Opinion Markets Software Technology
May 20, 2024

Analysing Market Dynamics: Bitcoin’s Stability, Ethereum’s Growth, and the Decline of Meme Coins Post-Halving

In Brief

The Bitcoin halving event on April 19, 2024, marked a significant shift in the crypto markets.

It has been one month since the highly anticipated Bitcoin halving event on April 19, 2024, when the reward for mining new bitcoins was cut in half. This occurrence, which happens roughly every four years, has historically had a major impact on the crypto markets. Let’s take a look at how things are shaping up one month later.

Bitcoin Still Shows Resilience

In the weeks leading up to the halving, there was widespread speculation about how Bitcoin’s price would react. Some analysts predicted a huge rally as the reduced supply kicked in, while others warned of a potential sell-off as miners looked to offset lower revenues.

As it turns out, neither of those extreme scenarios played out. Bitcoin has held relatively steady since the halving, trading in a range between $60,000 and $70,000. This price stability is being viewed as a positive sign by Bitcoin bulls.

“Bitcoin has demonstrated remarkable resilience in the face of this latest supply shock,” said crypto analyst Ran Neuner. “The fact that it hasn’t crashed shows there is real, sustained demand at these levels.”

Neuner and other technical analysts see the potential for Bitcoin to rally towards $84,000 in the coming weeks if it can decisively break above the $70,000 resistance level on high volume. They point to bullish indicators like the stochastic RSI showing a buy signal on weekly charts.

The main analyst at Bitget Research, Ryan Lee, stressed the significance of stablecoin market capitalisation and ETF flows in forecasting the future movements of Bitcoin. He pointed out that the poor performance of Bitcoin in April was caused by net withdrawals from exchange-traded funds that held the cryptocurrency. The current data for May indicates “large inflows and small outflows,” however, raising the possibility that the pressure on bitcoin’s decline is abating.

Others are more cautious, noting that previous Bitcoin market cycles suggest the biggest price rises don’t happen until over a year after the halving as the reduced supply really starts getting absorbed.

Despite technical evidence pointing to a possible decline, Matt Bell, CEO of Turbofish, an open-source blockchain technology business, suggests evaluating Bitcoin’s price movements within the larger context of its technology and market dynamics. He draws attention to the robustness of Bitcoin, which stems from its solid technological base that includes a decentralised design and an unchangeable ledger.

Ether Steals the Show

While Bitcoin has held steady post-halving, the real star of the show in recent weeks has been Ethereum and its native token Ether (ETH). Buoyed by the prospect of a spot ETH exchange-traded fund getting approved in the coming months, ETH has rallied over 30% against Bitcoin since the halving.

Much of the enthusiasm has centred around the continued growth of Ethereum’s layer-2 scaling solutions and the booming ecosystem of decentralised apps and services they support. High fees on the Ethereum base layer are being seen as less of a pain point as more activity migrates to these low-cost layer-2 chains.

According to the Coinbase report, the US government’s licensing of spot bitcoin exchange-traded funds (ETFs) has strengthened the argument for crypto as a store of value and a major asset. Ethereum’s core posture is still unclear, though, since other layer-1s like Solana threaten to displace Ethereum as the preferred network for deploying decentralised apps. 

The asset’s value accrual procedures are also impacted by the increase in Ethereum layer-2s and the decrease in ETH burn. Ethereum’s long-term standing is still strong despite these obstacles, with benefits like its decentralised and secure mainnet, the growth of its EVM platform, and the maturation of Solidity’s developer community. ETH’s past trading patterns show that it may provide stories about technological tokens as well as stores of value.

Another tailwind for Ethereum has been the relentless inflows into liquid ETH investment vehicles like the Grayscale Ethereum Trust and ETH-focused funds from players like Blackrock. With a spot ETF potentially opening the floodgates for even more institutional money, some analysts are calling for ETH to hit $5,000 or higher by year’s end.

Of course, Ethereum’s transition to proof-of-stake has brought new risks around centralisation and complexity that Bitcoin supporters are quick to highlight. Only time will tell if these layer-2 scaling solutions deliver on their promise.

Meme Season Goes Bust

While Bitcoin has chugged along steadily and Ethereum has shined, the scene has been quite different for many alternative cryptocurrencies – especially meme coins and other speculative tokens.

Meme coins like Pepe (PEPE) and Shiba Inu (SHIB) were all the rage in the weeks leading up to the Bitcoin halving, with prices going parabolic as new money poured in. Traders talked excitedly about “meme season” being in full swing.

However, the tides seem to have turned over the past month. Many of the top meme coins are down 30% or more from their recent highs as the euphoria has faded. Projects with questionable fundamentals and low liquidity have been hit especially hard.

“The trading frenzy around meme coins was clearly overheated and due for a major cooldown,” said Neuner. “When the hype cycle reverses, these low-cap coins with big diluted valuations get slammed on any profit-taking.”

The plunge in meme coin prices has served as a sobering reminder that not every altcoin rallies forever against Bitcoin. There is a constant market cycle of rotations happening, with money flowing in and out of different themes and narratives.

Some crypto analysts are now speculating that the next phase could see capital rotating back into more established “blue chip” altcoins like Ethereum, Solana, and Polygon as traders look for lower-risk ways to gain upside exposure beyond just Bitcoin.

Overall Verdict: Healthy Market Dynamics

When looking at the overall crypto landscape one month after the latest Bitcoin halving, most commentators seem to agree that we are seeing healthy market dynamics playing out.

Bitcoin has held up well amidst the supply shock, reinforcing its status as a mature asset with strong fundamental demand drivers. Meanwhile, Ethereum has shined as an avenue for more speculative investing in use cases beyond just digital gold.

At the riskier end of the spectrum, the meme coin frenzy appears to have been a brief account of fleeting excess and speculation. While painful for those caught on the wrong side, these cycles ultimately serve to shake out weak hands and reset narratives.

According to the experts, “When you look at Bitcoin absorbing the halving with minimal volatility while money rotates between Ethereum and the altcoin casinos, it really does seem like the crypto market is maturing in a healthy way.”

As the crypto market heads into the always-volatile summer months, the early innings after the latest Bitcoin halving have set the stage for what could be an epic cycle filled with twists and turns.

Disclaimer

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About The Author

Viktoriia is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.

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Viktoriia Palchik
Viktoriia Palchik

Viktoriia is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.

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