Dogecoin and Shiba Inu coin have posted double-digit gains over the weekend as trader sentiment on memecoins turns bullish.
Luke Martin, host of “The Coinist” podcast, shares a bullish outlook on DOGE in a recent tweet.
Experts predict that Dogecoin could be worth $0.42 by the end of 2021.
Altcoins DOGE and SHIB price surged over the weekend, and the correlation between the two Shiba Inu-themed altcoins became evident.
Analysts bullish on DOGE and SHIB, further price rally likely
Two Shiba Inu-themed memecoins, Dogecoin and Shiba Inu coin, witnessed a surge in momentum over the weekend. Among top altcoins, DOGE and SHIB posted the highest gains, which explains traders’ bullish outlook.
Dogecoin is back in the spotlight after posting an 18.8% weekly surge in price. IntoTheBlock, a blockchain intelligence firm, uses the Global In/Out of the Money (GIOM) indicator to determine whether addresses that hold DOGE are profitable at the current price level. An address’s average cost is calculated based on the weighted average price at which it bought or received the amount of DOGE tokens that it currently holds.
According to GIOM, 66% of addresses currently holding DOGE in their wallets are profitable at the current price ($0.24) level. This is bullish for DOGE traders.
Dogecoin Global In/Out of Money
The increase in bullish sentiment among DOGE traders spilled over to SHIB, popular as “DOGE Killer.” SHIB price is up 21.3% in the last week. Currently, SHIB is nearly 80% away from its all-time high, but traders have a bullish outlook due to the increasing correlation between the two Shiba Inu-themed coins.
Ahead of the latest price rally in DOGE and SHIB, a panel of cryptocurrency experts predicted DOGE could be worth $0.42 (up 60% from the current price level) by the end of 2021. Finder, a price comparison website, surveyed the panel, and it polled a total of 42 experts on what they expect to see happen to DOGE prices in the future.
Forrest Przybysz, a senior cryptocurrency investment analyst at Token Metrics and a panel member, said,
I would expect DOGE to grow in tandem with the rest of the rapidly growing crypto market, though it will likely have long periods of flat price action followed by violent speculative pumps like we’ve seen in the past.
The crypto experts stated that they see Dogecoin hitting $1.21 by 2025 and $3.60 by 2030. The panel was starkly divided since experts like John Hawkins, senior lecturer at the University of Canberra, predicted that DOGE would be worth $0.15 by the end of 2021 and worthless by 2030. Hawkins stated,
Dogecoin seems largely dependent on Elon Musk’s erratic tweets.
Nevertheless, the average response of the panel members puts the DOGE price rally on the path to $0.42 before the end of 2021. Crypto influencers like Luke Martin, host of “The Coinist” podcast, recently tweeted about DOGE with a bullish sentiment:
Bitcoin’s price has been rallying in tandem with altcoins, sending mentions of the markets flipping back to a bullish supercycle for Bitcoin (BTC). The flagship cryptocurrency went through the resistance levels of $42,000 for the first time since May 19, hitting a peak of $42,541 on July 31.
Alongside the market rally, the Bitcoin dominance (BTCD) index has been seeing an uptrend as well. As per data from TradingView, BTCD hit a 3 month high of 49.2% on July 31. The last time it was at these levels was back in May when it was on the decline from the yearly high of 73.6% it hit at the start of January.
The BTCD index is calculated using the ratio of the Bitcoin market versus the rest of the cryptocurrency market. As the name suggests, being the flagship crypto asset indicates the dominance that Bitcoin has over the rest of cryptocurrency tokens.
Speaking with Cointelegraph about the market rally being led by Bitcoin, Pete Humiston, manager at Kraken Intelligence, the research division of Kraken, a cryptocurrency exchange, stated: “Because altcoins felt the brunt of the sell-off over the past few months and because BTC is crypto’s ‘safe haven’ asset, a rally in dominance indicates that market participants are reluctant to rotate back into altcoins.”
It’s also important to note that the last time the BTCD index was at these levels, it was on its way down from a high in January amid the full-blown bull market. Whereas it is currently on the uptrend from the lows it hit in mid-May. Back in May, altcoins like Ethereum (ETH) were outperforming BTC which led to the dominance dropping below 40%. This time around, however, BTC has been making gradual price gains that not all altcoins have been able to match, thus leading to the rising BTC dominance.
