Cardano Surges 20% Amid Bitcoin's Expected Pullback to $40K

• Layer 1 Tokens ADA, ALGO, DOT, SOL Lead in Performance as Shift from BTC Boosts Altcoins
• Current Market Trends
• Performance of Notable Tokens
• Potential Future for BTC
• Understanding CME Price Gaps
• Historical BTC Price Gaps and Rally
• Institutional Inflow into Bitcoin Underestimated
• Anticipated Buyer Interest
• Bitcoin Predictions

Layer 1 Tokens ADA, ALGO, DOT, SOL Lead in Performance as Shift from BTC Boosts Altcoins

Crypto analyst Willy Woo suggests that Bitcoin$42,260 -0.64% may drop to $40,000 to fill the CME price gap. Layer 1 (L1) blockchain native tokens saw the most significant gains on Friday. Cardano (ADA) stood out as the top performer, with a robust Bitcoin (BTC) price fueling the shift of capital to altcoins. Throughout the day, Bitcoin fluctuated between $43,000 and $44,000, quickly recovering from a small drop after a stronger U.S. employment report than expected, which dampened interest rate cut expectations for the coming year.

Current Market Trends

Bitcoin was recently trading around $43,800, consolidating while investors processed its fast rally to nearly $45,000 this week after breaking out from $38,000 a week ago. In contrast, altcoins surged widely, echoing early November's altcoin rotation when slowing Bitcoin momentum encouraged traders to realize some gains and invest in smaller, riskier cryptocurrencies. These shifts of capital are common in the crypto markets following significant Bitcoin run-ups, then followed by a rally in larger crypto assets, then among meme coins and micro caps as traders seek tokens that haven't yet moved to make a profit.

Performance of Notable Tokens

ADA saw a 25% surge to 57 cents at a point during the day, its highest price since August 2022. It relinquished some of its early gains later in the day but remained up almost 20%. Other notable top performers were Polkadot$8.21 -2.51% (DOT), Algorand (ALGO), and Solana$104 5.03% (SOL) native tokens, posting gains of 7%-11%. The CoinDesk Market Index (CMI), made up of nearly 200 cryptocurrencies, rose 1.5% throughout the day, outperforming BTC and highlighting altcoin performance.

Potential Future for BTC

As the momentum of Bitcoin slowed, some analysts suggested a possible pullback to retest lower price levels. Willy Woo, a Bitcoin-focused analyst, suggested a price level between $39,000-$41,000 based on a price gap in the Chicago Mercantile Exchange (CME) Bitcoin futures market, which BTC might fill in the future.

Understanding CME Price Gaps

Price gaps occur because the CME futures market, unlike native crypto exchanges like Binance or Deribit, do not trade round the clock, and there might be a difference between closing and opening prices depending on Bitcoin's price action when the market is closed. Some analysts believe that asset prices tend to revisit these levels during a correction, filling the gap.

Historical BTC Price Gaps and Rally

Bitcoin rallied last weekend, crossing $40,000 when the CME futures market was closed, creating a price gap on the chart. By my count, 28 out of 30 gaps have been filled on CME daily candles (93%), Woo posted on social media. However, these gaps do not always get filled. For instance, BTC has not revisited the CME gap at around $20,000 yet, which was formed in March during the weekend collapse of Silicon Valley Bank (SVB).

Institutional Inflow into Bitcoin Underestimated

Despite a potential short-term pullback, Bitcoin's outlook is bullish, with increasing interest among institutional investors, as per Hany Rashwan, co-founder and CEO of digital asset management firm 21.co, in an interview with CoinDesk TV. Rashwan expressed that market observers are underappreciating future inflows into BTC if a spot-based exchange-traded fund gets approved in the U.S, which is likely according to analysts.

Anticipated Buyer Interest

There are a lot of prospective buyers who wanted to invest in crypto but have been prohibited to do so because of regulations, Rashwan said. He noted that 75% of inflows into digital asset funds in the past year happened in the last 60-90 days. That's not normal, he said, adding that it's a sign of change in sentiment across primarily institutional players.

Bitcoin Predictions

Rashwan foresees all-time high prices for Bitcoin, but not in the short term. I think we will beat the Bitcoin all-time highs sometime in the next 12-18 months, he said. We are not fully out of the woods yet.

Edited by Jonathan Stoker