Even crypto enthusiasts were overwhelmed by Bitcoin’s rapid growth of the last two months, after being clearly undervalued for half a year. As in 2017, Bitcoin first surged in May, with the crypto market climbing to new heights from month to month afterwards. Yet, this time around, the situation is fundamentally different. While in 2017 retail players reigned in the market, today it is a market of institutionalists and big money.
There are a number of major factors on the market that act as drivers of growth.
The obvious demand from institutional investors is likely to be satisfied by such projects as Fidelity, Bakkt, and Coinbase Custody. Fidelity and Bakkt are to go on stream quite soon, in about one or two months.
The number of active addresses with a significant number of bitcoins has reached an all-time high – over 2.5 mio addresses with a balance of more than $1,000.
World giants such as Starbucks, Whole Foods, Gamestop and Baskin Robbins are starting to accept payments in cryptocurrency. It is also accepted at Microsoft, Expedia, and Steam. Amazon is said to be likely to join the club soon. The number of transactions has also remained high over the past year and a half.
There’s a growing interest in the next Bitcoin halving – a regular planned reduction in the reward-base for mining a single block on the blockchain; the event is less than a year away.
Will bitcoin save us from trade wars?
Based on a common opinion in the market, the exchange rate has been affected by the escalating trade conflict between China and the United States. However, it has not reached its culmination yet as market players are not dropping their dollar assets and there has been no impact on bitcoin.
The possibility of this scenario is still quite real. Results of the confrontation will be worth talking about when dollar drops against other currencies while bitcoin grows.
Over the past month, several major institutional investors entered the market to locally purchase bitcoins. It often happens during the daytime Asian session. Perhaps, the buyers are large Asian funds or family offices.
Mental rally
The current bitcoin rally is largely based on psychology. It is highly likely that the $10,000 threshold will be hit very soon. When it happens the next psychological threshold will be $20,000 that was never reached last time. It is possible that bitcoin will not linger at $10,000 and will immediately go further up to $11,000 or $12,000. This is where further consolidation may happen.
Obviously, none of the investors want to buy at the peak price but once the asset has remained at the high mark for several weeks, participants get used to it.
There is a lot of media speculation about FOMO but what is currently happening in the market is ‘smart growth’ or a growth on big money. Retail has not returned to the volume of 18 months ago. It is very likely that this time retail will finish last and buy cryptocurrencies at local peaks.
By Alexei Kiriyenko, Managing Partner at EXANTE