When altcoins will go up
On the morning of May 22, the Bitcoin rate reached a new historical maximum at $111,726 on the Binance exchange. Experts named institutional demand for the main cryptocurrency as the reason for this movement, noting the weakness of the rest of the crypto market, while “the Bitcoin price is being formed” at new levels, writes RBC Crypto.
“As Bitcoin continues to set its price, it is absorbing much of the market’s liquidity. We are likely to see strength in individual altcoins and sectors rather than a broad rally,” Mena Theodorou, co-founder of Australian crypto exchange Coinstash, told Decrypt.
Over the past 24 hours, Bitcoin has grown by 3.5% to $110.6 thousand, according to Coinmarkecap as of 12:30 Moscow time, outpacing almost 50% of other cryptocurrencies from the list of the 100 largest by capitalization. The overall crypto market by capitalization has grown to almost $3.5 trillion, which is comparable to Bitcoin's growth.
But for altcoins (any cryptocurrency other than Bitcoin) to start a general rise in prices, Bitcoin’s rise to historical highs is not enough. Reece Hobson, an analyst at the brokerage company eToro, noted two key events that are necessary for the alt season to begin:
- the process of quantitative easing by the US Federal Reserve System (Fed) should begin. This will allow “more liquidity to be injected into the system”;
- Bitcoin's dominance in the crypto market should reach 70%.
What drives Bitcoin
Many experts agree that the movement of the Bitcoin price to new records is due to institutional demand.
“Unlike previous bull runs, the rally is likely driven by institutional and long-term capital rather than retail speculation,” Presto Research analyst Min Jung told The Block, noting the importance of bitcoin accumulation strategies by companies such as the largest corporate bitcoin holder Strategy and Japanese investment firm Metaplanet.
This argument was supported by Hobson, who pointed to net inflows into U.S. exchange-traded funds (ETFs) in May of more than $2.8 billion, bringing total assets under management by ETF issuers to more than $122 billion.
Bitcoin spot exchange-traded funds (ETFs) provide investors with legal access to the cryptocurrency through the NASDAQ and NYSE exchanges in the form of shares. The issuance of new shares requires the funds to actually deliver (purchase) Bitcoin. Demand from such ETFs has provided the crypto market with a significant influx of capital and has become a driver of its growth in 2024.
“Bitcoin’s move was driven by a combination of positive momentum, growing optimism about cryptocurrency regulation in the U.S., and continued interest from institutional buyers,” James Butterfill, head of research at crypto asset manager CoinShares, told CNBC.
Butterfill cited the country's credit rating downgrade by Moody's as another reason why Bitcoin was able to break a new price record.
In mid-May, the international rating agency Moody's downgraded the US credit rating from AAA to AA1 due to concerns about the growth of the national debt. They expect the national debt to grow to approximately 134% of US GDP by 2035, compared to 98% in 2024. In the crypto community, it is generally accepted that the increase in US national debt directly correlates with the growth of the price of Bitcoin. Historically, since the creation of Bitcoin, both indicators have had a high correlation: as the US debt grows, so does the price of the main cryptocurrency.
“The rally was also fueled by broader macroeconomic concerns, including the recent downgrade of the US credit rating by Moody’s, which strengthened Bitcoin’s position as a hedge against currency instability,” Butterfill said.
Источник: cryptocurrency.tech
