Bitcoin Yields 14.30% Gains in January as Demand Skyrockets

Indeed, BTC’s price opened on January 1st at a low of $28,997, and seven days later, it had risen by nearly 45% to hit a new all-time high of $42,000, according to CEX.IO’s exchange rate.

Despite the significant gains incurred within such a short period, Bitcoin experienced one of the largest one-day corrections since March 2020’s Black Thursday, shortly after reaching record highs. Its price plunged by more than 28%, to hit a low of $30,333.

Some whales took advantage of the downswing to add more tokens at a discount to their portfolios. As prices plummeted, the number of addresses holding 1,000 to 10,000 BTC surged by nearly 2%. Approximately 43 new whales joined the network at the time, helping Bitcoin rebound to $40,100 by January 14th.

Although investors seemed hopeful about another leg up that could see BTC rise above $50,000, one on-chain metric forecasted that a local top had been reached.

The Entity-Adjusted Spent Output Profit Ratio (aSOPR) indicator anticipated that Bitcoin was bound for further losses. This fundamental metric represents the profit ratio of BTC tokens moved on-chain, measured through the variation between the purchase price and sale price.

Each time this on-chain index rose to near a value equal to or higher than 1.20 over the past eight years, it served as a sell signal leading to a steep correction. On January 14th, the aSOPR was hovering at a value of 1.24, suggesting that BTC would likely enter a considerable corrective period before its uptrend resumed.

What came next was a 28% retracement that saw Bitcoin dip below the $29,000. But prices did not last long around this level as Grayscale seems to have bought the dip to meet institutional demand. The firm reportedly added more than 41,500 BTC to its holdings, worth roughly $1.3 billion.

The significant spike in upward pressure helped BTC recover towards the end of the month to close at $33,172. Bitcoin holders were able to grasp a monthly gain of 14.30% throughout January.

Ethereum Generates Over 78% Monthly Gains While Tokens Flee Exchanges

Ethereum was able to catch up with Bitcoin’s impressive bull run throughout January despite investors’ skepticism. The launch of the ETH 2.0 deposit contract in December 2020 was expected to quickly generate a supply shock, pushing prices to new all-time highs. But as Ether went into a consolidation phase first, market participants became concerned about its future price action.

Even though it took some time for the Beacon Chain news to be priced in, the first ten days of January demonstrated that Ethereum was poised to surprise even the most skeptics.

The second-largest cryptocurrency by market capitalization opened the monthly trading session at a low of $738.13 and quickly began trending upwards. By January 10th, Ether had climbed by more than 80% to reach a high of $1,347.55.

Long-term investors that had been underwater since Ethereum last traded around these price levels appear to have booked in profits en masse. The sudden spike in selling pressure was followed by a 32.70% downswing, pushing ETH’s market value to $900, according to the exchange rate from CEX.IO.

Regardless of the massive losses incurred during this correction, market participants rushed to cryptocurrency exchanges to buy Ethereum at a discount. As buy orders were getting triggered while overleveraged traders were getting liquidated, ETH was able to rebound and hit a new all-time high of $1,440 on January 19th.

From that moment on, Ethereum price began to make a series of higher lows while the $1,440 resistance continued to reject it from advancing further. Such market behavior formed a massive ascending triangle on Ether’s 1-day chart. A horizontal trendline developed along with the swing highs, while a rising trendline developed along with the swing lows.

Although Ethereum closed in January at $1,315, providing investors a whopping monthly gain of more than 78%, the ascending triangle pattern forecasts that prices are bound for higher highs. By measuring the distance of the triangle’s widest range and adding its x-axis, it projects that Ether is prime to rise another 37% towards $2,000.

FOMO is About to Kick In

Regardless of the massive gains that Bitcoin and Ethereum generated in January, both of these cryptocurrencies seem primed for higher highs.

From a technical perspective, the formation of a descending triangle on BTC’s 1-day chart forecasts a target of $45,000. Meanwhile, the ascending triangle that formed on ETH’s 1-day chart could see it rise to $2,000.

When looking at the Stablecoin Supply Ratio (SSR) indicator, the bullish thesis holds. This on-chain metric has been steadily declining since the beginning of the year as more stablecoins are minted to meet the market’s demand. A low SSR is indicative of mounting buying power ready to flow into the cryptocurrency market.

As more stablecoins get deposited into exchanges, it signals that investors are positioning themselves to re-enter the market. A potential breakout of the technical patterns previously mentioned may ignite FOMO among market participants who will want to get a piece of Bitcoin and Ethereum. Under such circumstances, these cryptocurrencies could easily break new record highs.

Konstantin Anissimov, Executive Director at CEX.IO