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Crypto’s Been Going Crazy; Here’s Why

By now we all know that crypto went on a true bull run last week, when Bitcoin broke above $13,500 for the first time since January 2018. With Bitcoin making up 61.5% of crypto’s total value, it was no surprise that the overall crypto market hit a 12-month high at the same time. Per Coinwatch.com, the total market cap of crypto peaked above $365 billion on June 26; it has since slipped to $316.50 billion. At this writing, BTC is trading at $11,075, and has a market cap of $196.21 billion.

To make sense of everything, we’ll take a step back for a longer look. The three-month chart for BCT shows clearly that the coin has been on an upward trend since this past April 1, and equally clearly that this week’s volatility includes the steepest losses during that time.

But BTC remains at 15-month highs, and the losses in recent days look like classic profit taking. The sharp peaks and valleys are reminiscent of Bitcoin’s chart pattern during the runup and dropdown from November 2017 to April 2018. So, volatility is baked into BTC, but we already knew that. As Forbes Magazine's Caitlin Long reminds us, Bitcoin is designed to present investors with a stable system, rather than stable prices.

And this brings us to the second major point in to BTC’s recent price surge: as it rose in price, it attracted more miners as well as more buyers, and in blockchain, more miners means greater security. Bitcoin’s hashrate, the speed at which miners run calculations to open the next block, is at an all-time high. Back to Ms. Long, who points out, “The higher the hash power, the more secure Bitcoin becomes… simply because the cost to amass enough hash power to attack the network far exceeds the gain from doing so.”

The gains in BTC’s hashrate have been making a splash in the crypto world, and feeding another important trend: Bitcoin has a distinctly positive news sentiment, as seen by the slant of articles published in the past week. We can turn back to Coinwatch, for a look at Bitcoin’s News Sentiment:

Coinwatch analyzes the cryptocurrency news channels in real-time, and presents the results. You can see here that in the last week BTC has gotten slightly more than the average number or write-ups, and the tone has been significantly more bullish than usual. The coin has been doing well in the markets, investors are interested in it, and it’s clearly reflected in the news. Which, of course, helps feed more favorable investor sentiment toward BTC.

Three main topics are filling the headlines about BTC: the current bull run, the unveiling of Facebook’s (FB) Libra project, and, most recently, the surge in the hashrate. All three factors are pushing BTC to a positive trend: reporting on gains feeds a bullish narrative, reporting on Libra generates interest in cryptocurrency, and reporting on the hashrate and related security issues reassures the public. While there is reporting on BTC’s slips during the week, it’s overshadowed by the positive trends.

Widespread Gains in Major Coins

Bitcoin is not the only crypto posting gains and positive news sentiment in the past week. Ethereum (ETH), the third-largest coin by market cap, has shown a similar pattern in recent days. ETH is up 110% in the past three months, and at this writing is trading just below $298.

As with Bitcoin, ETH has a distinctly positive news sentiment. The number of articles featuring the coin is in line with the weekly average, while the tone of those articles is decidedly bullish – at 90%, even more bullish than Bitcoin’s tone. The most recent articles on ETH emphasize that the coin has stabilized at current trading levels, that transaction volumes are high, and that a 52-day bull run is in the realm of possibility.

The third major cryptocoin, Ripple (XRP) has also posted gains in the April-May-June period, but not to the same extent as BTC or ETH. Where those coins are up 166% and 110% respectively, Ripple has only gained 27%, and has been in a ranging pattern since mid-May. In the last 7 weeks, XRP has stayed between 37 and 47 cents per coin. Where other cryptos have been showing sharp gains, XRP has simply failed to get traction.

A look at Ripple’s news sentiment shows the effect of this trading pattern on the general outlook toward the coin. Articles on XRP have trended decidedly bearish, far more than the average in the cryptocurrency industry.

Reading the headlines in Ripple-related articles bears this out. Recent press mentions include Ripple Price Analysis: XRP Recovery Could Face Many Hurdles. It’s a tone that we just aren’t seeing in the Bitcoin and Ethereum articles.

Ripple’s holding pattern, and recent losses among the smaller altcoins, are less significant to the overall cryptocurrency market than the gains in Bitcoin and Ethereum. With those two coins making up over 71% of the total market cap in crypto, we would expect to see the markets follow their lead, and we do. Again from Coinwatch.com, the total market cap chart bears this out – it closely follows the pattern established by BTC and ETH.

The general tenor of the crypto markets is optimistic now, despite a drop from last week’s high points. News and investor sentiment remain positive on two the three largest coins, and neither of those shows any sign of the bottom falling out.

In our last article on this subject, we quoted investor and fund manager Mike Novogratz, who foresaw – during the recent price run-up – BTC stabilizing between $7,000 and $10,000. He’s a careful prognosticator, however, and he also said, “If I’m wrong on that, I think I’m wrong on the upside.” He appears to have been correct; BTC appears to be stabilizing, at least for now, near $11,000.