Past week has seen a strong upward trend in the crypto market. The price of the largest cryptocurrency, bitcoin, rose by about nine percent, and the price of the second-largest cryptocurrency, ether, by about five percent. The total market cap of the rest of the crypto market (excluding the largest stablecoins) rose by about four percent.
As bitcoin’s price developed clearly better than the rest of the market, bitcoin dominance rose by nearly two percent (about 1.2 percentage points). As ether’s price developed weaker than bitcoin, the ETH/BTC ratio, in turn, saw a decline of about three percent.
Among the tokens in the Kvarn X trading service, the strongest weekly gains came from CRV (+16%), AAVE (+11%), and SUI (+11%). Among the few decliners of the upward-trending week were LDO (-5%), XRP (-3%), and S (-1%).
Bitcoin Hits All-Time High
The most significant event for crypto investors during the past week occurred yesterday, when the dollar price of the largest cryptocurrency, bitcoin, rose to a new all-time high. The price surpassed the previous record of around $109,000 on Wednesday, climbing to nearly $112,000 during the night into Thursday.
The breaking of bitcoin’s all-time high (ATH) is, naturally, a very significant event. Historically, the breaking of an ATH has often not marked the end of an upward move, but rather served as a catalyst for its acceleration. After bitcoin’s ATH, we have also often seen very sharp price increases in alt-coins.
Stocks Down, Bitcoin Up?
This time, the event is especially interesting because of the context in which bitcoin's new ATH was achieved.
The ATH day, Wednesday, was not particularly strong in the stock markets. In fact, it was strikingly weak. A poorly performing U.S. government bond auction caused U.S. bond yields to spike sharply, and the S&P 500 index dropped a notable 1.6 percent.
Based on everything we’ve seen so far from the price behavior of cryptocurrencies, such a day would have been expected to result in a clear down day for bitcoin as well. Instead, we saw bitcoin price rise to a new all-time high.
Such clear divergences between bitcoin’s price and the stock market are worth noting.
During the spring, we have highlighted in Kvarn Pulse newsletters the hypothesis of a potential decoupling between bitcoin and the stock market. Yesterday’s market events are one more data point in favor of this hypothesis.
To briefly recap why this decoupling would be significant:
Bitcoin has historically offered investors quite remarkable returns and an very good risk/reward ratio. However, it’s challenge as an asset has somewhat been that its price development has been strongly correlated with the stock market. If this correlation were to begin weakening, it would significantly strengthen bitcoin’s status as a widely accepted investment asset. High return expectations and non-correlated price behavior compared to the stock market are something like the “Holy Grail” that many investors optimizing their portfolio’s risk/reward profile are seeking.
As a caricatured example of how unusual the current situation is: bitcoin’s price is at its all-time high, while the Dow Jones stock index is below its 200-day moving average.
If decoupling were to occur, we might expect it to look something like this in its early stages.
Of course, no single day should be given too much weight—even when it brings a new all-time high. We consider Wednesday’s events to be new and interesting data point and will continue to follow the situation closely.
March 2024 or November 2024?
Some bitcoin investors use the heuristic that the best times to buy (more) bitcoin are a) at the bottom of a bear market, when bitcoin is declared dead, or b) in a bull market, when bitcoin sets a new ATH.
Historically, these rules of thumb have yielded good results, though we naturally have no guarantees of their future validity. What we can fairly confidently say, however, is that after an BTC ATH, the crypto market tends to enter a particularly interesting period, with plenty of events likely ahead.
An interesting framework for analyzing the crypto market after bitcoin’s new ATH could be to compare it to the two previous post-ATH markets (March 2024 and November 2024).
As a reminder:
In March 2024, the crypto market’s development after BTC’s ATH was seen by many eager crypto investors as a bit of a “fizzle”. At that time, bitcoin’s price exceeded its old ATH by only about ten percent. We also didn’t see a clear “alt-season” after the BTC ATH—where the alt-coin market as a whole would have yielded better returns than bitcoin.
In November 2024, however, following the U.S. presidential election and BTC’s ATH, a significantly stronger upward move occurred. Bitcoin’s price rose by over 40% in just over a month following the old ATH.
At that time, we also saw the alt-coin market clearly outperform bitcoin. For example, XRP, Cardano (ADA), and Hedera (HBAR) each saw their prices increase by several hundred percent within a few weeks.
So, this ongoing bull market can now be observed through the question: will the next developments resemble more March 2024, or November 2024?
It is naturally too early to draw conclusions just one day after new BTC ATH. Our starting point for analysis, however, is that we expect the coming weeks to more closely resemble the latest comparison point (November 2024), unless market development gives us reason to assume otherwise. It is usually unproductive to guess at the end of a market rally before there are any clear signs of one.
We consider it especially useful to monitor bitcoin dominance in the coming weeks.
If bitcoin dominance remains in an uptrend, it would indicate relative caution among crypto investors. In that case, we would keep our expectations for both bitcoin’s USD price development and the relative outperformance of alt-coins rather moderate. If, on the other hand, we saw bitcoin dominance turn downward, this could be a sign of a “full-on” bull run, with alt-coin prices soaring much like in November 2024.
At this very moment, bitcoin dominance is in a somewhat ambiguous state, allowing for both a new “higher low” and a “lower high” to be observed.
Interesting weeks ahead
In summary, we note that the crypto market became significantly more interesting overnight. A new ATH doesn’t guarantee a massive bull run, but bitcoin’s massive bull runs have often started from a new ATH.
The best advice at this point is to follow the crypto market’s development with heightened attentiveness. Movements during a bull market—especially near a peak—are often sharp, as volatility increases toward the top. In November 2024, we also saw how an “alt-season” can begin and unfold explosively.
We will continue to closely monitor the situation and return again next week with the Kvarn Pulse newsletter, so stay tuned!
