Market commentary
Over the past three months, the upward trend of Bitcoin (BTC) has accelerated. The primary driver of this price surge has been the anticipation of the approval of the first Spot Bitcoin ETF in the USA. The deadline for the decision by the US Securities and Exchange Commission (SEC) is this Wednesday. Due to numerous discussions between the SEC and applicants, Bloomberg analysts estimate the likelihood of approval at 95%.
Bitcoin BTC/USD (daily) / Charts: Tradingview
However, since mid-December 2023, Bitcoin has been in a consolidation phase. The majority of buying pressure came from the United States, both through the CME Exchange and various investment products. This highlights that the recent rally is primarily attributed to the expectation of the ETF.
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Altcoin investors become more defensive
While Bitcoin experienced consolidation throughout December, alternative cryptocurrencies (altcoins) saw a significant upswing. Signs of market exhaustion became apparent at the beginning of the new year. Some investors have positioned themselves more defensively, anticipating a classic "Buy the rumor, sell the news" scenario.
Solana SOL/USD (daily) / Charts: Tradingview
The market favorite Solana (SOL), for example, corrected by -28.55% since the Christmas highs. Other Layer 1 Blockchains like Sei (SEI), Injective (INJ), or Avalanche (AVAX), which showed significant market strength in recent weeks, also moved around -30% downward. Most popular meme coins like Bonk Inu (BONK) experienced declines of over -50%. In contrast, Bitcoin has been trading at a similar price level for a month.
Ethereum continues downward trend against Bitcoin
The relative market weakness of altcoins is also reflected in the relationship between Ethereum and Bitcoin (ETH/BTC). Since the long-awaited transition to proof of stake (merge) in mid-2022, ETH/BTC has been in a relentless downtrend. Currently, the ratio is at levels only seen prior to the previous 2020/21 bull cycle.
Ethereum vs. Bitcoin ETH/BTC (weekly) / Charts: Tradingview
One reason for this could be the strong narrative of the Bitcoin ETF. However, the situation for Ethereum (ETH) could change after the approval. After all, the second largest cryptocurrency by market capitalisation remains interesting for institutional investors as a deflationary asset. In November, the world's largest asset manager, BlackRock, filed for a spot ETF on ETH. The deadline for this is the second half of 2024.
Disclaimer
All information in this publication is provided for general information purposes only. The information provided in this publication does not constitute investment advice and is not intended as such. This publication does not constitute and is not intended as an offer, recommendation or solicitation to invest in any financial instrument, including cryptocurrencies and the like. The contents contained in the publication represent the personal opinions of the respective authors and are not suitable or intended as a basis for decision-making.
Risk notice
Investing in cryptocurrencies, is fundamentally associated with risk. The total loss of the invested capital cannot be excluded. Cryptocurrencies are very volatile and can therefore be exposed to extreme price fluctuations in a short period of time.
