In June, Bitcoin (BTC -0.54%) quickly broke by way of the $30,000 mark, and lots of bulls had been satisfied that the sky was the restrict. However since then, the cryptocurrency has drifted decrease and throughout the previous 30 days it has declined 4.5%.
So the place is Bitcoin headed subsequent? There are two components to look at, each of which might have great implications for the long-term worth of the world’s hottest cryptocurrency.
Inexperienced flag: Bitcoin Dominance metric
Throughout the crypto business, Bitcoin dominance is a well-liked metric for figuring out how “dominant” Bitcoin is amongst all different cryptos. By dividing Bitcoin’s market capitalization by the whole worth of the crypto market, it is easy to see at a look how traders are fascinated by Bitcoin and the crypto market general.
What’s putting right here is how the Bitcoin dominance metric has oscillated over the summer time. As will be seen within the TradingView chart above, up till about mid-June, the Bitcoin dominance metric was sitting between 47% and 48%.
However then, as quickly as information broke that BlackRock (BLK 1.38%) was making use of for a brand new spot Bitcoin exchange-traded fund, the ratio instantly elevated to 52%. The pondering then was that the digital coin was going to obtain an enormous new wave of institutional cash, and that despatched the value (and market cap) hovering.
However then one thing simply as fascinating occurred in mid-July: the XRP (XRP -0.90%) courtroom ruling, wherein the courtroom concluded that the crypto wasn’t an unregistered safety. That information was virtually unanimously considered as being constructive for the general crypto market, and particularly for extra speculative altcoins.
And that despatched the costs of altcoins — particularly these immediately within the crosshairs of the Securities and Change Fee — hovering. The general market consensus modified: It was now altcoin season, and Bitcoin was out of favor.
Picture supply: Getty Photographs.
That dynamic explains why Bitcoin has been treading water over the previous 30 days, and why the Bitcoin dominance metric is now hovering slightly below 50%. A inexperienced flag for the crypto, then, can be the breakout of this metric to the next degree. This is able to sign {that a} large new inflow of institutional cash into Bitcoin is coming quickly.
So long as the metric is caught at current ranges, it looks as if traders are virtually evenly break up on whether or not it is Bitcoin season or whether or not it is altcoin season.
Crimson flag: The Litecoin halving
The second main issue to look at is the Litecoin (LTC -0.02%) halving, now scheduled for Aug. 2. In a halving occasion, the mining reward is lower by half, and that instantly impacts technical components resembling the general provide development of the coin.
The standard pondering is that halving occasions, which happen solely as soon as each 4 years, are very bullish for the prospects of a cryptocurrency. Thus, heading into 2023, many crypto traders anticipated the run as much as the August halving occasion to be very bullish for Litecoin. However that merely hasn’t occurred and Litecoin is barely up 1% over the previous 30 days.
In case you’re a Bitcoin investor, what occurs with Litecoin issues, as a result of Bitcoin additionally has a halving occasion developing. Furthermore, Litecoin was created from a copy of the original Bitcoin source code, so the 2 cryptos share a standard DNA.
Proper now, crypto traders are optimistic in regards to the Bitcoin halving in April 2024, primarily as a result of previous halving occasions for Bitcoin have produced spectacular returns. Actually, Normal Chartered Financial institution is now suggesting the value of Bitcoin might soar to as excessive as $120,000 by the tip of 2024, primarily on account of this halving. That is a quadrupling from at the moment’s degree of slightly greater than $29,000.
Nevertheless, there may very well be a pink flag for Bitcoin if the Litecoin halving seems to be a nothing burger. You possibly can consider the Litecoin halving in 2023 as a preview of the Bitcoin halving in 2024.
If the Litecoin halving would not ship a pop, then what does that imply for the Bitcoin halving subsequent 12 months? Are all these large worth forecasts for Bitcoin hitting $100,000 and past primarily based on simply hope and hypothesis? Keep in mind: Previous outcomes are not any assure of future returns.
What’s subsequent for Bitcoin?
There are different components that might affect the place Bitcoin is headed. Proper now, for instance, regardless of the Federal Reserve does subsequent after its newest rate of interest hike can very a lot affect the value of Bitcoin over the brief time period.
Nevertheless, I am conserving my eyes on components with long-term implications for the value of Bitcoin. A inexperienced flag can be the continued inflow of institutional cash into Bitcoin, whereas a pink flag can be a Litecoin halving that fails to supply as anticipated.
By the tip of this summer time, traders ought to have a a lot better thought of the place Bitcoin may very well be headed in 2024 and past. For now, I stay cautiously optimistic.