A bull market might not lead BTCD to rise further
In addition to the market capitalization being significantly larger than the rest of the crypto assets, keeping stablecoins aside, Bitcoin is the most highly traded crypto-token in a 24-hour period with Ethereum being a close second. However, stablecoins are known to impact Bitcoin dominance as well due to huge influxes in that market. A prime example of this was back in April when a $3 billion USD Coin (USDC) influx led to the Bitcoin dominance hitting its lowest since August 2018.
Humiston further spoke on what the market conditions would need to be like to sustain the ongoing uptrend in the index, saying that, “Until it’s clear as day that we’re entering back into a bull market uptrend, we can expect folks to remain relatively risk-averse, altcoins to underperform and BTC dominance to trend higher.”
JPMorgan’s global market strategist, Nikolaos Panigirtzoglou, recently mentioned in an interview with CNBC that if the Bitcoin dominance goes past 50%, it could be an indicator of whether the “bear phase is over or not” for the cryptocurrency markets. However, as seen in the bull run starting in late 2020 and even in 2018, the BTC dominance usually rises at the beginning of recovery after a slump and drops during euphoric phases of the market. Usually, this period of euphoria is followed by a major correction and then the cycle repeats itself.
It is also noteworthy that even though BTCD is used as a measure of market sentiment when looked at in purely percentage terms, it’s often not the most reliable indicator. As the cryptocurrency markets mature, it is inevitable that some altcoins will become more resilient to crashes and lead to a decline of Bitcoin dominance.
A report from Stack Funds was released in May after BTC dominance dropped to nearly 40%, revealing that the index could bounce back and mark the end of the market slump. Shaun Heng, vice president of growth and operations at CoinMarketCap, a cryptocurrency ranking and analytics platform, told Cointelegraph:
“Although Bitcoin is volatile, I believe it will still dominate the market for a while to come. Bitcoin is the basis for which all other cryptocurrencies were made, and while I don’t expect to see it reach the heights it did in the past, I also don’t think it will fall off considerably in the foreseeable future.”
While Bitcoin is often considered to be the safe-haven asset of the cryptocurrency markets, this “sentiment recovery” that Bitcoin is witnessing saw it regain some of what was lost during the start of the summer. ETH has shown 12.1% over the last seven days compared with Bitcoin’s 3.30%.
Ethereum flipping Bitcoin?
In a recent development, the CEO of Pantera Capital, Dan Morehead, mentioned that the transition of Ethereum to Ethereum 2.0 (Eth2) network will help Ether outpace Bitcoin. In addition to ETH’s price rally, the Ethereum network is also soon to undergo a major update. In a benchmark event toward the migration of the blockchain to an entirely proof-of-stake network, on August 4, the highly anticipated London hard fork takes place which adds five Ethereum Improvement Proposals (EIPs), including the EIP-1559.
This is a new transaction pricing mechanism that alters the dynamic expansion and contraction of block sizes to improve scalability. This is set to change the way network fees are managed by incentivizing miners for prioritizing transactions.
Even though this is a huge change for the network and is highly anticipated in the community, Humiston mentioned why this might not impact the macro trend of the markets any time soon: “Because the impact of the London hard fork/EIP-1559 will take time to materialize and BTC dictates the macro trend, we don’t anticipate August 4 will ignite a new alt season.”
He even added that since the hard fork is a high-profile event that is perceived as a long-term tailwind for the token, the event could be a case of “buy the rumor, sell the news,” leading to a short-term weakness for ETH. However, it is also possible that the hard fork could support another rally for ETH. It’s important to recognize that due to the high correlation between the price movements of ETH and BTC, ETH may not rally based on the hard fork development single-handedly and it would need BTC to hold above $40,000 levels for a rally to be possible.
Even though Ethereum’s market capitalization is only 18% of the entire crypto market — less than roughly 50% of BTC’s market capitalization — its utilization in the decentralized finance (DeFi) markets often makes it a contender for the top-ranked token by 24h trading values. In fact, early in July, a Goldman Sachs analyst said that Ether could overtake Bitcoin as the most dominant digital currency as it seems to be the one with the “highest real use potential.”
However, Heng opined that “There is a high correlation between Bitcoin performance and that of altcoins, even with Ethereum. As Bitcoin value drops, so do the values of altcoins. And Bitcoin’s performance in the past is in part what boosted altcoin availability today.”
A sign of things to come?
As Bitcoin’s dominance maintains its rebound along with price levels holding above $38,000, the premium cryptocurrency continues to quash the “flippening” narrative that the drop in Bitcoin’s active addresses over two weeks brought back into the spotlight. In addition to MicroStrategy’s CEO, Michael Saylor pledged to buy more BTC. Even though the firm holds over $400 million in “paper” losses, he said that there is no reason to not hold Bitcoin for 100 years.
