Crypto market buoyant in final quarter of the year. Will it stay that way? 2021

This October, Bitcoin (BTC/USD) saw gains of more than 77% compared to its 2013 levels. The month of Halloween started on a high note, with the flagship crypto passing $50,000 again. It wasn’t just Bitcoin – the whole market boomed, with the overall crypto market cap going above $2 trillion. Will the tendency sustain itself?

According to the experts with Coinbase, that’s very likely for four reasons: impending ETF approval, the Fed’s decision not to ban crypto, the appeal of Bitcoin as a hedge against inflation, and rapid adoption of the Lightning Network.

Powell has ‘no intention to ban’ crypto

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

The day after Federal Reserve Chairman Jerome Powell’s comment about not intending to ban cryptocurrencies, the prices of Bitcoin and Ethereum (ETH/USD) increased by more than 10%.

Impending ETF approval

There are high hopes that we’ll finally see the first BTC exchange-traded fund in the US. The SEC seems to support CME-traded Bitcoin futures.

Lightning Network going mainstream

Bitcoin is being helped by swift adoption of the Lightning Network, a “layer 2” solution that makes the whole network move faster. It is now able to support transfers of around 3,000 bitcoin (about $148 million). Both Twitter’s Bitcoin tipping function and El Salvador’s Chivo wallet run on the Lightning Network.

Bitcoin as a value store

Bitcoin is gaining appeal as a hedge against inflation. Last week, the world’s top central banks concurred that inflation would keep rising, propelled by Covid-related supply chain disruptions. In countries using the euro, inflation in September was up 3.3% y/y, the biggest increase in 12 years. This paled in comparison to the US, where consumer prices rose by 5.2% in August y/y.

Crypto fundamentals are much stronger than last year

Rewind one year. We witnessed the biggest bull run in the history of crypto. Bitcoin rose by $50,000 in five months (from $10,000 to $60,000). While conflicting signals remain, it’s hard to argue that crypto’s fundamentals have weakened since last year. More importantly, digital assets are becoming part of more and more people’s lives, including assets like DeFi protocols and NFTs.