Over the past 24 hours, the cryptocurrency market has remained relatively stable in the $450 billion region, after recording a $30 billion increase in market valuation on February 27. Bitcoin has remained above the $10,500 mark, despite a major sell volume that led the cryptocurrency to decline from $11,000 to $10,300.
Earlier today, on February 28, a large sell volume across most major cryptocurrency exchanges including Bitfinex led the price of bitcoin to drop by more than $700 within a span of three hours. Since then, bitcoin has rebounded to $10,500, but volumes remain low on many exchanges.
More importantly, the daily trading volume of Tether, a cryptocurrency that is backed at 1:1 ratio with the US dollar, has spiked to $2.5 billion, indicating that cryptocurrency traders are using Tether to hedge the value of major cryptocurrencies. It is unlikely that traders are selling Tether and allocating their funds into other cryptocurrencies, because the market valuation of the market has fallen by over $18 billion since February 27.
Based on the price trend of bitcoin, Ethereum and other major cryptocurrencies throughout the past week, it is unlikely that the market will enter a strong bull market in the short-term. It is more likely that the market will remain highly volatile in the $450 billion region both in the upside and downside, before it leads a strong rally to its previous levels in January.
In late 2017, when the price of cryptocurrencies achieved all-time highs, extremely optimistic media coverage coaxed investors outside of the cryptocurrency market, especially in the finance sector, to invest heavily in the cryptocurrency market. As the price of major cryptocurrencies plunged, many casual investors and newcomers suffered major losses.
As such, analysts expected the market to experience a long-term bear market, similar to that of 2014, due to the abrupt fall in the value of bitcoin and many other cryptocurrencies in the market, including tokens.
However, the market has bounced back reasonably fast, and at this juncture, it is possible that the market could begin a swift recovery process throughout March and April, potentially back to the $600 billion region. Throughout the recovery, as evidently portrayed in the daily transaction volumes of bitcoin and Ethereum, large dips and minor corrections will occur frequently, and the market will continue to be highly volatile.
Ethereum for instance, which peaked at $979 this month, remains below $860, and has been outperformed by bitcoin this month. Although it has only fallen by around 40 percent from its all-time high, it is struggling to sustain strong momentum for a short-term spike in value.
The controversial claims and false statements of influential figures like Bill Gates are also affecting the public’s viewpoint on cryptocurrencies.
This week, Gates stated that cryptocurrencies are anonymous, only used for drugs, and are linked to deaths, three claims that are factually incorrect. Bitcoin is transparent and not anonymous by nature and 95 percent of drug purchases are made by fiat money like the US dollar.
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Last modified: March 4, 2021 5:05 PM