New data from Pantera Capital, an investment company and hedge fund, suggests that Bitcoin’s (BTCThe current price action is closely following the trajectory of the stock-to-follow model, and the company’s analysts believe BTC will hit $ 115,212 by Aug. 1.
Bitcoin’s parabolic rally may have moved the price slightly higher than this week’s model and projection 28% correction sent temporary shivers across the market, but sharp corrections and short periods of consolidation characterize bull markets.
The model focuses on the price impact of Bitcoin halving events that have reduced the amount of Bitcoin halving each block every 4 years.
According to the model, the impact of declining Bitcoin supply becomes apparent about 6 months after each halving. When the price of Bitcoin halved on May 11, 2020, it was around $ 8,000 and 6 months later, BTC was trading above $ 15,000 and on the verge of parabolic rally to a new record.
The chart above shows the progress of the price of Bitcoin in the days after each halving. A similar pattern developed over the past two halves, only with a different time span. Current BTC performance appears to be in between the 2012 market cycles, which has the potential to lead to a price of Bitcoin between $ 300,000 and $ 400,000 about 450 days after the last halving, or about August 4th.
Signs of a maturing market
Another significant difference between this rally and 2017 has to do with the overall market composition and where the value is. A majority of the value of the current market is consolidated in Bitcoin and Ether (ETH) such as institutional investors have chosen the most established chains to date to gain exposure to the cryptocurrency sector.
Andy Yee, a Public Policy Director for Visa in Greater China, pointed out this development in one Tweet response to Pantera’s report:
“This rally is different. Huge shift from highly speculative non-functioning tokens in 2017 to #Bitcoin and #Ethereum today, according to PanteraCapital. “
As can be seen in the chart above, Bitcoin and Ether have 86% of the value. The other 5,000 chains have 14%. While BTC peaked at the end of 2017, the top two coins had a total of 52% of the value, indicating that BTC and ETH have consolidated their market share over the past three years.
Possible reasons for this shift in funds include institutional money focused on Bitcoin as a gateway to the cryptocurrency market due to its network security and extensive mining infrastructure, and the fast-growing decentralized financial ecosystem mainly built on the Ethereum network.
As the DeFi ecosystem continues to grow, it will also attract institutional attention, further increasing the price of Ether as it requires it to communicate with all smart contracts and DeFi platforms on the Ethereum network.
Data from defipulse shows that the total value locked DeFi now stands at $ 29.98 billion, close to its all-time high of $ 23.116 billion.
As the TVL increases, so does the value of the major ecosystem coins, inclusive AAVE and Synthetix (SNX). Trading volume on top decentralized exchanges such as Uniswap and SushiSwap continues to grow with data from Dune Analytics showing that the combined weekly DEX volume recently exceeded $ 13 billion.
Institutional influx into Bitcoin can trigger another altcoin season
While Bitcoin and Ether currently hold 86% of the cryptocurrency market value, previous market cycles would indicate that money may be flowing from the top cryptocurrencies to promising new projects. This dynamic has led analysts like Raoul Pal to it suggests that after the great rally of Bitcoin and Ether, the “next stop is alts with higher risk”.
Media have also reported that Goldman Sachs is rumored to be preparing to offer cryptocurrency custody services could pave the way for the next hype cycle for Bitcoin. A sustained influx of institutional-class money could be the catalyst that raises the price of Bitcoin and keeps it in line with the projections of the stock-to-flow model.
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