Crypto market rallies as Bitcoin approaches all-time high

Last week was an exciting one in the cryptocurrency market, giving hope after two years in the doldrums.

Bitcoin (BTC)

After lolling at $20-30k throughout 2023, Bitcoin (BTC), the OG of cryptocurrencies, broke through and steadily rose in November, and last week hovered around the $63k mark. This is close to the all-time high of $67k in November 2021, before the market tumbled in early 2022.

This 184% one-year increase brings bullish predictions by pundits for the whole market, as generally altcoins follow the lead of BTC. Meantime, spot Bitcoin ETFs witnessed their highest daily inflows, reaching nearly $680 million on February 28th.

The halving of BTC in April, in which the mining rewards are algorithmically reduced from 6.25 to 3.125 BTC, will bring in complex forces which will ripple through the crypto market, potentially making for a volatile next few months. The algorithmic halving of BTC rewards means that miners get less rewards for their efforts, until over the next century the rewards are reduced to zero, when BTC will be capped. This will make Bitcoin a strictly scarce currency. Scarcity has been the hallmark of successful currencies throughout human history, and the downfall of the Dollar due to dilution by overprinting, has been predicted by economic historians.

Ethereum (ETH)

The price rise of Ethereum (ETH) has not been as dramatic, just 120% in the last year. This in spite of the Ethereum Virtual Machine (EVM) becoming a platform for many high-profile projects. The goal of the EVM is to become a “world computer” based on the Blockchain; offering increasingly sophisticated smart contracts for non-fungible tokens (NFTs), decentralised autonomous organisations (DAOs), metaverses, and decentralised finance (DeFi).

Since The Merge last year, in which the Ethereum blockchain shifted from Proof of Work to Proof of Staking validation, gas fees have dropped, making many transactions viable again for the masses. An Ether ETF approval by the Securities Exchange Commission (SEC) is anticipated around May, bringing ETH to mainstream investors.

The Dencun upgrade this year aims to be the Ethereum platform’s “coming of age,” with lower fees, higher throughput, and better speeds. According to Grayscale Research, “While the future remains uncertain, we believe the Ethereum ecosystem remains well positioned to solidify its place as the preeminent smart contract platform.”

Solana (SOL)

Solana’s rise has been stellar, with a 504% price increase over the last year. This in spite of issues with the blockchain, which closed down several times. In the last week, SOL surged 12%, surpassing $130, fuelled by the heightened activity surrounding the Solana-based meme coin, Dogwifhat (WIF).

Solana is a Layer 1 blockchain that offers users fast speeds and affordable costs. It supports smart contracts and facilitates the creation of decentralised applications (dApps). Projects built on Solana include a variety of DeFi platforms as well as NFT marketplaces, where users can buy Solana-based NFT projects. Its high performance means Solana doesn’t require a traditional scaling Layer 2 solution, unlike Ethereum. (Source: Coingecko)

Ripple (XRP)

Ripple was (and still is) involved in a lengthy court case vs the SEC; however, eight months ago, XRP pumped over 70% after a U.S. federal judge ruled that the digital token used on the Ripple network is not considered a security.

In spite of bold predictions by XRP proponents, the price movement has been lacklustre in spite of it being promoted as a ISO 20022 currency specifically designed for cross-border trading transactions. Last week, a former director of Ripple, Sean McBride, accused the US government of suppressing the price of XRP, without explaining how this was being done. In a follow-up post, he speculated that the community will see a spot-based XRP ETF this year or 2025. Furthermore, McBride expects Ripple to go public outside the U.S. by next year.

Regulation

Authorities continue to labour over regulation of the cryptocurrency market. Nigeria has taken drastic measures in an attempt to stabilize its plummeting national currency, the naira, by blocking access to the major cryptocurrency exchanges Coinbase, Binance and Kraken.

In Australia, there’s a move towards tightening regulations around cryptocurrencies. The European Central Bank (ECB) has been vocal about its skepticism towards Bitcoin and other cryptocurrencies. In a blog post which continues to resonate in the crypto community, the ECB criticised the unfulfilled promises of Bitcoin and highlighted the potential social dangers if these issues are not addressed effectively.

This is part of a global trend where governments and financial authorities are trying to find the right balance between fostering innovation in the blockchain space and protecting investors from the volatility and risks associated with crypto investments. Regulatory changes can have immediate effects on the market, influencing investor confidence and shaping the future trajectory of cryptocurrency adoption and integration into the mainstream financial system.

Conclusion

The past week in the cryptocurrency market highlighted the delicate interplay between economic policies, regulatory decisions, and market sentiment. Developments in one part of the world can have ripple effects globally, influencing investment strategies and market dynamics. Whether you’re an investor, a learner, or simply a curious observer, staying informed about these changes is crucial in navigating the complex and ever-evolving landscape of cryptocurrencies.

For those interested in diving deeper into the world of crypto, it’s important to approach it with a blend of curiosity, caution, and a willingness to learn. As the market continues to mature, we can expect more debates, regulatory shifts, and technological advancements that will shape the future of digital finance.

Image created by OpenAI DALL-E