By
Temitope Olatunji
April 18th, 2024
Cryptocurrency market shows good recovery after the closure of the Bitcoin Futures market, with Bitcoin and altcoins gaining 10-15%.
Earlier this week on Tuesday, August 14, cryptocurrency market valuations touched the rock-bottom of 2018 as the overall market valuations dropped below $200 billion for the first time this year. Bitcoin was seen going below and breaking the $6000 support, however, this huge valuation drop was majorly due to the sell-off taking place in the altcoin space. Almost all of the top twenty cryptocurrencies lost 10-20% in a single day with Ethereum touching is 2018-low of $256.
However, in the last 24-hours, cryptocurrency markets have managed to recover pretty well, and at the press time, the overall market valuations stand to $213 billion, according to the data on CoinMarketCap. Bitcoin has recovered nearly 15% in the last 2 days coming close to $6500 while Ethereum too is seen trading at $300 price.
Analysts have been giving different reasons behind this price recovery. Brian Kelly, a cryptoanalyst and a regulator contributor to CNBC’s Fast Money programme, said that the market recovery on Thursday was due to the closure of the US Bitcoin futures market.
Kelly said that in the Bitcoin futures market, investors are lured to deliberately bring the Bitcoin price down thereby creating a sentiment of sell-off among retail investors which spirals down to a further price drop. Investors then cash-out on the short contracts. Kelly says that if Bitcoin price manages to reach $7000, it can further pull the price of other altcoins northwards. He said:
“They (altcoins) are still quite correlated (with Bitcoin). Over the last 60 days or so, Bitcoin has really been the leader — a lot of that had to do with the speculation about an ETF. But what you did see today is stuff like Ethereum almost 10% off yesterday’s lows, stuff like Stellar Lumens — still holding up quite well. So yes, if you get a 10 or 15 percent run on Bitcoin on a short squeeze, it should bring everything else back up.”
The Strong U.S. Dollar Caused the Plunge in the Crypto Market
eToro’s senior market analyst Mati Greenspan believes that one of the major reasons that caused the crypto market to plunge is the growing strength of the U.S. Dollar against that of the fiat currencies of other emerging markets.
In a detailed email statement to CCN, Greenspan wrote:
“As the United States moves to tighten its economy and avoid strong inflation, they’re taking action that is strengthening the Dollar. Because the US Dollar is the global reserve currency, many smaller economies rely heavily on a stable exchange rate with the greenback. So too, as the Dollar is being seen as a stable store of value at the moment, there really isn’t much incentive for people to store their money in digital assets.”
He further added:
“Over the course of this week, it seems that cryptocurrencies have been reacting negatively to the surging US Dollar. In this sense, they’ve been acting a lot like traditional commodities. Usually, when the Dollar goes up assets like gold and oil go down in relation. Over the last week, both digital gold and real gold have fallen sharply in the face of the rapidly rising Dollar.”
Increasing Bitcoin Hashrate Shows Strong Investor Validation for the Long-Term
Despite the meltdown in the Bitcoin price since the beginning of this year, a good news for the Bitcoin investors is that the hashrate has been continuously increasing. In an interview with Bloomberg, David Sapper, the chief operating officer at Australia-based cryptocurrency exchange Blockbid said that the increasing hashrate is a sign that investors are still prepared to hold the digital currency for the long-term. Sapper said:
“The increased hash rate means people are here for the long-term because they’re happy to just accumulate what they have, potentially even run at a loss. At the same time, they do sometimes have to clear house and dump.”
Hashrate is a term in the crypto market used to define the ease with which computers can perform mining operations or solve a Bitcoin code. A higher hash rate means that the opportunity to find the next block increases along with better rewards. Usually, with the declining price of Bitcoin, mining becomes less profitable considering the number of resources used to mine digital currencies.
On the contrary, data suggest that there has been an exponential increase in the hashrate during the entire bear market of 2018. CEO of Genesis Mining, Marco Streng says that this is indicative of the fact that more efficient miners have been taking up the charge with the drop-out of the inefficient miners. He added:
“There are still major expansions happening, especially from more efficient miners. The expansion is so big that it compensated for the drop-out of not-so-efficient miners.”
This is a great sign especially for long-term investors who have remained optimistic about the future potential of Bitcoin. Much recently Rich-Dad-Poor-Dad author Robert Kiyosaki made some bold statements saying that Bitcoin could possibly replace the U.S. Dollar as a global currency while calling the latter as a scam.