Digital Assets Market Review: February 2021

February was an eventful month for Bitcoin and Ethereum as each digital asset reached new all-time highs. Bitcoin led the march higher and garnered most of the headlines dragging the rest of the market up with it.

Early in the month, we saw Elon Musk announce that Tesla would add $1.5 billion in BTC to the balance sheet. 

Until this point, Michael Saylor had been the corporate voice championing bitcoin as a balance sheet reserve asset, buying billions worth of Bitcoin for Microstrategy. However, Tesla’s entry into space has opened the door for other CFOs considering diversifying into digital assets. 

The news skyrocketed BTC prices up over 20% on February 8th, a rally that continued over the next two weeks and saw Bitcoin mint fresh all-time-highs around $58,500. However, the move was too far too fast for the crypto heavyweight, and profit takers pushed the price down 28.8% into month-end from peak to trough.

Note: Watch our monthly market breakdown with Nate Cox here

Despite the large pullback and a moderate move higher in implied volatility levels, the February pullback remained orderly, and we didn’t see wide-scale panic.

Given January also saw a ~30% pullback from highs for both BTC and ETH, you could argue this type of price action is relatively normal for digital assets, and investors have become somewhat accustomed to the large fluctuations in returns. 

With attention in the Ethereum markets focused mostly on “gas” rates and DeFi adoption, ETH is off to an impressive start to 2021. In January, Ethereum prices rose by roughly 78%, cooling off somewhat in February with a mere 8% rise. 

Like Bitcoin, Etherum posted impressive mid-month gains, breaking above the $2000 level for the first time, up over 40% from the open on Feb 1.  However, gravity took hold, and like Bitcoin, it retraced significantly from the highs, actually giving back all of February gains temporarily, and finished the month up a modest 8%. 

As was true in January, Two Prime was able to take advantage of these volatility swings in both Bitcoin and Ethereum and generate coin inflows as the prices in USD terms deteriorated. 

While we remain net bullish into the future, expect continued volatility from this recent pullback as leveraged traders recover from liquidations and new investors wait to see price stability reclaimed before the next move higher.