Fundamental Factors Drive Cryptocurrency Prices to New Highs
VYSYN Ventures Weekly Insights #73 - Polkadot, Bitcoin, and Ethereum examples of shift in market forces
Interoperability blockchain platform Polkadot is leading a new wave of price discovery heading into the final months of 2021. With the platform’s parachain auctions around the corner, its native cryptocurrency DOT rose to a new all-time high.
Polkadot’s explosion is happening at a time when Bitcoin, Ethereum, and several other cryptocurrencies also look primed for more upside moves. In the latest VYSYN Release, we examine the nature of these price surges and how they seem to be occurring due to fundamental factors in the blockchain and cryptocurrency industry.
Fundamental changes push cryptocurrency prices higher
Cryptocurrencies have always fluctuated up and down. In the past, these moves have contained major speculative forces behind them, prompting warnings from fundamental-driven investors. However, this picture is changing. For some projects development updates have fuelled increased adoption, while for others like Bitcoin, friendly regulatory policies have fueled surges.
Polkadot, a multichain protocol that is designed to facilitate cross-chain transactions across different blockchains, offers a good example of this phenomenon. Its parachain auction is a significant milestone that has been expected by the cryptocurrency community for a long time. As such, Polkadot adds immense value to the blockchain ecosystem by enhancing interoperability, a significant roadblock to blockchain adoption.
The parachain auctions are a major milestone towards achieving greater interoperability. When activated, these parachains will allow transactions to be spread out and processed in parallel to each other, across different protocols. This will also significantly improve the throughput and scalability of the Polkadot network, making the project even more attractive to developers.
On November 1st, 2021, Polkadot announced via its Twitter handle that the motion to enable parachain registration and crowdloans had passed Polkadot's council and gone to a public referendum. The project also made it known that if passed, parachain teams will be able to register their parachain and open their crowdloan on November 4th, 2021.
This announcement has clearly triggered a long-anticipated surge in the price of DOT above the $50 level, with fans of the project predicting higher levels in the future. For instance, cryptocurrency analyst, Michael van de Poppe has indicated that if crucial levels hold, we might see DOT prices continue moving higher up to $75.
Bitcoin and Ethereum move due to fundamental forces
Polkadot is not the only blockchain project experiencing price surges due to fundamental changes. Other top blockchain and cryptocurrency projects have experienced some positive developmental and regulatory adjustments recently. The most famous one was perhaps the launch of the ProShares Bitcoin Strategy ETF in the United States. This was a sign of mainstream approval that raised market sentiment. It is yet another sign that cryptocurrencies are here to stay and that mainstream adoption is close to fruition.
ETF approval by the SEC opens the cryptocurrency market for a new category of investors with different risk appetites. As a result of this approval, Bitcoin prices surged to a new high, establishing bullish sentiment for Bitcoin and other cryptocurrencies. Bitcoin prices retreated after the initial surge, but have since bounced off support with the market set to target higher levels.
Ethereum also experienced huge fundamental changes that pushed prices higher. The network announced a protocol update that moves it closer to the much anticipated Ethereum 2.0. This will transition the network’s consensus algorithm from a Proof-of-Work (PoW) to a more efficient and secure Proof-of-Stake (PoS) protocol.
We recently highlighted an update on Ethereum’s Beacon Chain, termed Ethereum Altair, was successfully executed by the development team. As expected, successful execution of this update caused an upward surge in the price of ETH, as the cryptocurrency pushed above the $4,500 level.
The positive vibe created by these leading cryptocurrencies seems to be spreading across the entire cryptocurrency market. Not only are crypto prices climbing higher, project teams seem to be finding the time. The Fear and Greed index of the cryptocurrency market is currently at a high level, with more room to explore up top.
Historically, users have reacted in cryptocurrency markets either as a result of the Fear of Missing Out (FOMO), when the market trends higher, or Fear Uncertainty and Doubts (FUD), which causes market declines. At the time of writing, the Fear and Greed index is at 73.
Conventional wisdom suggests that it’s time for investors to become fearful of overvalued prices. However, given the fundamental shift in market forces, one could argue that the markets have reached sustainable price levels.
Present market conditions are bullish and price rises are not being fuelled by mere speculation. There are fundamental developments among major blockchains that promote adoption. As such, this is a great sign for an industry that is stepping into another phase of maturity.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown to USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocations, versatile marketing support, and tech assistance.