Copycat season over? Analyst expects traders to pivot back to Bitcoin after 'pullback' to $30,000

The bitcoin market is divided on how to interpret this week's bitcoin price slump. At one point on Wednesday, bitcoin lost more than 35 percent of its value, falling as low as $30,000 on Coinbase.

Global media have attributed the price slump to China's reaffirmation of its stance against crypto businesses and Tesla's sudden cessation of using bitcoin as a payment method for its electric vehicles.

Traders Buy the Dip, Leading Bitcoin to Rally Immediately After Testing $30,000 Source: TradingView

JPMorgan Chase: The current altcoin market is full of bubbles: September 2 news, a report released by JPMorgan Chase on Wednesday showed that retail investors have been buying stocks at a record pace throughout the summer, helping to drive the market to record highs. The bank estimates that retail investor net inflows into U.S. crypto markets hit an all-time high of nearly $16 billion in July, up from around $13 billion in August. JPMorgan emphasized that the previous record was $10 billion in June last year. "Cryptocurrency markets look frothy again," JPMorgan said. Altcoins now account for about 33 percent of the cryptocurrency market, a sharp surge from 22 percent in early August. “The share of altcoins looks quite high by historical standards, which in our view is more likely to reflect a bubble and retail investor ‘mania’ than a structural uptrend,” JPMorgan concluded. (business insider) [2021/9/2 22:55:55]

Nikolaos Panigirtzoglou, managing director of global market strategy at JPMorgan Chase, further noted that inflows into publicly traded bitcoin funds continue to decline. He suspects this is a rotation investment model, where institutional investors liquidate their positions in the bitcoin futures market and reallocate the proceeds to build up long positions in gold funds.

Opinion: Bitcoin could be worth much more without altcoins: On September 11th, Dan Tapiero, a macro investor and co-founder of 10T Holdings, retweeted a top ten list of altcoins and wrote, “It’s amazing how many alternative investments still have value, but imagine if all the wasted attention was focused on Bitcoin.” He believes that after gold, Bitcoin is the only other truly global asset that is standardized. Chainalysis’ new “Cryptocurrency Adoption” index shows its far-reaching global impact. (Coingape)[2020/9/11]

Panigirtzoglou added: "It's unclear what drives this shift."

News | Report: The correlation between the market cap of altcoins and on-chain metrics violates Metcalfe’s Law: The market cap of altcoins is much lower than the market cap of Bitcoin, and the crypto company Messari is trying to study the correlation between the market cap of altcoins and their on-chain metrics sex. As opposed to time-series analysis (studying how an asset has progressed over different time intervals), it can be inferred that the altcoins with the highest market capitalization trade the most according to the analysis charts, but this is not set in stone. The relationship between effective addresses and liquid market capitalization of altcoins within 24 hours also follows the same trend, and the altcoin with the highest number of transactions has the highest liquid market capitalization. While these findings are consistent with expected results, it violates the famous Metcalfe's law, which states that the strength of a network is proportional to the square of the users. In this case, the relationship between cryptoassets and market cap and on-chain metrics was found to be linear (AMBCrypto) [2019/8/8]

However, he cautioned that Bitcoin’s momentum signals are still in positive territory. Therefore, it is too early to declare the end of the bull market.

Lennard Neo, head of research at crypto index fund provider Stack Funds, suggested a similar near-term upside pattern, citing a potential rotation pattern from altcoins to bitcoin.

Lennard referred to recent movements in the bitcoin market and its dominance over a plethora of alternative digital assets, dubbed the Bitcoin Dominance Index. He noted that the cryptocurrency’s net market capitalization surged about 40% as Bitcoin’s dominance over altcoins fell from 73.5% to 40.5%.

Bitcoin Dominance Index (Blue) vs. Total Cryptocurrency Market Cap (Red) Source: Stack Funds

This suggests that many investors remain entrenched in the cryptocurrency market, primarily focused on shifting their gains from Bitcoin into altcoins that seem bullish in the short-term. Neo added that ethereum’s 180% rise this year to the end of last month has also benefited from a rotation investment model from altcoins to bitcoin.

But now, capital will want to return to the bitcoin market, the former Bloomberg analyst said, adding:

Veteran hedge fund manager and investor Ben Miller also backed Bitcoin's bullish bias, calling its recent downside correction a "routine pullback."

“If I like something that’s more expensive, then for sure it’s a price drop,” the former chief investment officer at Legg Mason Capital Management said, referring to a similar price drop that occurred during Bitcoin’s great 2017 bull run. , I would have liked it better at the lower price."

But bearish pessimism continues to offset bullish forecasts, especially when Guggenheim Chief Investment Officer Scott Minerd once claimed that Bitcoin would rise to $600,000, but yesterday he completely reversed his attitude and put Bitcoin Known as "Tulip fever" (Tulipmania).

Meanwhile, Mark Haefele, chief investment officer at UBS Global Wealth Management, said bitcoin is an unreliable store of value due to its volatile price. Julius de Kempenaer, senior technical analyst at Stockcharts.com, also noted that Bitcoin's recent price plunge has also dampened its prospects as a safe-haven asset.

At the time of writing, Bitcoin is trading above $40,000, up more than 30% from its brief low of $30,000.

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