VYSYN Ventures Weekly Insights #39
There’s been explosive upside movement for most cryptocurrencies since the beginning of 2021. After the initial surge of Bitcoin, the altcoin season seems to be upon us. Several projects are registering all time high (ATH) prices. Who or what is behind the current surge in the prices of cryptocurrencies?
The growth of any market is fueled by the economic forces of demand and supply. The difference between a sustainable growth and a bubble depends on what exactly is behind these forces at any given time. In this VYSYN release, we will be taking a closer look at some of the cryptocurrencies that have achieved significant price movements.
Our aim is to consider the driving forces behind the movements of some of the biggest cryptocurrencies. Such analysis will help us gauge the sustainability of the current market trend.
Bitcoin (BTC) Price Rise Fueled By $1.5 Billion Tesla Purchase
Bitcoin started to push upwards in the last quarter of 2020. Before Q4 2020, BTC price was trading in sub-$10k territory. By the end of 2020, Bitcoin price surpassed the previous ATH near $20k and entered uncharted territory.
With a few retracements along the line, Bitcoin price surged until it was above $42,000. This move by Bitcoin was mainly driven by the entry of mainstream institutional investors. After this move, price fell to sub 30,000 levels. On January 29, Elon Musk, the CEO of Tesla and the richest man in the world, edited his twitter bio to simply read #bitcoin.
In response to this development, Bitcoin headed upwards once again, moving close to the $40,000 mark. Further fuel was added when Tesla announced that it had bought $1.5 billion worth of Bitcoin. This news sent the market flying again with price recording a 19% daily jump on Monday. There is speculation that Musk’s actions and that of his company will attract more CEOs and corporations into the Bitcoin market.
Ethereum (ETH) Skyrockets as Staking Launches on Ethereum 2.0
Like Bitcoin, Ethereum began its journey towards it’s ATH in Q4 of 2020. The climb was gradual but steady until kicking up a gear in 2021. In the first week of January, Ethereum surged past the $1,000 mark. After this point, Ethereum continued to achieve a new ATH.
Ethereum’s surge has been largely attributed largely to the launch of Ethereum 2.0. Many believe this to be a more scalable, more secure, and more sustainable version of the Ethereum blockchain. Some believe that the impact of this upgrade is yet to be fully priced in.
Analysts have been particularly monitoring the ETH staking that is enabled by Ethereum 2.0. Validators on the platform who have staked their ETH will not recover them until phase 2 of the Ethereum 2.0 is launched. This will not happen until at least another year. This long-term “skin in the game” has attracted confidence and trust in the long-term prospects for Ethereum and ETH.
Dogecoin (DOGE) Driven By Elon Musk Tweets
Elon Musk has also shared his views on Dogecoin. There is no bigger influencer in the cryptocurrency marketplace than Musk. Musk has used his twitter account to make several posts in support of Dogecoin. On February 4, 2021, Musk tweeted a picture of a rocket heading to the moon, followed by another tweet solely sharing the word “Doge”.
He has followed this display with several positive tweets supporting Dogecoin, including a description of Dogecoin as “the people’s crypto”. American celebrity rapper Snoop Dogg has also joined in the promotion of the “fun crypto” with a number of tweets as well. In response to the bullish sentiment, Dogecoin achieved an ATH of ~$0.089. At the time of writing, the price of Doge has fallen to ~$0.065.
Binance (BNB) Breaches New Highs After Increased Adoption and Token Burn
The BNB utility token of the Binance platform crossed the $100 price for the first time this year. Since then, the cryptocurrency has surged unto higher prices, reaching an ATH of $148.07 in the process. At the time of writing, one BNB token is trading at ~$130.
Binance is the largest cryptocurrency exchange in terms of volume. The rise in the price of the BNB token has been driven by a few factors which includes adoption on the Binance exchange and BNB token burns. With more users trading on the platform and paying their fees in BNB, the token is finding more liquidity and demand.
On January 19, 2021, Binance destroyed a total of 3,691,888 BNB tokens. According to CZ, the pattern of token burns would be adjusted in the future. He indicated that a model that will speed up the burn process will be adopted. From a token economics perspective, a greater burn rate will increase the scarcity of BNB, and bullishly play into its valuation. However, market participants may already be pricing in after CZ’s comments.
Chainlink (LINK) Continues Upwards After Increased Mainstream Adoption
Currently ranked 9th on CoinmarketCap, Chainlink is another one of the projects that has registered impressive results in the price surge of 2021. The platform’s cryptocurrency, LINK, reached an ATH price of ~$36 close to the time of writing.
Chainlink is finding a strong use case, especially as more mainstream processes are trying to adopt and integrate blockchain protocols. Chainlink is a decentralized oracle network which aims to connect smart contracts with data from the real world. The platform provides an avenue for feeding data in smart contracts to blockchains from external feeds.
With the increased rise in mainstream protocols that are connected with blockchains, like decentralized finance (DeFi), projects like Chainlink are experiencing increased usage. This implies more adoption of their tokens which is directly reflecting in the price rise.
A Marketplace that is Driven by Emotion
A review of the Crypto Fear and Greed index reveals that investors sentiment is extremely bullish at the time of writing. This index takes into consideration a number of key measurable algorithms in the market and among investors. This involves the measurement of the volatility rate, momentum/volume, and other factors.
In order to make the most of the market, you need to understand what forces are driving your particular cryptocurrency of interest, putting into consideration the emotional state of investors at a particular time. With investor sentiment at all-time highs and renowned investors getting a piece of the action, the forces have been driving the market in one direction only!