New data acquired from Pantera Capital indicate that Bitcoin’s current price action seems to be following the stock-to-follow model’s trajectory. The investment firm and hedge fund stated that bitcoin will surge to $115,212 by August 1, 2021. These analysts say that BTC and ETH’s growing dominance of the crypto space are indications that the current bull run market is mainly different compared to the last one.
Bitcoin’s explosive rally may have placed its price a little bit ahead of the model’s projection and last week’s 28% correction sent a few shivers across the market. However, sharp corrections and short consolidations are characteristic of the normal bull markets.
This model focuses mainly on the price impact of Bitcoin halving events that cut the total amount of bitcoin minted every block in half every four years. Based on the model, the effect of decreasing BTC’s supply becomes present about six months after every halving.
When bitcoin price halved on May 11, 2020, the price was almost $8,000 and about six months later bitcoin was trading above $15,000 and on the verge of coming into a parabolic rally to a new all-time high.
The chart represents bitcoin’s progress in the days of every halving. A similar pattern developed over the last two halvings, just with a differing period. The current bitcoin performance seems to be in between the 2012 market 2016 cycles. It has the potential to lead to a price of BTC between $300,000 and $400,000 almost 450 days after the last halving, or about August 4.
Signs Of A Maturing Market
Another notable difference between the current rally and that of 2017 is the general market composition and the specific location of the market value. Most of the value of the current market is consolidated in Ether and Bitcoin. Institutional investors have chosen the most established chains to gain some exposure to the crypto industry.
One Public Policy Director for Visa in Greater China, Andy Yee, highlighted this development in a Tweet response to Pantera’s report:
“This rally is different. The massive shift from high-speculative, non-functioning tokens in 2017 to #Bitcoin and #Ethereum today, according to PanteraCapital.”
According to the chart published above, Ether and Bitcoin command a staggering 86% of the entire market cap. The other 5,000 chains are left to scramble for the remaining 14%. When Bitcoin surged in late 2017, the two top coins had a total of 52% of the entire market value. This means that Bitcoin and Ether have consolidated their market segment in the last three years.
The shift in funds is likely brought about by the institutional money focusing on bitcoin as their primary entry point into the crypto scene. They choose to invest in bitcoin because of its vast mining infrastructure and network security. Also, Ether investments have gathered momentum as a result of the burgeoning decentralized finance (DeFi) ecosystem that is mainly powered by the Ethereum network.
As the DeFi space continues to thrive, it is expected to attract more institutional attention which will also boost the price of Ether as it is needed to interact with every smart contract and DeFi platform on the Ethereum network. Data acquired from Defipulse indicates that the total value locked in the DeFi sector now stands at about $23.116 billion.
As the TVL soars, so does the value of the major ecosystem coins including Synthetix (SNX) and AAVE. Notably, trading volume on the top decentralized exchanges like SushiSwap and Uniswap continues to expand with data acquired from Dune Analytics indicates that the cumulative weekly DEX volume recently surged above $13 billion.
Institutional Inflow to Bitcoin May Cause A New Altseason
While Ether and Bitcoin currently command 86% of the crypto market cap, previous market cycles indicate the possibility of funds flowing out of the top cryptos and into the promising new projects. This dynamic has made analysts like Raoul Pal say that after BTC and ETH’s massive rally, the “next stop will be higher risk altcoins.”
The media has also highlighted that Goldman Sachs may be getting ready to offer custody services for cryptos, which would set the stage for the next bitcoin hype cycle. A continuous inflow of money from the institutional class may become the catalyst that pushes BTC price higher and keeps it in line with the projections given by the stock-to-flow model.