Amid tech stock turmoil, the cryptocurrency market is shining, with a Bitcoin resurgence, Ethereum rally, and notable gains in altcoins. Explore the factors driving this cryptocurrency boom.
Over the past week, the cryptocurrency market has witnessed a rollercoaster of events. Bitcoin (btc) has increased more than 21%. Its current market price is around $34,000, with a momentous 16-month high recorded at $35,150 on October 23.
But Bitcoin is not the only cryptocurrency that enjoys the limelight. Ethereum (ETH) has marked an impressive rally of around 19%, currently valued at around $1,800.
While these pioneers make headlines, the altcoin market has offered its share of surprises. Link of the chain (LINK) increased by a staggering 50% and is now priced at around $11. Solana (SOL) witnessed a 34% jump, reaching $32, and Polygon (MATIC) is up 28% to $0.65.
So what is causing this impressive rally? Let's try to peel back the layers of this resurgence, understand the factors influencing the current boom, and explore whether the altcoin season is really making its long-awaited comeback.
Rumors about ETFs
The current bullish momentum depends on the fate of Bitcoin ETF. In essence, an ETF works as a basket of assets that tracks the performance of a particular index or sector.
The appeal of a Bitcoin ETF, especially a "spot" one, is that it would be backed directly by actual Bitcoin assets rather than derivatives or futures. This means investors gain more direct exposure to the asset's performance.
The US Securities and Exchange Commission (SEC) has historically been cautious about approving a spot Bitcoin ETF. Their concerns arise from potential fraud, market manipulation, and the overall volatility of the cryptocurrency market.
For many, the SEC's stance has been a major obstacle to the widespread acceptance of Bitcoin and other cryptocurrencies.
However, recent events hint at a possible change in the SEC's stance. Grayscale, a major player in the world of cryptocurrencies, was to court against the SEC for converting his Bitcoin Trust into an ETF.
The court's decision in favor of Grayscale has raised hopes. The SEC did not appeal this ruling and was found to have acted โarbitrarily and capriciouslyโ in denying Grayscale.
What does this mean for other pending ETF applications? The implication is significant. The SEC might now be more inclined to reconsider and potentially approve other Bitcoin ETF applications.
When to expect a spot ETF?
Discussions have been intense within the cryptocurrency community. In a notable episode of Unchained Crypto, James Seyffart of Bloomberg Intelligence and Matt Hougan of Bitwise Asset Management echoed a shared optimism.
They predict the introduction of a spot Bitcoin ETF before the important date of January 10, 2024.
His feeling is not isolated. JPMorgan recently published a report that resonates with this optimism. Analysis suggests that the SEC is potentially preparing to give the go-ahead to multiple Bitcoin spot ETF applications in the coming months.
This convergence of perspectives from different corners of the financial world adds weight to the anticipation, indicating that the winds of change are indeed blowing in the cryptocurrency space.
Additionally, as Seyffart noted in a tweet, Bitcoin and its related brands, such as Grayscale, are becoming more prevalent in everyday scenarios, such as airport advertising.
This public visibility not only shows the growth of the cryptocurrency sector but also plays a vital role in its normalization among the masses. The more people see, hear, and become familiar with cryptocurrency-related content, the faster it will become widely accepted.
Tech stocks take a hit
On October 25, seven major technology companies, often called the โMagnificent Seven,โ saw their stock values โโdrop significantly.
These companies (Apple, Microsoft, Meta, Amazon, Alphabet (Google's parent company), Nvidia and Tesla) are some of the biggest names in technology. Together, they make up a large part of the stock market, specifically the S&P 500 index.
Analysts noted that this was the worst performance they have seen in technology stocks in a long time. And many ordinary people began searching for terms like โstock market crashโ on Google, showing that they are worried too.
While these big tech companies struggled, the world of cryptocurrencies saw their value rise. In just one week, the total value of all cryptocurrencies combined increased by 18%, from $1.08 trillion on October 19 to $1.27 trillion at the time of writing.
So what does this mean? When traditional tech stocks underperform, cryptocurrencies could become a popular choice for investors. If tech stocks falter, people could see cryptocurrencies as a safer place to put their money.
Additionally, with the bullish momentum of cryptocurrencies, some traders and investors could move their money from stocks to digital currencies, seeking quick returns.
Is altcoin season back and what to expect next?
Historically, Bitcoin often takes the lead during market bull runs, garnering substantial attention and capital.
Following the rise of Bitcoin, there is a trend for capital to flow into alternative cryptocurrencies (altcoins) in what the crypto community affectionately calls the โaltcoin season.โ
This cycle has been seen in previous bull runs of 2017-18 and 2020-21, with altcoins sometimes offering even more significant returns than Bitcoin at its peak.
To understand whether we are currently in the midst of an altcoin season, it is crucial to turn to data. Historically, a hallmark of an altcoin season is when the majority of the top 100 altcoins post gains, often outpacing Bitcoin's percentage gain.
As of October 25, not only has Bitcoin posted a substantial gain, but an overwhelming majority of the top 100 altcoins are also in the green. This synchronized growth across the board is reminiscent of previous altcoin seasons.
However, the current scenario offers a nuanced picture. Bitcoin's recent performance, marked by a 21% increase in just one week, has been formidable. At the same time, major altcoins have seen substantial increases, with some even surpassing Bitcoin in percentage terms.
The widespread rally indicates a distributed interest and capital infusion across the crypto spectrum rather than just a market focused on Bitcoin or altcoins.
Past cycles also indicate that during an altcoin season, Bitcoin's dominance (its market cap as a percentage of the total cryptocurrency market cap) tends to decline as altcoins collectively dominate a larger market share, which is not the case currently.
Therefore, we could be at the beginning of a major uptrend. Bitcoin usually advances and ends its run before other currencies get going. So while it's exciting to see all the rumors, the real altcoin party may still be a little ways off. However, unexpected market changes can occur in the volatile world of cryptocurrencies, and forecasts may not always match reality.
For now, the smart move is to keep a close eye on how Bitcoin is doing. Be careful with your money. Investing can be unpredictable, especially with all the ups and downs expected soon. Never invest more than you can afford to lose.
Disclosure: This article does not represent investment advice. The content and materials appearing on this page are for educational purposes only.
