06.12.2021

Kraken experts reveal the main factors behind the recent growth of the crypto market

Experts of the Kraken cryptocurrency exchange have released a report on the growth of the crypto market over the past few weeks, that is, mainly in August. In it, they listed the main factors that influenced the rise in prices for Bitcoin and other cryptocurrencies.

The main ones were the gradual return of BTC miners to the network after pressure from the Chinese government and a sharp increase in the popularity of the NFT token sphere this year.

Note that September will only be remembered for the sharp collapse of the market that happened yesterday evening. If on Tuesday morning Bitcoin was valued at $ 52,920, then by the evening it plummeted to the level of $ 42,843.

The scale of the collapse is visible on the 15-minute chart of the cryptocurrency. In fact, the main phases of the rate drawdown occurred within half an hour.

bitcoin chart rate

15 minute Bitcoin chart

The rest of the coins also became significantly cheaper. Most of the top cryptocurrencies by market cap have dropped about 15-20 percent this morning.

cryptocurrency rating rate

Rates of top cryptocurrencies by capitalization

Traditionally, the reason for the market collapse of such a scale was the cascade liquidation of traders’ positions. That is, traders traded with borrowed money with great leverage. As a result of the sharp downward movement of the market, their positions were liquidated and sold, which caused an even stronger drawdown. Since sales have triggered more crashes, this is called a cascade.

However, so far analysts have focused on the reasons for the growth at the end of the summer.

Why cryptocurrencies have grown

Kraken Intelligence manager Pete Humiston noted that even the mining ban in China and other negative news from China could not seriously shake the industry. Here is his quote on this matter, in which the expert shares his vision of the situation. The cue is from Decrypt.

Bitcoin’s return to the $ 50,000 mark was due to strong technical and fundamental factors. Among them is the return of miners to the network two months after they were forced to hastily leave the territory of China.

Recall that the Chinese authorities have banned the mining of cryptocurrency in certain regions of the country. The decision was mainly explained by problems in the supply of electricity and its excessive consumption. At the same time, experts admit that in this way the government simply spoils the reputation of the digital yuan in the face of full-fledged cryptocurrencies. We are talking about the country’s national currency, which will work in a new form. Testing of the digital yuan has been going on for several months.

Bitcoin trading chart

Bitcoin hashrate change in 180 days

According to the contents of the report, in August 2021, Bitcoin’s monthly return was 14 percent. Trading volume also rose about 17 percent to $ 136 billion. At the same time, back in July, this figure fell to an eight-month low in the zone of $ 116 billion .

The difficulty of mining Bitcoin “has been adjusted upward for the third time in a row. As well as the growth of the hash rate – that is, the total computing power of the network – the increase in this indicator suggests that most of the miners “expelled” from China are starting to plug their equipment into the socket in other regions of the world. In addition to the growth of the crypto market itself, the pressure from China has also contributed to a greater decentralization of the industry as a whole, as now miners are more actively distributed around the world.

Humiston also noted that with the growth of the crypto market, the popularity of Bitcoin will only increase in the near future. Here is his line.

If the current trend continues, we may see a rise in interest in owning Bitcoin as an asset as a safe haven from inflation, especially amid the short-term macroeconomic environment worsened by the spread of new coronavirus variants.

However, over the past month, Bitcoin has not become the most profitable investment. Analysts found that the main cryptocurrency had lower returns than the average for the top 20 coins. This is to be expected, since the larger the BTC capitalization becomes, the larger and more liquid the market becomes, which means that it can no longer maintain the same growth rates.

Positive changes in market dynamics were also recorded in Ethereum trading – the largest altcoin has more than doubled in price over the past month after an important upgrade EIP-1559, presented in the London hardfork. Recall that EIP-1559 provided the project with a new model for the formation of fees, thanks to which ETH can become a deflationary asset in the foreseeable future.

In particular, yesterday turned out to be the second deflationary day in the history of cryptocurrency. This means that the amount of ETH burned as commissions was greater than the amount of Ether created as a block reward.

Ethereum cryptocurrency blockchain

Ethereum deflation as a graph

As experts noted, the main reason for the active burning of ETH was the unique NFT tokens, interaction with which requires large commissions. According to analysts, 49 percent of all burned ethers were destroyed due to interactions with NFT trading platforms. That is, in fact, unique tokens and transactions with them made Ethereum a rarer asset – and this directly affects its price, subject to stable demand.

We believe that the second half of the summer really turned out to be positive for the cryptocurrency market. The miners are back to work after the problems in China, once again proving the power of the decentralized network. In addition, Ethereum began to burn, and at a very serious rate due to the activity of NFT fans. In addition, BTC was recognized as an official means of payment in El Salvador. Aside from the evening crash, the niche’s prospects seem very bright. Although drawdowns are always necessary for the further growth of rates.

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