Bitcoin and Ethereum Show New Momentum After 20% Gain, Is a New Rally in the Works?

Year-to-date, the price of Bitcoin is up 40% against the United States dollar, and other major cryptocurrencies such as Ethereum and Litecoin have also demonstrated strong gains in the past four months.

After experiencing a slight retracement, Bitcoin along with Ethereum and the rest of the cryptocurrency market are showing signs of new momentum, with BTC recently breaching $5,200.

One potentially overlooked factor in analyzing the price trend of Bitcoin in the beginning of April may have been the dominance of Bitcoin futures markets based in the U.S. Due to the relatively small volume of major futures markets such as CME Group, the impact of futures on the price trend of Bitcoin was believed to be minimal by many.

At least until March, the volume of Bitcoin futures markets in the U.S. neared that of the Bitcoin volume of the biggest exchange in the global cryptocurrency market.

In the future, with CBOE's reported pullout from the Bitcoin futures market, the share of the futures market in the volume of BTC could change, but in the general scheme of things, Bitwise has shown that futures markets can no longer be dismissed when analyzing the price of Bitcoin.

The liquidation of short contracts and the large volume coming from U.S.-based futures markets were crucial in fueling the momentum of Bitcoin in early April, acting as near-term price catalysts.

Bitcoin has not been in the $5,000 region since early November, and pushing through September and October levels in the $6,000 to $7,000 range would require proper fundamental and technical factors to gain new momentum.

Bitcoin is nearing its fixed supply of 21 million and the restriction the halving would put on the circulating supply of the asset is highly likely to affect the price of the asset, especially if the demand remains at the current level or even rises in the months to come.

In the past four months, a fairly large number of crypto assets - such as Litecoin, Enjin Coin, Binance Coin, Augur, Ontology, Cardano and EOS - have shown price movements independent from that of BTC. Throughout history, at least in recent years, alternative cryptocurrencies have demonstrated the tendency to record intensified movements based on the direction of Bitcoin.

Ultimately, for Bitcoin, Ethereum and the rest of the cryptocurrency market to engage in a new rally following an impressive 20% gain in the past week, strong stimuli such as last week's short squeeze or the investment of nearly $100 million by a single buyer are needed.