Monthly recap: Bitcoin and Ethereum post massive gains as trust erodes in the global financial system

Bitcoin Generates 47% in Monthly Returns as Institutional Demand Skyrockets

Bitcoin's fundamental backdrop is growing more robust than ever. During the month of December 2020, the flagship cryptocurrency was recognized as a hedge against inflation. Even JPMorgan Chase acknowledged that gold would suffer the most as capital shifts towards the pioneer digital asset. 

Institutional investors like MicroStrategy and MassMutual did not wait long to add more BTC to their balance sheets despite its high market value. The spike in buying pressure was significant enough that it outweighed the fear, uncertainty, and doubt generated when Mt. Gox announced that it would release 150,000 Bitcoin into the market. 

Although prices tumbled during the first two weeks of the last month of the year, they quickly recovered, surpassing previous all-time highs.  

Indeed, Bitcoin kicked off December 2020 on the right foot, rising to a record high of $19,932 during the first few hours of the monthly trading session, according to the exchange rate on CEX.IO. Its uprising was put on hold as investors grew concerned about the injection of more than $2.85 billion worth of BTC into the market. Some market participants panicked sold their tokens, pushing prices down to $17,589, which marked the month's lowest price point. 

While retail investors were selling their holdings in anticipation of a steeper correction, institutions worldwide increased their uptake of Bitcoin. The rising demand among high net worth individuals saw BTC regain lost ground and rise to new horizons. Its price shot up by more than 67% to close 2020 at a new all-time high of $29,034. 

Bitcoin holders realized a massive 47% gain during the month of December due to the impressive bull run this cryptocurrency experienced, which was mostly driven by institutional demand. 

Ethereum 2.0 Is the Catalyst for Ether's Bull Run

The launch of the most anticipated ETH 2.0 Beacon Chain on December 1st, 2020, served as a "sell the news" event for cryptocurrency enthusiasts. As a matter of fact, the smart contracts giant took a 14% nosedive after opening the monthly trading session at a high of $615.80. 

While prices dropped a few dollars below the $530 mark, it appears that sidelined investors took advantage of the downward price action to re-enter the market.

American billionaire and hedge fund manager Paul Tudor Jones appeared to have "bought the dip" as he endorsed Ethereum as an industrial digital asset due to its utility. Meanwhile, Grayscale recorded a significant spike in demand for its Ethereum-based trust revealing the growing conviction around this digital asset. Such high demand levels were also seen on Ether's network activity as the number of non-zero ETH addresses surpassed 50 million. 

Vitalik Buterin, Ethereum's founder, said that the spike in network growth was attributed to the Beacon Chain's launch. Roughly 1% of the total Ether supply was sent to ETH 2.0's deposit contract at the time when this cryptocurrency was trading around $590. With so many tokens taken out of circulation, the selling pressure behind this altcoin dropped significantly, leading to an impressive bull run.

Indeed, Ethereum was able to bounce off the $530 support level to hit a new yearly high of $675.75 on December 17th, according to the exchange rate on CEX.IO. This price hurdle momentarily contained Ether from advancing further, but a few days later, it failed to do so. Breaking through such resistance barrier was followed by a 9% bullish impulse that saw ETH close December 2020 at a high of $737.20. 

Investors were able to grasp monthly returns of nearly 20% given the upward price action that the second-largest cryptocurrency by market capitalization had. 

Further Gains on the Horizon

The Tom Demark (TD) Sequential indicator flashed sell signals on Bitcoin and Ethereum's monthly chart. Nonetheless, it appears that demand for these cryptocurrencies continues growing despite the pessimistic outlook that several technical indexes present. 

The erosion of trust in the global financial system has investors flocking to the crypto market to hedge against inflation, which could push BTC and ETH further up. 

Although corrections are needed for the healthy continuation of bullish cycles, it may seem like this time is different. A significant portion of the money that has been printed worldwide over the past few months to contain the effects of the pandemic on the global economy seems to be flowing into the cryptocurrency markets, adding fuel to the upward pressure. 

If this continues to happen in the coming months, Bitcoin may rise to $50,000 and Ethereum towards $2,000 before a significant retracement occurs. With the former in price discovery mode and the latter approaching previous all-time highs during the current economic disaster, the sky is the limit for these cryptocurrencies.