What To Expect From Bitcoin And Ethereum In The Near Future

Whenever one thinks of Bitcoin, a plethora of thoughts may come to mine. The proponents of the technology see it as digital gold that serves the purpose of acting as a vehicle to store value or alternatively a medium of digital cash exchange on a peer-to-peer (P2P) basis. 

While the group of detractors simply see it as a bubble with no real intrinsic valuation or potentially a technology with great innovative merit but hard to fulfil its promises due to the scalability constraints. Regardless of the opinion one has of BTC, sufficient factual evidence 10 years into its existence has proven that the digital asset has amassed the most capitalization due to its merits as first-mover advantage and its ability to stay true to an ideology. 

And as the crypto market keeps maturing, parallels continue to be logically drawn to see BTC as holding the crown as the world’s reserve digital currency, the same way the USD has dominated the landscape to park capital since the Bretton Woods Agreement back in 1944. 

Traditional markets at a key juncture

Traditional finances have reached a perilous crossroads with the unorthodox policy experimentations orchestrated by central banks not yielding the desired results and the ammunition to keep pumping global economies running thin, with a pool of over $15 trillion negative-yielding bonds around the world, with a race to the bottom in currency wars, and don’t get me started on the dangerous record high valuation in stocks, Brexit, trade wars, etc.

Raoul PAL, Founder at Global Macro Investor and Real Vision, one of the must-follow voices in the macro investment space, puts it best, noting that

“We are at one of the biggest junctures for markets in history. You may disagree with my assessment of the odds. It doesn't matter. But you simply cannot ignore the risk. Bonds. Dollars. Bitcoin and Gold are the alternatives.”

His series of tweets elaborating on the bleak state of affairs that favor Bitcoin is absolute gold. 

All these factors mentioned above are setting the stage for protracted instability/uncertainty in traditional markets, which is simply music to the ears of Bitcoin maximalist, as we’ve come to a juncture where there is an imperial need to start diversifying portfolios. And it’s precisely these 10 flawless years since the inception of Bitcoin core, with blocks minted day in and day out unperturbed, that has built the perception amongst mainstream investors to accept the digital asset as a valid alternative to diversify into the appeal of an asset that has proven uncorrelated, which is a massive gift for the large capital looking to lower a portfolio’s volatility. 

As this momentum in Bitcoin builds up, contributing factors aiding to its rally against its main rival Ethereum keep piling in. Most notably, global investors are coming to grips that as global economies agonize with slow growth numbers, it's going to get a whole lot worse as the US-China trade war is rapidly morphing into a currency war. 

The fear is that with the Chinese now officially weaponizing its Yuan exchange rate to get a competitive advantage to offset the US tariffs, a mass exodus of capital out of China and Hong Kong will ensue, with early tentative signs suggesting Bitcoin will act as a shelter for this capital.

Ethereum overwhelmed by Bitcoin’s excess of demand

The upper echelons achieved in the digital trading world by BTC have relegated to a secondary pedestal the rest of digital assets, also known as Altcoins, with Ethereum the undisputable asset that acts as a proxy to read the overall Alts complex sentiment. The difficulties of ETH to circumvent the hurdles of its limited scalability capacity until the ‘Serenity’ upgrade in early 2020, alongside the absence of a dominant status as BTC, has really taken its toll in the appeal that currently exists towards ETH and the overall altcoins space as BTC rules the leaderboard.

This sentiment towards accumulating Bitcoins as opposed to the rest of crypto assets (Alts), including Ethereum, in terms of market dynamics, is described as a BTC cycle. And right now, Bitcoin is sizzling hot as the pick of choice to add into one’s portfolio. The chart below, which looks at the total market dominance by market capitalization, speaks for itself. 

It is now almost 10 times as capitalized than Ethereum, which is a clear statement of intention as to what asset is currently king of the crypto space.

By checking this next chart, it’s clearly visible that the current crypto dynamics are such that for the most part of 2019, with a pronounced acceleration since mid-June, BTC/ETH has been decimated by trading over -40% from its highs about 2 months ago. The chart is even breaching the lower end of its trading channel, which is a clear testament of the bullishness in BTC. 

If one turns the focus to the chart of the top 125 altcoins by market cap against BTC, an analogous picture emerges, with the rate of depreciation picking up at an alarming pace. From the highs of the year, the altcoins complex have lost over 50% of its value versus the King of cryptos. 

Bitcoin in pole position to embrace new tsunami of capital 

What this means is that, hands down, the market has determined that in the crypto space, BTC is currently the favorite investment to allocate one’s chips as the pool of capital drawn to invest in the digital assets expands. Proof of that is the surge in Google search trends for the term Bitcoin, which has overcome stocks in the finance category, which is the first time it has happened since the crypto boom of 2017, suggesting interest is building up again. 

This is also the year when institutional capital is finally setting up all the infrastructure necessary to embrace the crypto space. From JPMorgan announcing its JPM Coin for interbank payments ($6 trillion/day), Facebook with the intention to launch its digital currency project Libra, custodian ships solutions such as Fidelity. Besides, the opening of Bitcoin futures platform Bakkt, which is gearing up to launch soon to develop a regulated ecosystem of physically settled bitcoin futures, represents a milestone to access the trading of Bitcoin. TD Ameritrade, and E-Trade are not far behind. Throw into the mix the potential approval of the first BTC ETF down the road, and the future is definitely looking bright to see further adoption = capital into BTC.  

Even the ephemeral bearish sentiment by BTC getting hit because of all of the heat being poured on Facebook’s Libra coin has rapidly dissipated. The fear of government pushback and regulators stepping up to the place with sweeping new regulations to undermine cryptos is not stopping Bitcoin this time. Since the 2019 rally began back in April, the amount of negative headlines that Bitcoin has managed to duck has been nothing short of epic, from the ban of crypto trading in India or the hacking of Binance’s Bitcoins just to name a few. Remember, when an asset discards negatives news, that’s very revealing of the current market sentiment.

So far in 2019, the declaration of intent by the market is unambiguous, the allure to invest in Bitcoin is far exceeding the interest drawn by Ethereum, which tends to average about six-months before catching up. For now, we are in a clear BTC cycle after exiting an 8-month bear cycle and amid the bleak backdrop, traditional investors are starting to recognize that there is a new kid (BTC) on the block (pun intended) to respect.  

About the author:

As Market Insights commentator at Global Prime, Ivan Delgado provides regular market commentary that is applicable, actionable and insightful. Our ultimate aim at the brokerage is to make each one of our clients feel special and cared for. 

Disclaimer: the article is for informational purposes only and does not guarantee a return on investment. Readers invest at their own risk. Bitnewstoday authors and editors are not responsible for the readers’ actions.

Image courtesy of Cryptonewsz