New data from Pantera Capital, an investment company and hedge fund, indicate that Bitcoin’s (BTC) current price activity is closely tracking the stock-to-follow model route, and analysts expect that BTC will hit $115,212 by August 1.
Bitcoin’s parabolic surge may have put the price a little ahead of the model’s forecast, and this week’s 28 percent reversal sent brief shivers through the industry, but rapid declines and quick consolidation times are typical of the bull markets.
The model focuses on the market effect of bitcoin halving events that cut the volume of bitcoin minted per block in half every four years.
According to the model, the effect of the dwindling supply of Bitcoin is present approximately 6 months after each halving. As the price of Bitcoin was halved on May 11, 2020 the price was about $8,000 and 6 months later BTC was priced over $15,000 and on the brink of joining the parabolic rally at a new all-time high.
The chart above shows the progress of Bitcoin’s price in the days after each halving. A similar pattern developed over the past two halvings, just with a differing time span. The current BTC performance appears to be in between the 2012 market 2016 cycles, which has the potential to lead to a price of Bitcoin between $300,000 and $400,000 around 450 days after the last halving, or roughly Aug. 4.
Signs of a maturing market
Another important contrast between this rally and 2017 has to do with the total market composition and the place of the value. The bulk of the liquidity of the new market is consolidated in Bitcoin and Ether (ETH) as retail investors have so far selected the most developed chains to obtain exposure to the cryptocurrency field.
Andy Yee, a Public Policy Director for Visa in Greater China, pointed to this development in a Tweet response to Pantera’s report:
“This rally is different. Massive shift from high-speculative, non-functioning tokens in 2017 to #Bitcoin and #Ethereum today, according to PanteraCapital.”
As seen in the map above, Bitcoin and Ether have 86% of the volume. The remaining five thousand chains have 14 percent. Although BTC peaked late in 2017, the two top coins had a combined valuation of 52%, suggesting that BTC and ETH have consolidated their market share over the last three years.
Possible explanations for this change in funds include retail capital that relies on Bitcoin as an entry point to the cryptocurrency industry due to its network stability and robust mining infrastructure and the burgeoning decentralized finance community that is mainly based on the Ethereum network.
As the DeFi ecosystem begins to expand, it will also draw institutional interest, further boosting the price of Ether as it is needed to communicate with both smart contracts and DeFi platforms on the Ethereum network.
Data from defipulse shows that the total value locked in DeFi now stands at $29.98 billion, near its all-time high of $23.116 billion.
As TVL rises, so does the valuation of the top eco-system coins, like AAVE and Synthetix (SNX). The amount of trade on the top decentralised exchanges, such as Uniswap and SushiSwap, continues to rise, with data from Dune Analytics showing that the combined weekly DEX volume has recently exceeded $13 billion.
Institutional inflow to Bitcoin may trigger a new altcoin season
While Bitcoin and Ether currently hold 86% of the cryptocurrency market value, past market cycles would indicate the possible flow of funds out of the top cryptocurrencies and into promising new projects. This dynamic has led analysts like Raoul Pal to suggest that after Bitcoin and Ether’s stellar rally, the “next stop will be higher risk alts.”
Media has also confirmed that Goldman Sachs is said to be planning to provide custody services for cryptocurrencies that could set the stage for the next hype period for Bitcoin. A continuous inflow of capital from the institutional class may be a factor that increases the price of Bitcoin and holds it in line with the forecasts of the stock-to-flow model.
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