With the alt coin rally starting to top out, or even correct, and Bitcoin prices seemingly stagnate at around $14K, what does the market need to really take off and where could this spark possibly come from.
The recent alt coin rally wasn’t really the result of new money coming into the market. It was mostly due to the stagnation of Bitcoin, causing investors to chase profits elsewhere. So people were chipping away at their Bitcoin holdings and just moving it to different alt coins. This is normal behavior, but if we want the type of growth we saw last year, the market needs a fresh flow of new money coming in. So what are the scenarios in which this can happen? Below I look at the two ways that could actually bring in enough money, and then I choose the most likely candidate to keep your eyes on in the coming weeks in months.
A top coin starts hitting new highs – It seems at least for the moment, Bitcoin has stalled out in price. I think it will come back, but the truth is, the price is still very high, and investors have shown in the last few weeks that they like lower entry points, even new investors are showing this behavior. So BTC may be a little too high to keep brining in the new investors, even if the price keeps rising slowly but steadily.
But nothing attracts new money to the market like a coin hitting new highs and grabbing all the headlines.
So my pick for the next coin to start making headlines is Ethereum. Ethereum is back at number 2 and several exchanges are gearing up to pump Ethereum, possibly in a similar way to how Bitcoin was pumped all the way $20K last year. However, it’s getting harder and harder to pump BTC, but Ethereum is prime for a pump up to $2K and above, something that will grab headlines and reignite interest in the market from those who are on the sidelines still.
New institutional money flowing in – This was the main theory last year when it came to what will drive the crypto markets in 2018, but so far it is off to a slow start. The CBOE and CME futures markets were heralded as a way for institutional investors to get into BTC, but all those contracts are settled in cash, not BTC.
Next up was Bitcoin ETFs. However, just this week, several of the large ETF projects were put on hold or even scrapped. This is not a great sign for institutional money coming into crypto in the short term. Part of the reason is because the SEC noticed how manipulated the markets were and put out warnings saying as much. This is one of the reasons I believe Ethereum may be the next to get pumped. With BTC becoming part of mainstream finance, it will attract too much oversight and attention to keep manipulating the price on one or two exchanges. That’s what makes Ethereum a good pick.
But overall, the flood of institutional money appears to be on hold, at least for now, so I wouldn’t bet on that just yet to save the markets.
So in my final analysis, the most likely way that new money will start flowing into the market again, at the rates it did last year, is if Ethereum can be pumped up to new highs. And in the process, make headlines every time it cracks another one thousand in value. This is the most likely scenario and the easiest to achieve, at least in the short term.
Bitfinex, the exchange responsible for most of the volume during the BTC rise, has launched Ethfinex, a trading platform for Ethereum based tokens. Something like this can be a huge boost for Ethereum, and something that can send the price moving upwards quickly as people begin trading on the platform.
So keep your eye on Ethereum, it could very well be the key to reigniting this market and attracting new money again.