- Bitcoin and ethereum could soon race past their all-time highs, according to strategist Nick Cawley.
- Increased interest in crypto by retail investors, banks, and businesses has fueled the rally.
- Here are the five cryptos Cawley’s watching closely as positive sentiment sweeps the crypto market.
- See more stories on Insider’s business page.
Expect bitcoin and ethereum to test all-time highs as the cryptocurrency rally gains steam, driven by emboldened retail traders and higher adoption rates by banks.
That’s according to Nick Cawley, a strategist at DailyFX.com with over 20 years of experience trading fixed income products who’s bullish on the burgeoning asset class.
“It’s too big to be ignored any longer,” Cawley said in a recent interview with Insider. “And I think you will get ongoing adoption. I think the banks, investment companies, hedge funds are making the clearest inroads.”
Cryptocurrencies have attracted mainstream interest in the past year as central banks steadily increase the money supply through emergency monetary stimulus programs in response to the pandemic. Excess liquidity flowed into markets and inadvertently laid the groundwork for a rally in bitcoin, which has a capped supply of 21 million coins.
As retail traders flocked to digital assets, financial institutions like banks and brokerages have noted the trend and are now allowing wealthy retail clients to access crypto funds.
Corporations are also warming to the idea of swapping cash for the highly volatile digital assets.
Leading bitcoin bull Michael Saylor, CEO of business analytics software firm MicroStrategy, made waves last August by adding over $1 billion of bitcoin to his company’s balance sheet at an average price of $11,653 per coin. Bitcoin has climbed about 300% since then, and MicroStrategy (MSTR) shares have subsequently soared about 400%.
Tesla (TSLA) followed suit this February by adding $1.5 billion bitcoin to its balance sheet, but rampant volatility and a pullback from April highs have discouraged other corporations from committing to bitcoin.
The corporate adoption trend will continue at a slower, uneven pace, Cawley said. But there are other ways to embrace crypto without jeopardizing balance sheet stability.
Rumors have surfaced recently about Amazon and Walmart flirting with cryptocurrencies, and if the world’s two largest retailers outside of China accept crypto as payment, Cawley said it could drive another big bitcoin rally.
Bitcoin tumbled nearly 36% in May and struggled for direction for about two months before leaping 57% in the past month. Cawley doesn’t set specific crypto price targets but sees near-term upside for the world’s top cryptocurrency and said the “all-time high is under threat.”
“You are looking at a fresh multi-week high on the horizon,” Cawley said. “And that will lead, then, to higher prices. The recent block of consolidation we’ve had is a very positive driver and very positive factor to allow prices to move higher.”
A pullback driven by profit-taking was inevitable in an asset that surges as quickly as bitcoin did, Cawley said, adding that the digital asset is more likely to grind slowly higher than sudden soar “to the moon,” as Reddit traders like to say.
Environmental concerns about how much energy bitcoin mining takes as well as the risk of China’s crypto crackdown are worth noting, Cawley said, but he expects further positive price action as investors have continued to dismiss those doubts.
“With the market moving higher and the sentiment positive, I think it will take something quite substantial to knock it off its current course,” Cawley said. He added that regulation from the Securities and Exchange Commission could send crypto prices down in the short term, even if it legitimizes the space and draws new investors to cryptocurrencies in the long term.
Bitcoin and ethereum, which Cawley said could also soon set an all-time high, are the barometer for the rest of the crypto market. Positive price action from the two largest digital assets can be “a rising tide floating all boats” and lead to outsized altcoin gains, Cawley said.
“Some people are hoping that they find the next bitcoin deep down in the next layers of the altcoin market,” Cawley said.
There are “often more opportunities” in the rapidly expanding altcoin market, Cawley said, though the failure rate of little-known coins is remarkably high because most never gain traction. The more noticed they become, the more attractive they become, Cawley noted.
Here are the five cryptos Cawley said he keeps a close eye on:
- Bitcoin (BTC), the largest crypto by market cap, which has a capped supply of 21 million and is up 69% this year
- Ethereum (ETH), the second-largest coin by market cap, which recently underwent a major upgrade that changed the way transaction fees are calculated
- Dogecoin (DOGE), the token that originated from a meme but has now gone mainstream, thanks to endorsements from the likes of Tesla CEO Elon Musk
- Solana (SOL), a “well-designed ethereum competitor,” in the words of popular investment strategist Lyn Alden
- Cardano (ADA), an altcoin that’s up 37% in the past week and earned the endorsement of crypto bull and entrepreneur David Gokhshtein
Cawley doesn’t formally recommend or share price predictions for cryptocurrencies, but he said his favorites are ethereum and Cardano, adding that both may have further room to run.