Since the end of November 2022, Bitcoin has gained around 80% of its market cap, hitting the $28 000 level. The largest part of this movement started on March 10, when the Federal Reserve announced an additional liquidity injection to save the country's banking system. If you missed this amazing move, there is no reason to worry about it. Despite the Bitcoin pump, many altcoins are still 90% down from their all-time highs, providing traders and investors great opportunities in the upcoming weeks.
This article will describe the reasons for the Bitcoin rally and arguments in favor of the altcoin rally.
Bitcoin vs. Fiat currencies
Although Nakamoto remains mysterious, his goal in creating cryptocurrency was to regain financial control from elites, giving ordinary people a chance to participate in a decentralized financial system. Moreover, Bitcoin was created to respond to the Great Financial Crisis in 2008, which showed that even the world's biggest banks could fail. It highlighted the fragility of the modern financial system and called for the decentralization of financial transactions.
Fifteen years later, the banking system failed again. Major banks such as Credit Suisse, Silvergate Bank, and Silicon Valley Bank made critical mistakes that led to their bankruptcy. Moreover, analysts have calculated that 186 more US banks may experience similar problems shortly.
Fifteen years is a fairly short time in economic history, and many people faced a banking sector problem for the second time in their investing careers. If something happens once, it can be considered an accident, but twice like a system. Fortunately, unlike the 2008 crisis, people now have a great alternative to bank deposits - cryptocurrencies.
It is worth noting that the Federal Reserve and the US Department of the Treasury promise to prevent the collapse of other banks, but we all know what methods they use - they print fiat currencies. If earlier it worked, now the situation is completely different. Inflation in the US is at 6%, which is 4% above the Fed's target. Moreover, recent data showed that the rate of decline in inflation fell significantly in January and February, while the labor market is still strong.
It would be best to remember that as of December 2022, the US public debt was 123% of GDP. In 2022, $475 billion was spent on paying interest on the US government debt - 8% of all government spending. In the near future, the US government will spend more than $1 trillion on interest (more than on defense). Moreover, this payment by 2032 could reach $1.7 trillion annually under certain scenarios. In the best case, even if the Fed quickly brings the rate back down and inflation calms, by 2030, more than 12.5% of America's budget will be spent on interest. At worst - about 18-20%.
Under such circumstances, bailing out banks by injecting additional liquidity could trick the US economy. Inflation could reach double digits, and to beat it, raising the rate even higher will be necessary. At the same time, the high rate is the main reason for the collapse of banks. The measures currently being taken by the US government only postpone the inevitable for a while but do not solve the problem.
With such a vulnerability of the entire fiat financial system, gold and Bitcoin are haven assets that will help investors save capital. And as we can see, many have already bet on these assets. However, the global rally is far from being over.
Altcoins will dominate in the middle term
Most often, the rise in the price of altcoins lags behind the first cryptocurrency. This happens because most investors are explicitly focused on Bitcoin, and when some news enters the market, the first thing they do is pump the BTCUSD. However, as the price rises, investors take profits and transfer the released funds to other crypto projects.
At the moment, the Bitcoin season is taking place on the market, meaning the capitalization of bitcoin is growing faster than other cryptocurrencies. For example, since March 10, 2023, Bitcoin has gained 45%, while Ethereum has added only 31%. Like any indicator, the altcoin season index moves between 0 and 100. At the moment, the value is at the level of 25. Hence, in the near future, the capitalization of altcoins will grow faster than Bitcoin's.
Another indicator to look at is Bitcoin Dominance (BTC.D). As we can notice, the price reached a massive resistance level and already showed a reaction. Further decline would also signal altcoins' strength against the number one cryptocurrency.
Now, let’s look at potential targets for crypto altcoins excluding BTC and ETH. The price broke through the descending trendline and double-tested it. It is heading toward the resistance area around 450B, with around 20% possible gain. If the price breaks through this resistance, it will move toward the 630B market cap area, making it a 62% growth from the current level.
We suggest you look at ETH/BTC charts to find the best performers. Buying coins that formed bullish patterns or are currently traded at support levels may bring you the most returns.
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This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. The views and ideas shared in this post are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the post may be subject to change without prior notice.
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