Oh, how the mighty have fallen.
The first, and still the most valuable cryptocurrency by market capitalization, Bitcoin (BTC 3.81%) remains the top dog in this realm. The king of cryptocurrencies, Bitcoin's directional moves tend to determine the overall direction of the crypto market. Of late, that direction has been down.
Bitcoin has fallen from its high of more than $68,000 per token seen just last month to the $46,000 level as of Dec. 13. That's good for a drop of more than 30% from its peak, putting this top cryptocurrency squarely into bear market territory.
Sentiment across the entire crypto world remains negative right now. Much of this recent negative sentiment shift has to do with the regulatory outlook for cryptocurrencies in general. Chinese bans on crypto mining have had a very negative effect for this proof-of-work protocol. Concerns about the environmental impact of crypto mining have since spread to other large jurisdictions, with Kazakhstan recently becoming unfriendly to mining operations. And even the U.S. has stepped up its questioning about the strain crypto mining could put on power grids, as well as the environmental impact of this practice.
Additionally, concerns that Bitcoin may not be as "true" a market hedge as some believe are beginning to permeate. Often called "digital gold," Bitcoin has been viewed by many, including ARK Invest CEO Cathie Wood, as a "low correlation" asset relative to equities. Whether this is empirically true or not remains to be seen, with cryptocurrencies such as Bitcoin appearing to trade in rather close correlation with risk assets, such as meme stocks, recently.
Image source: Getty Images.
Could Santa Claus be coming to crypto land?
Ho ho ho! In equity markets, a Santa Claus rally (or Santa rally) is something many investors kind of expect every year. Just like getting an annual bonus, relying on investors picking up sweet deals during the holidays and bidding up stocks is something of a tradition.
In the crypto markets, one might say that the recent rallies we've seen of late suggest that Santa's already been to crypto land. Indeed, this year has seen a number of surges, with Bitcoin very recently posting new all-time highs.
However, should riskier equities and risk assets across the spectrum experience a Santa Claus rally this year, Bitcoin will likely be one of the top cryptocurrencies leading the way. Given Bitcoin's size and institutional appeal, along with a number of Bitcoin exchange-traded funds (ETFs) that have been launched this year, fund managers looking for exposure to crypto are likely to look at Bitcoin first. This is a key catalyst Bitcoin bulls point to as a reason to own this token over smaller, but potentially higher-upside, cryptocurrencies right now.
So, can we really expect $50,000 in 2021?
Right now, Bitcoin's faltering momentum is certainly suggesting that a run toward $50,000 in the very near term may be a longer shot than most crypto investors would like. That said, this is a token that has seen frequent double-digit percentage rallies take place in recent weeks. It's also worth noting that Bitcoin is around 10% below the $50,000 mark at the time of writing -- a relatively short distance. So, as long as sentiment shifts even slightly into positive territory, this target is certainly achievable in the near term.
Regardless, Bitcoin remains a long-term investment for most serious crypto aficionados. This is a token that has shown a rather robust (albeit volatile) upward trend over more than a decade. Bitcoin holds a unique place in the emerging cryptocurrency market as a technical trend-setter and the value store that other digital coins must be measured against.
This sell-off could continue into the new year, and investors holding Bitcoin need to be comfortable with that. There are no guarantees in life. That said, Bitcoin's status as the top dog in the crypto world means this is a cryptocurrency that remains top of mind for most investors.
It's impossible to suggest where this token is headed -- no one has a crystal ball. However, the balance of probabilities and Bitcoin's growing real-world utility add up to a promising near-term prognosis. If positive momentum returns to the crypto world in a meaningful way, capital inflows into Bitcoin could easily take this token to new all-time highs. Maybe in time for Christmas.
