Posted 12 months ago | by Ben Armstrong
Bitcoin Buying May Shift to Altcoins – if Rally is Intact
Bitcoin prices continue to rise. BTC traded as high as $9,300 USD over the last week, and it appears to be forming a base in the mid $8,000 USD range. At the time of writing, BTC is trading at $8,806 USD, and there has been little change in its price over the past 24 hours.
Bitcoin has been the leader among the major tokens, and there may be a shift happening. As the post-crash rally has matured altcoins like ETH and XRP have started to catch up to BTC. As BTC is thought of as the flagship token, this market action makes sense.
None of the major tokens have been able to rebound to the level they were trading at in February, but BTC may reach the $10,000 USD level in the coming weeks. If BTC is able to resist the downdraft that is starting in risk assets, altcoins may be in a good position to rally.
Bitcoin is the Anchor
It is easy to see that a strong market for BTC is a boon to the entire crypto sector, which makes ongoing BTC strength vital for the crypto complex. Ethereum prices have been able to retake the $200 USD level, and if there isn't a meaningful pullback in BTC prices, ETH could once again be knocking on the $300 USD level.
The real risk to the rally has nothing to do with cryptos, and everything to do with the established financial markets. The movement into cryptos by new investors is meaningful, but more important is the overall view of buying non-cash assets.
Crypto investors have flocked into stablecoins in the wake of the crash earlier this year, and this shows that while BTC prices are up, there is still a lot of nervous money that is on the sidelines. Many crypto bulls see this as positive for the rally, but it is also a warning sign.
Dancing on a Razor's Edge
Cryptos are one of many asset classes that have rallied hard over the last few months. Stocks and a few fiat currencies have appreciated strongly in USD terms, and many of these assets may be on the cusp of a big pullback.
The crypto crunch of 2020 wasn't the result of a fundamental shift in the nature of the tokens. Cryptos have become mainstream, and as such, are subject to the wider liquidity flows and investors' psychology in the global marketplace.
If we see another round of selling in so-called 'risk assets', Bitcoin could be sold right alongside the Aussie Dollar and S&P 500. On the other hand, if we see BTC break out of the 'risk-assets' category, it is possible that cryptos, in general, will keep on going up.