In just one 24-hour period, Bitcoin jumped $3,600 and is already trading above $23K. Along with the price, trading volume has more than doubled, further bolstering confidence in the rally at this stage. The Bitcoin dominance index rose by almost 2% to 65.51% over the day. The volume of Bitcoin short position liquidations in the futures market on December 16th was over $500 million. Alternative cryptocurrencies followed Bitcoin’s lead. Virtually the entire market is growing right now but the most notable growth is within the top 10. For example, Ethereum (ETH) is adding 11% and trading around $650. It is very likely that this is far from the limit of growth even within the current bullish wave. In other words, we are only witnessing the beginning of the rally across the sector.
So what are the main differences with 2017, and why hasn’t the current growth momentum exhausted its potential? The driving force behind the 2017 rally was retail FOMO. In 2020, however, retail investors tended to stay on the sidelines. When the rally brought Bitcoin close to $20K, retail investors began buying altcoins as they were not yet close to their all-time highs. However, institutional demand for liquid instruments concentrated around a few instruments.
It is very profitable for institutional investors to create a sense of euphoria in the market but so far most are cautious about what is happening. Nevertheless, there will be no sign of common sense in the case that BTC continues to grow at such a pace, for example, during the next week. That will be the most dangerous moment of the current rally because the overbought technical indicators will be stronger than FOMO at some point.
The FxPro Analyst Team