Are Bitcoin and Ethereum about to hit new highs?

The emerging cryptocurrency asset class has provided market participants with a wild and turbulent ride over the past few years. Bitcoin’s rise over the past decade has given new meaning to the term bull run. Ethereum, the second-largest cryptocurrency, has also been a rising beast.

Cryptocurrency reflects a libertarian philosophy that returns the power of money from governments, central banks, financial authorities, and private financial institutions to individuals. The price depends only on the bid and ask prices in the market.

Critics argue that they have no intrinsic value and only facilitate criminal behavior. However, it’s also possible that critics simply want to maintain the status quo. After all, government power comes from control over money. The ability to expand or contract the money supply is a key source of power.

Cryptocurrencies are the result of technological advancement. Blockchain technology is the backbone of fintech, increasing the speed and efficiency of transaction settlement and keeping records of ownership.

Cryptocurrencies reflect the trend of globalization because they transcend national borders and are a substitute for currency. The value of legal tender comes from the credit of the country that issues it. The value of cryptocurrencies comes entirely from market participants who determine their price. While government monetary policies can affect the value of legal tender, they have no role in the crypto space.

The recent price action could mean new highs for Bitcoin and Ethereum in the coming weeks or months. The market capitalization of the entire asset class could reach a new peak by the end of 2021.

The April and May crash

On April 14, cryptocurrency exchange Coinbase Global Inc (NASDAQ:COIN) was listed on the Nasdaq, and Bitcoin reached a record high of $65,520. In the past few years, the record highs of cryptocurrencies have been event-driven.

The leading cryptocurrency surpassed the $20,000 level for the first time when cryptocurrency futures emerged in late 2017. The listing of COIN, a trading platform that enhances liquidity and execution, pushed cryptocurrency prices to recent highs.

The weekly chart shows that Bitcoin corrected to a low of $28,800 per coin during the week of June 21.

The second-ranked cryptocurrency took longer to reach its highs, but like Bitcoin, it fell to its lows in late June.

The weekly chart shows that Ethereum rose to a high of $4,406.50 in mid-May before falling to a low of $1,697.75 during the week of June 21.

The prices of both Bitcoin and Ethereum have fallen by more than half.

Oscillating bottom

From May to early August, Bitcoin digested the crazy downward trend through shocks, and the price mainly fluctuated below $40,000 per coin.

The daily chart shows a volatile bottoming trend before the end of July.

Ethereum’s volatility bottoming period was relatively short, with prices remaining below $2,440 until the end of July.

Recover

Both cryptocurrencies have recovered in the past few weeks. Since the April and May highs, both Bitcoin and Ethereum have seen a 50% correction. The midpoints of their trading ranges are $47,160 and $3,052.125, respectively. At the end of last week, Bitcoin was trading at $48,000 and Ethereum was trading at $3,220.

Meanwhile, on August 23, Bitcoin surpassed the $50,000 mark for the first time since mid-May. On August 9, Ethereum surpassed $3,000 per token for the first time since May 17 and reached a high of nearly $3,390 on August 23.

Two factors supporting cryptocurrency

Bulls regained control over the weekend as the crypto asset class’s market capitalization reclaimed over $2 trillion. Three factors continue to work in favor of crypto assets.

• Inflationary pressures continue to rise due to the Fed’s dovish monetary policy and the U.S. government’s fiscal stimulus. Even as central banks begin to taper their quantitative easing programs, governments are close to approving trillions of dollars in infrastructure and other spending plans. Rising prices across all asset classes are good for the value of cryptocurrencies.

• Confidence and credit in fiat currencies continue to weaken. People continue to lose faith in government officials. The governor of New York recently resigned in disgrace. The governor of California will face a recall election in mid-September. Polls show that the Biden administration's approval rating has declined after a series of policy missteps. Cryptocurrencies espouse libertarian ideology and return control of the money supply from the government to the individual. As trust and credit in the dollar, euro, and other reserve currencies decline, cryptocurrencies are an alternative.

A new high may be reached by the end of 2021

Analysts expect Bitcoin, Ethereum and the cryptocurrency asset class to reach higher prices by the end of 2021. Of course, there are risks associated with this volatile asset class.

At a cybersecurity summit for U.S. technology companies and financial institutions held at the White House on August 25, CEOs asked the president to crack down on cryptocurrencies, which have long been a favorite tool for hackers and ransomware demanders. At the same time, digital currencies also play an important role in capital flight.

(Source: Yingwei Finance)