,220. Bitcoin and Ethereum made a 50% retracement of the movements.
Meanwhile, on August 23, bitcoin broke above the $ 50,000 level for the first time since mid-May. Ethereum surpassed $ 3,000 per coin on Aug. 9 for the first time since May 17, hitting highs of nearly $ 3,390 on Aug. 23.
Three factors supporting cryptocurrencies in early September
The market capitalization of the cryptocurrency asset class was back above the $ 2 trillion level at the end of last week, so the bulls are back in control. There are three factors that continue to favor the rises of bitcoin, Ethereum and many others of the more than 11,460 digital currencies in this asset class.
- Inflationary pressures continue to mount due to the Fed’s monetary policy and US government fiscal stimulus. Although the central bank begins to reduce its quantitative expansion program, the government is about to approve trillions in infrastructure and other spending initiatives. The rise in prices of all asset classes is bullish for cryptocurrency values.
- The faith and credit given to fiat currencies continues to erode. People keep losing faith in government officials. The governor of New York State recently resigned after falling from grace. The governor of California faces an election in mid-September. Polls show a decline in support for the Biden Administration following a series of political blunders. Cryptocurrencies embrace a libertarian ideology that shifts control of the money supply from the government to individuals. As faith and credit in the dollar, euro, and other reserve currencies wane, cryptocurrencies become an alternative.
- America’s withdrawal from Afghanistan has been nothing short of a disaster. It took 20 years, trillions of dollars, four presidents and many lives to replace the Taliban with more Taliban. Tens of thousands of people, or more, are trying to flee the brutal regime with the deadline looming this week, August 31. Many are leaving with only the clothes they are wearing. The lucky ones who have their savings in cryptocurrencies can transport their wealth on a USB drive or access it abroad with a strong password. Cryptocurrencies transcend borders and have become the flight capital instruments par excellence.
The collapse of Afghanistan and the return of the Taliban are a defeat for the United States and NATO allies. The lives of those left behind are in danger. The foreign policy consequences are substantial and could boost and accelerate movements by China and Russia. China’s plans are to reunify with Taiwan, which they consider to be part of China’s sovereign territory. Russia could use US foreign policy and perceived military weakness as a reason to increase its sphere of influence in Ukraine and other former Soviet bloc countries.
Hostile regimes in North Korea and Iran are likely to use the situation to provoke the United States and its allies in the coming months and years. Furthermore, Afghanistan is once again an area where terrorist groups can flourish. Last week, a terrorist attack killed a dozen US troops and many civilians.
Those who fear political changes and outbreaks of violence in their countries are likely looking to cryptocurrencies for a way to protect and transport their wealth in times of turmoil.
Highest highs in late 2021
I believe that bitcoin, ethereum and the cryptocurrency asset class will hit highs in late 2021. However, there are risks in this highly volatile asset class.
At a cybersecurity summit of US tech companies and financial institutions held at the White House on Aug. 25, assistant CEOs called on the president to crack down on cryptocurrencies. Cryptocurrencies have become the favorite monetary instruments of hackers and those asking for ransom.
Meanwhile, the role of digital currencies as flight capital in a dangerous world could outweigh any effort to control the global cryptocurrency asset class. I think that capital flight is now one of the most compelling reasons for people around the world to keep at least some of their wealth in the form of digital currencies.