Institutions, not retail, in the driver’s seat
As Bitcoin’s price soared past the key $10K, the main factors driving the rally this time around are much different than they were in late 2017.
Analysis
As bitcoin’s price keeps setting new yearly highs, the question on everyone’s mind right now is whether it’s different this time. Let’s take a closer look at why this rally is nothing like the “bubble” in 2017.
Bitcoin all-time performance. Source: coin360.com
As many experts pointed out, BTC going above the key psychological $10,000 mark is likely to trigger FOMO (i.e., fear of missing out), according to Fundstrat’s Tom Lee, who adds that bitcoin can now easily take out its all-time highs.
Other market analysts, such as Tone Vays, however, disagree. He told Cointelegraph:
“I actually don’t think it’s important at all. The $10,000 benchmark did nothing to slow down price back in 2017. And it looks like it did nothing to slow down the prices here in 2019.”
Bitcoin broke through into the mainstream in late 2017. At the time, its historic surge to nearly $20,000 was driven mainly by retail investors. This time, however, the public is still largely on the sidelines, according to Google Trends.
In fact, the number of Google searches for “bitcoin” is only around 10% of what they were in 2017. In other words, retail investor FOMO has not even started yet, which may suggest that BTC price could go much higher than last time.
On the other hand, institutional demand for bitcoin has soared. As of June 17, open interest at CME Group saw 5,311 contracts totalling 26,555 BTC, or approximately $246 million — dwarfing the volumes during the 2017 price peak.
“CME Bitcoin futures (BTC) shows growing signs of institutional interest,” CME Group tweeted June 18.
“BTC open interest rose by a record 643 contracts in a single day, establishing a new all-time high of 5,311 contracts on June 17 (26,555 equivalent bitcoin; ~$250M notional).”
Other indicators, such as the GBTC price premium as well as record volume for bitcoin derivatives exchange BitMEX (on a Saturday!), also suggests that “smart money” is pouring in.
As Cointelegraph reported on Friday, hash rate hit a new all-time high at over 65,000,000 TH/s. In other words, Bitcoin is more secure than ever and would require an unfathomable amount of computing power to affect the network.
Bitcoin network Hash Rate. Source: blockchain.com
Meanwhile, other fundamentals have also grown in lockstep with hash rate. Daily on-chain transaction volume, block size and other metrics are also confirming that more people than ever are using bitcoin.
Additionally, network transaction fees have remained relatively low compared to 2017, with optimizations like SegWit and off-chain scaling solutions like the Lightning network helping ease congestion.
The latest rally to five figures is also happening way before the Bitcoin block reward halving set for May 2020. This is when mining block rewards will be cut from 12.5 to 6.25 BTC, thus reducing the bitcoins minted by miners who are naturally market sellers.
Interestingly, the previous halving event occurred in the summer of 2016 — or more than a year before the price skyrocketed.This time, however, BTC/USD appears to be front-running the event, as the halving is still 333 days away.
A popular bitcoin market analyst known as PlanB suggests that investors may not be waiting this time around for the expected reduction in supply. He added:
“Front running would be in line with Efficient Market Hypothesis: if you believe S2F and that BTC will be $50k May 2020, why wait?”
Of course, intraday BTC price moves are not as important for low time preference investors. These “hodlers” are confident that bitcoin — with its fixed supply — will outperform fiat currencies, whose supply is growing at an accelerating pace over the long term.
On June 18, European Central Bank head Mario Draghi hinted that a monetary stimulus is on the way if the economy doesn’t improve. This is an increasingly dovish tone that was applauded by the financial sector.
At the same time, Draghi was criticized by United States President Donald Trump, who said this would spark unfair European competition against the U.S., whose Federal Reserve bank is also suggesting it will hold off on raising interest rates.
Morgan Creek co-founder Anthony Pompliano tweeted that this will make bitcoin even more scarce as interest rates go lower and more fiat currency is created:
“Cut rates.
Print money.
Make BTC more scarce.
Long Bitcoin, Short the Bankers!”
Therefore, the biggest macroeconomic picture looks bright for bitcoin investors who are dumping ever-depreciating fiat currencies for hard-capped “digital gold.”
What’s more, investors are starting to not only realize that bitcoin’s supply is fixed and transparent, but it’s also the world’s first neutral, open-access money that no authority can control.
In other words, what the internet did to information, bitcoin is starting to do to money.
Historic BTC market cycles, rising institutional interest alongside an increasingly robust network fundamentals, as well as the confirmed depreciating value of fiat currencies, could all propel bitcoin’s price orders of magnitude higher than in 2017.
Crypto markets one-week performance. Source: coin360.com
Buy some bitcoin. You’ll thank yourself.
bro but the price is too high right now. And so it might fall in few days because of libra
why the hell would i want to spend hard earned money on a crap coin that was once under 5 cents each? you think il thank myself. I couldnt care if this went to over 100k To hell with the scam.
Wtf do you mean scam? You sound salty about something
The Banksters are in panic mode. Their fiat scam days are nearly over, watch out for weeping and gnashing of teeth and running to the political puppets to ban Cryptos.
The smartest and easiest way to earn in bitcoin while it’s bullish is to invest in crypto cloud mining services like genesis-mining.com or gominer.co because you can have the advantage of their services and profit more.
Who in their right mind would withdraw over $15,000 Australian Dollars of their hard earned money. To buy just one Bitcoin? You would have to be completely insane. Bitcoin use to be under 5 cents each. Bitscam i like to call it. Is just that. Paying over $15,000 for one digital out of thin air CRAP! thats ll it is. CRAP!! Bitcoin is controlled. You cant buy the damn thing here without heaps of checks and photo ID. Do you people actually believe you are one step ahead of the banks?? The banks will drive this up then take all your money. Good luck with BITSCAM. It should be outlawed.
Cool
Someone is salty AF. It has value because of the millions of TERAHASHES of computing power. That’s what a bitcoin is, a complex mathmatical algorithm. Now why does a dollar have value? Because the gov’t says so? Ok. Fiatscam!
Bitcoin doesn’t require you to understand it and those who do invest won’t mind your opinion while they enjoy their investment. G’day, “mate.”
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Institutions, not retail, in the driver’s seat
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