In the history of financial markets, there are only a few tradable assets that have conquered this frontier. Currently, Bitcoin has the eighth highest market value among all tradable assets in the world, including stocks and commodities. Among the top 10 exchange-traded assets, it sits right above Tencent, which turned Bitcoin around with its eventual boom past the $ 1 trillion mark, including Facebook, which was reversed earlier this month.
Bitcoin is just one step away from Google and two steps away from silver. Considering the history of commodities such as silver and gold, which has been traded for centuries now, the history of Bitcoin is extremely short and only started in January 2009 as an experiment. Even stocks like Google and Tencent have a history of two decades, while Apple and Microsoft have had more than four decades.
Was Bitcoin’s last boom organic?
When analyzing the timing of Bitcoin eventually destroying this landmark, it is clear that there were no major institutional announcements that led to the increase in market capitalization. The Bitcoin Coinbase Premium Index by the provider data provider CryptoQuant – if the premium is high, it indicates strong purchases on Coinbase – suggest that the Coinbase premium was negative at the time of this breakthrough.
CryptoQuant CEO Ki Young Ju explained to Cointelegraph what it suggests: “Purchasing power comes mostly from stable whales and small investors, not from institutional investors or high-net-worth individuals in the US”.
Finally, Bitcoin (BTC) broke the $ 1 trillion market capitalization limit on February 19, tripling its market capitalization in three months. This important beacon came almost a year after rising to less than $ 100 billion on March 12, 2020, more commonly known as ‘Black Thursday’ in the cryptocurrency community.
It is also important to consider the share of BTC in the circulating offer before accepting the price implications of Bitcoin volumes. According to Glassnode’s research, 78% of Bitcoin’s supply is illiquid, which means that the demand for economy is only a small aspect of how its price is affected.
Fortunately, or alas, for the market, the price of Bitcoin is still mostly dependent on sentiment. This is clear from the fact that Robinhood alone has acquired more than 6 million retail crypto investors this year.
While acknowledging the presence and overall influence of institutional investors, Jay Hao, CEO of the cryptocurrency exchange OKEx, told Cointelegraph that a Twitter trend could be responsible for the pressure of $ 1 trillion: ‘This madness that Elon Musk, Michael Saylor and Senator Cynthia include. Lummis, could have helped BTC break the $ 1 trillion market capitalization without any final pressure from institutional investors who generally do not buy when the market seems too much. He further added:
“At this point, many technical indicators suggest that BTC began to look overbought when retailers jumped in, fueled by the ‘laser-eye’ trend that stormed Twitter with participants shooting for $ 100K BTC, including many prominent executives and politicians. ”
Institutional involvement in Bitcoin can be overestimated
Crypto venture capitalist Brock Pierce pointed out to Cointelegraph that according to him, the opinion of institutional involvement can be ‘overestimated’, but that it is still present, as is evident from their long positions:
‘There was a mix of retail and institutions and other factors that made the market rise higher. As for the chain statistics, we see that large amounts of bitcoin are leaving the exchanges and also miners who are reluctant to sell. Both serve to reduce supply and to reduce any selling pressure in the market. ”
He further believes that companies are adopting ‘programmatic purchases’ because they are trying to achieve a certain award. Moreover, as indicated by Pierce and Hao, it is often the sentiment in the market that causes small investors to get involved, which causes large price movements in the BTC market.
You recently pointed out on Twitter that leading miners often have private wallets, separate from their mining portfolios; consequently, their power may be greater than chain analysis may suggest. He further clarified the implications this could have on the price of Bitcoin:
“It seems that affiliated miners (whales) sell Bitcoins in exchange, not via OTC transactions. They have different personal wallets than mining wallets, so it is important to see the trend, not an absolute number. The significant outflow occurred when the price was $ 58,000 and has recently cooled. ”
Institutions continue to buy the dip?
After Bitcoin surpassed the $ 1 trillion trillion mark, it quickly reached its everyday high of $ 58,352 on February 21, but the next day the BTC price fell 20% along with several other cryptocurrency assets in a correction more commonly referred to as “Bloody Monday” in the cryptocurrency community. The price is still trading between about $ 45,000 and the previous $ 50,000 support level.
During this price drop, it appears that institutional investors saw it as a green light to buy the dip in large quantities. Jack Dorsey’s Square bought another round of Bitcoin, about 3,318 BTC for $ 170 million. Square only bought Bitcoin in October 2020 and bought 4,709 Bitcoin for about $ 50 million at an average price of $ 10,618 per BTC. Square’s motivation to buy the dip in a second investment round may be driven by the fact that the profit on the first investment round is around 400%.
In addition to Square, Michael Saylor’s MicroStrategy bought another $ 1 billion in Bitcoin, an additional 19,452 coins at an average price of $ 52,765. This investment in Bitcoin comes just six months after the initial $ 250 million investment in August 2020. .
MicroStrategy now owns more than 90,000 BTC, accounting for 63% of its total market capitalization. Saylor announced that MicroStrategy “remains focused on our two corporate strategies to grow our business analytics software and acquire and hold bitcoin.” Hao further comments on the purchase:
‘The MicroStrategy debt offering and the subsequent purchase of additional $ 1 billion BTC was a big announcement, although we already know what a great Bitcoin bull and evangelist Michael Saylor is! […] Institutional investors do not pursue trends, but await the correction to buy at an acceptable price. I expect that we will soon hear about more and more institutional activities. ‘
David Donovan, executive vice president of Publicis Sapient – a digital transformation firm – told Cointelegraph his concerns about the lack of regulation, especially as investing in BTC involves risk and volatility: ‘Individuals should not invest their money in bitcoin if they do not a solid financial position, as there is currently no FCID protection for stored bitcoin. ”
JPMorgan Chase became the latest financial giant to cautiously endorse Bitcoin when it announced in a note to clients that ‘investors can probably pick up up to 1% of their allotment on cryptocurrencies in order to increase overall risk efficiency -adjusted returns of the portfolio. Most people would see this as a strong announcement; As the price of Bitcoin continues to struggle below $ 48,000, this contributes to the narrative that the influence of institutional investors on the market can be overestimated in the minds of the average crypto-consumer.