Cryptocurrencies ended the week on a strong note as Bitcoin (BTC) continued to consolidate above $43,400, while both large and small-cap altcoins climbed higher as traders started to fully embrace the burgeoning bull market.
Stocks initially trended higher on Friday after the November release of the Personal Consumption Expenditures (PCE) price index – the Fed’s preferred inflation reading – showed pricing pressures continued to fall, declining from 3.4% a year ago to 3.2% last month. Analysts had expected a 3.3% annual increase.
This strengthened expectations that the Fed will reduce interest rates early in 2024, with the CME FedWatch Tool showing that the market gives a 90% chance that the first interest rate cut will come in March.
The afternoon saw a reversal of fortunes, however, with the major indices experiencing a sharp sell-off as investors looked to close out positions ahead of the long holiday weekend and potentially muted price action next week, ahead of the New Year.
At the market close, the S&P and Nasdaq managed to climb back into the green, finishing up 0.17% and 0.19%, respectively, while the Dow lost 0.05%. Both the U.S. 10-year Treasury note and DXY experienced a brief sell-off after the PCE release but bounced back as the trading session progressed, with the 10Y gaining 0.3% and the DXY finishing flat.
Data provided by TradingView shows that Bitcoin hit a high of $44,420 in the early hours on Friday before dipping to a low of $43,410 near midday. From there, bulls pushed the price action higher, and at the time of writing, BTC trades at $43,700, a loss of 0.2% on the 24-hour chart.
According to Kitco senior technical analyst Jim Wyckoff, “A price uptrend is in place on the daily bar chart” for Bitcoin, “and bulls still have the firm overall near-term technical advantage. The path of least resistance for prices remains sideways to higher.”
Ethereum (ETH), the second-ranked crypto by market cap, rallied from $2,240 at the daily open to a high of $2,345, an increase of 4.75%.
While the majority of analysts remain bullish on Bitcoin ahead of the potential approval of the first spot BTC ETF, they are also warning that BTC may be a little overheated, and it could continue to trade sideways or lower while alts, especially Ether, rise.
“If you’re buying BTC here now for the ETF approval you are likely months too late,” tweeted market analyst CryptoGodJohn. “Yes, I think we can push to $48-$50k, but the rotation into ETH has already begun and the [ETH] ETF is not yet priced in.”
According to MN Trading founder Michaël van de Poppe, “The Bitcoin dominance is likely peaking pre-Bitcoin halving. That means that Q1 is going to give a great return for investments in the ETH ecosystem.”
“The year's first quarter is an excellent period for the Ethereum ecosystem based on historical price action,” Poppe said. “The last quarter of the year is the worst for the Ethereum ecosystem. This remains valid until proven otherwise, and the previous quarter showed the same.”
He noted that Ether received a larger share of the spotlight in 2022 after completing the transition from proof-of-work to proof-of-stake, but said the impacts of that transition would take time to be reflected in its price.
“That impact will occur in the coming year with the fundamental growth of the entire ecosystem leading to more interest in Ethereum, which now might become deflationary and a way more exciting investment asset than Bitcoin,” he said. “Just as Bitcoin has a Spot ETF application, Ethereum has the same popping up, which will be after Bitcoin's approval. This might be even more significant than Bitcoin as this would open the doors for dApps to be built on Ethereum and classified within ETFs.”
He added that Bitcoin has historically outperformed the market during pre-halving periods, but eventually, the new money flows out of BTC and into altcoins, starting with Ethereum.
“Bitcoin has seen a rally from $25,000 to $45,000, which might mean that we can continue rallying, but if we stay honest, the upside is probably skewed on that one, and the money will adapt towards other altcoins,” he concluded.
Altcoins finish the week strong
Altcoins continued to benefit from Bitcoin’s sideways trading as the majority of tokens in the top 200 recorded gains to end the work week ahead of the Christmas holiday.
Ethereum layer-2 scaling solution Optimism (OP) led the gainers, climbing 31.6% to trade at $3.33, while Treasure (MAGIC) increased by 22%, and Arbitrum (ARB) increased by 19.2%. Helium Mobile saw a second day of declines, falling 26.7%, while Fusionist (ACE) lost 13.6%, and Neutron (NTRN) fell 13.4%.
The overall cryptocurrency market cap now stands at $1.67 trillion, and Bitcoin’s dominance rate is 51.4%.
