Crypto Market Forecast: Week of January 25th 2021

It was a mixed week for traders in crypto markets. The Bitcoin price was hit by a sharp midweek sell-off and was down ~9% at week’s end, while the Ethereum price ended the week up ~16% and heading to an all-time high.

The DeFi space also rebounded with blue-chip DeFi tokens Aave (AAVE), Uniswap (UNI), and Synthetix (SNX up~40%, 25%, and 11% respectively.

A factor in bitcoin’s difficult price week were comments made by President Joe Biden’s pick for treasury secretary Janet Yellen, who suggested that the crypto sector could soon come under increased regulatory scrutiny in the US. During Yellen’s confirmation hearing on Tuesday, she was asked by Senator Maggie Hassan about the use of cryptocurrency for terrorism and other illicit purposes.

"Cryptocurrencies are a particular concern," Yellen responded. "I think many are used—at least in a transactions sense—mainly for illicit financing." She said the US would examine ways to curtail crypto’s use for money laundering.

Yellen’s comments follow a proposal from the US Financial Crimes Enforcement Network (FinCEN) to increase ID requirements and place value restrictions for transactions involving self-hosted crypto wallets, and which also cites the usage of cryptocurrency for criminal activity. Uncertainty reigns in this regard, though, as the new Biden administration has frozen new agency rulemaking pending further review.

Some US investors were unphased by Yellen’s comments and continue to commit strongly to bitcoin technology. MicroStrategy CEO Michael Saylor announced on Saturday that the company just purchased another ~314 bitcoins for ~USD10 million, in accordance with its treasury policy and at an average price of ~USD31,808 per bitcoin. This takes MicroStrategy’s bitcoin holdings to 70,784, which is worth ~USD2.25 billion. Following the announcement of the purchase, Saylor appeared on CNBC’s power lunch and said BTC could replace gold, bonds, the S&P 500, and even the Dow as the primary monetary index.

Crypto news for the week ahead

January 26th – Verge (XVG) blockchain halving

Verge (XVG) is a privacy-oriented project that was originally known as DogecoinDark. This Tuesday the network executes a block reward halving that will reduce the number of XVG offered to miners as a block reward from 200 to 100. A halving is often expected to lead to higher prices because they tighten supply, drive scarcity and reduce miner selling pressure. The price of XVG has risen ~88% in the last month.

January 29th – 115,00 bitcoin (USD3.6 billion) worth of options set to expire across derivatives exchanges

On January 29th, nearly 50% of Bitcoin options Open Interest contracts are set to expire. The nature of options contracts means they need to be settled on a predefined date. Traders need to decide what they will do with them before they expire and become invalid. The days around options expiry can drive up volatility for the underlying asset as traders exercise contracts and are forced into realizing profits or losses.

Top 10 Crypto Summary

It was a strong week for Ethereum ecosystem coins, with Chainlink (LINK) and Ethereum both standing out in the top 10 as alpha performers. ETH hit a new all-time high breaking past $1440 and entering price discovery mode. On January 23rd, Glassnode reported that the number of addresses holding 10,000 ETH hit a new all-time high. This implies that whales and institutional investors had a major part to play in ETH’s ongoing price run.

Bitcoin Price Chart

Bitcoin bulls had a difficult week with the Bitcoin price experiencing sharp bouts of selling pressure on the 21st and 22nd of January. Fundamentals for the network look strong, however, with mining difficulty hitting a new all-time high last week. This means it takes a new maximum amount of computing power to mine new blocks meaning the network is more secure than ever.