Apart from institutional investors like Saylor keeping their faith through the market slump, it appears that even the retail investors have not given in to the fear, uncertainty and doubt (FUD) surrounding the crypto-verse in the recent past. A report from Crypto.com revealed that the number of crypto users worldwide has more than doubled from 100 million in January this year to 220 million in June. Such re-enforced support noticed in the market adds to the positive sentiment often contributing to higher price stability for BTC — a characteristic that is usually expected from mature assets in the financial markets.
This ongoing uptrend in Bitcoin dominance could very well be a sign of another bull market season getting triggered. From what was witnessed in the bull run that began in Q4 2020 and lasted until May 2021, the BTC dominance first rose to a yearly high of 73.5% before the rest of the altcoins caught up to its proportional price action, leading to a full-blown bull market. If this trend repeats itself, the crypto community could be in for another market dominated by the bulls, and the rising BTC dominance is the flag bearer for that event.
Many things have morphed beyond the realm of what we originally designed them to do, such as the internet. When Satoshi Nakamoto first invented Bitcoin(CRYPTO:BTC) in 2008, they envisioned it as a peer-to-peer electronic cash payment system free from the grasp of central banks and governments. Today, those two entities are encroaching on that idealistic dream with a strategy of “if you can’t beat them, join them!”
The threat of central bank digital currencies (CBDCs) replacing decentralized cryptocurrencies is a real one, and investors are already seeing the signs. For example, the U.S. Federal Reserve is moving forward in developing its own cryptocurrency with a research paper coming out this summer. What’s more, China’s central bank is already on the verge of launching the digital renminbi (eYuan). So just what does this mean for the future of decentralized crypto?
Image source: Getty Images.
The empire strikes back
It’s difficult to see all of the implications at first glance, but CBDCs have the potential to revolutionize our economy, for better or for worse. Let’s say the Federal Reserve goes ahead and launches a digital U.S. dollar (eUSD) cryptocurrency. Like all cryptocurrencies, it will have a public ledger, allowing the Fed to see all consumer transactions on the network. Here’s the kicker — the Fed can then use that information to tabulate real-time economic data such as the consumer price index, manufacturing activity, and key product sales. This would greatly increase the Fed’s ability to accurately adjust the federal funds rate to balance the economy.
In the event of a force majeure (i.e., a financial crisis, deadly pandemic, alien invasion, etc.), the Fed could send stimulus in the form of eUSD to all applicable parties. Afterwards, the entity could monitor blockchain transactions for direct insight into how recipients are spending and determine if more stimulus is needed for the recovery.
The corporate world would greatly benefit from such a system as well. For example, a blockchain analytics company could perform an analysis on all wallets associated with marijuana dispensaries/point-of-sales. It could then tally the transactions, quickly derive the industry’s total addressable market and share this information with sector players to enhance their business strategies for the year.
Lastly, the Fed’s eUSD would synergize well with law enforcement agencies and the IRS. Wallets suspected of engaging in illicit transactions or criminal activities could be suspended until their owners are no longer persons of interest. In addition, tax evasion would be far more difficult as the IRS could simply cross-reference wallet transactions with taxpayers’ fillings to identify any discrepancies.
What this means for Bitcoin (and other cryptocurrencies)
Ideally, a CBDC network would have little to no transaction fees, be lightning fast, and be environmentally friendly, which goes against everything Bitcoin is right now. In addition, governments could implement recovery services if a coin is sent to the wrong address or simply perform a real-ID check for someone who lost their wallet key. Bitcoin has neither feature.
Moreover, a CBDC network’s revolutionary potential, coupled with the legitimacy of government backing, has the potential to entice many people to flock to its coin, putting it in direct competition with decentralized cryptocurrencies. Since the latter require growing user adoption for sustained price appreciation, many cryptocurrencies could end up struggling in the face of this formidable competition.
Of course, CBDCs arguably give governments a lot of new power too, so the whole thing could turn dystopian. But the fact of the matter is governments want CBDCs to gain legitimacy for better economic planning. Decentralized cryptocurrencies might end up facing increased regulations and crackdowns as they’re simply not part of the government-approved system. For the sake of argument, it’s far more challenging to tabulate economic data if one half of the country uses the eUSD as a medium of exchange and another uses alternatives like Bitcoin. Hence, investors should brace for the possibility that the “golden age” of cryptocurrency investing is coming to an end.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.