Now that 2021 had started we’ll be back with the usual weekly article where we’ll analyze some of the hottest topics in the crypto market, trying to stimulate our readers into learning more about where the industry is headed and how they can take advantage of it. If at the end of 2020 we’ve reflected on the year’s performance of the market, today we want to talk about some of the implications of the $1 trillion crypto market, an impressive milestone that had been reached recently.
Persistent buying enthusiasm
The chart below taken from coinmarketcap.com is showing the impulsiveness of the buying momentum that continues to persist. Now that market capitalization trend above $1 trillion, a new phase had started for the cryptocurrency market. As a market mainly driven by emotions, such impressive development is expected to generate more buying enthusiasm.
Weakness in the USD is a major tailwind for risk assets and crypto had been an important destination in 2020 and now for both retail and institutional investors. Volumes for 24h are also at record levels, communicating there is still demand even at record-breaking levels.
More regulation challenges ahead?
A month ago we’ve talked about crypto regulation challenges heading into 2021 and that still applies as there are signs public entities are gently trying to put a cap on the upside momentum. Ripple is a great example and the SEC’s $1.3 billion lawsuit put massive pressure on the third-largest cryptocurrency in the world. More similar actions could undermine the bull run and start to make market participants reconsider the upside potential left to squeeze out.
On top of that, if more central banks will launch digital currencies, it will mean more competition for the traditional crypto market. These factors are now ignored due to euphoria, but at some point, the market will start to care about them.
Crypto – the top modern-era investment?
Technology is at the core of modern civilization and it should be no surprise digital assets are where investments are flowing. The combination of fixed supply combined with a diminishing purchasing power of fiat currencies is supporting the rise of crypto valuations. As long as there is demand, prices can continue to go higher.
But we should also not forget the cryptocurrency market has cycles that are influenced by halving events. How much will the upward side of this cycle extend is still up for debate. Based on current conditions, more gains should be expected.