The end of 2017 sparked an unprecedented surge in Bitcoin [BTC] prices, which led to a broader rally in the market. The prices of Ethereum [ETH] and Litecoin [LTC] must be closely watched, because a rally in these coins could serve as a potential signal for the crypto market bottoming out, according to Clem Chambers, CEO of financial website ADVFN.
However, all cryptocurrencies have been struggling recently under intense selling pressure in the broader market. At the time of writing, Bitcoin was trading 0.5 percent lower against the U.S. dollar at $7,339.8. Litecoin slid 4.7 percent to trade at $86.53 while Ethereum fell 4.4 percent to trade at $476.34.
“ETH and LTC have the alpha on Bitcoin. As such, it would make sense to watch them as a way to catch the bottom with some extra pop,” Chambers wrote in a Forbes article. According to Chambers, both ETH and LTC gave enough advanced warning last year, so he expects these coins to exhibit such signs this year as well.
Bitcoin bubble cycle
BTC had scaled peaks of close to $20,000 against the U.S. dollar last year. Although BTC peaked first, LTC and then ETH were quick to follow, with their prices scaling new heights. Earlier last year, ETH had actually outperformed BTC and signaled the start of the bubble cycle.
Chambers noted that the sudden escalation in the prices of digital assets was mainly because cryptocurrencies were slowly emerging from obscurity into the mainstream.
The term ‘bubble’ refers to the rapid surge in asset prices driven by unwarranted buying in the market. This is then followed by a massive sell-off when the prices have peaked to the point where the assets can no longer find buyers at such high prices.
The bubble cycle for Bitcoin has burst, Chambers said, and it is very similar to the dotcom bubble which happened roughly between 1997-2001. During the dotcom bubble, investors flocked to put their money on Internet-based companies.
If one were to buy such assets when their prices bottom out, one will definitely mint serious profits going forward.
Though the market is currently trading in the bearish territory, Chambers along with many crypto enthusiasts believe that the next boom in prices could take place once more influential people in the mainstream start to understand the workings of these virtual currencies.
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