Across institutional and retail traders it looks like the sentiment is bullish: it’s a new era for bitcoin.
We’re seeing more institutional investors buy into BTC, and are likely to see that trend increase as this accumulation period ramps up and the value of the US dollar is debased by quantitative easing. Since last week, the BTC-S&P correlation has increased 13%. At this point, bitcoin is up more than 100% since mid-March.
Bloomberg appears bullish, bitcoin futures are gaining momentum, and BTC is heating up DeFi. It appears that interest in BTC is only going to increase, which is likely to have a positive impact on price.
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All prices are in USD.
Bitcoin price movements
- Current Bitcoin price: USD $12,030 (1:41pm PT), up 4.9% from last week (USD $11,461)
- 24hr high: USD $12,412
- 24hr low: USD $11,803
- 24hr change: -2.47%
- 24hr BTC volume sits around USD $25 billion, up 13.6% from last week (USD $22 billion)
- Bitcoin Dominance sits ~57.44%
- 30 day high / low: USD $12,359 / $9,137
- 90 day high / low: USD $12,359 / $8,719
- Bitcoin Volatility Index (BVI), 30day: 0.995, up 22.9% from last week (0.809)
- Hashrate: 125.80 EH/s, up 2.3% from last week (122.95 EH/s)
- Network value to transaction ratio (NVT): 72.39
- US dollar index (DXY): 92.34, down 1.37% from last week
- SPX-BTC 90d correlation: 0.200, up 13.6% over last week (0.176)
“Bitcoin has regained its mojo”
Looking at bitcoin from an institutional perspective, Bloomberg, traditionally bearish on bitcoin, now says that bitcoin is back and “has regained its mojo,” seeming to link its rise in price to the stock market’s rally as the S&P 500 nears a new all time high. Bitcoin’s correlation to the S&P has increased 13.6% from 0.176 to 0.200.
The Bloomberg article says that BTC’s “advance past $12,000 makes it one of the best-performing asset classes this year. It’s gained about 70% since the end of December and is up more than 100% since mid-March, when it briefly traded below $4,000.”
The article also notes that bitcoin’s 14-day Relative Strength Index (RSI) has a reading of 69, signaling that the asset isn’t overbought and that “further gains could be ahead.”
BTC-SPX correlation, 1month via Coin Metrics
OKCoin Liquidity Manager Dan Koehler explained yesterday in Cointelegraph that, “with $12,000 being the crucial resistance point before we had the 2018 breakout to $20,000, this time in the very near-term it looks like $12,400 has established itself as a resistance level.”
“There has been $78 million in short liquidations in the past 24 hours. It’s not just options, it’s mainly futures with some options thrown in the mix. Price action is interesting, as $12,000 to $12,400 was most likely driven by liquidation efforts of exchanges,” said Dan. “With bears likely re-establishing shorts at current levels, it could be interesting to see if selling pressure puts downward pressure on bitcoin, or if another breakout produces exaggerated upwards momentum.”
New era of BTC accumulation
Bitcoin is becoming an essential asset
In a podcast interview with Nathaniel Whittemore, Preston Pysh, founder of The Investor’s Podcast Network, says that we’re about to enter one of the biggest market cycles that the world is ever going to see.
Explaining that institutional investors are starting to recognize the opportunity that bitcoin represents, Pysh notes the move that publicly traded company MicroStrategy made putting $250M into bitcoin in an effort to hedge fiat currency inflation. The scale at which MicroStrategy invested in bitcoin likens the digital asset to a marketable security. This brings up the question of how many other companies are investing in bitcoin, and Pysh asks, if that trend takes hold, will there be any bitcoin left?
Bitcoin can’t be controlled or devalued
“The government cannot stimulate markets forever, the liquidity flood will end,” says George Ball, former Prudential Financial CEO, and now CEO at Sander Morris Harris. Bitcoin.com reported that Ball is “advising wealthy investors to acquire bitcoin because it is the only asset that cannot be undermined by the government.”
With interest rates so low, even a slight rate increase could affect US dollar inflation. Bloomberg notes that bitcoin “could potentially act as an inflation hedge, should prices start to rise.”
The US dollar index (DXY) is down 1.37% since last week, but down 7.07% over the past three months, and down 7.53% over the past six months.
US dollar index, 3months via Marketwatch
BTC futures soaring
Seeking a deflationary asset has turned more institutional investors on to bitcoin, sending bitcoin futures soaring. According to Decrypt, “open interest on the CME bitcoin futures hit a new high of $841 million at the start of the week.” Futures contracts are an attractive option for institutional investors seeking exposure to bitcoin, allowing them to speculate on the future price without buying bitcoin.
The Block noted that “the aggregate open interest across the largest bitcoin futures markets has been increasing steadily from around $2 billion in mid-March to nearly $6 billion at last check.” Open interest in CME bitcoin futures was at $365 million in July, representing a more than 100% increase over the past month.
Meanwhile, as the price of bitcoin has increased, short sellers have been hit hard. Cointelegraph reported that as the price hit $12,200 yesterday, $22.1 million of shorts were liquidated on just one exchange .
CoinMetrics’ Hashrate Index reaches new highs
Today’s State of the Network newsletter from CoinMetrics highlights that the CoinMetrics Bletchley Index (CMBI) has “reached new highs, showing no signs of slowing down despite the advent of the halving back in May.” The newsletter explains that “as a result of the sustained high levels of hash rate, the CMBI Bitcoin Observed Work Index has also reached new all time highs, indicating that miners in aggregate have been conducting over 11,250 Zeta Hashes per day.”
CMBI Bitcoin Hash Rate Index, via CoinMetrics
Bitinfocharts shows that the hashrate gained 6.9% since August 11th to 133.78 EH/s, only to lose 12%, falling down to 117.20 EH/s today. While Bitcoin’s hash rate decreased 6% overall since last week, the hash rate has increased 47.6% over the past year, and 152.8% over the past two years.
Bitcoin Hashrate historical chart, 2 years via Bitinfocharts
Watching hashrate levels gives investors a look at how quickly nodes are confirming blocks of transactions. The hashrate is based on a 24 hour period and acts as a security metric, signalling how many nodes in the network are contributing to its security by performing hashes.
As the price of bitcoin increases, we typically see more miners join the network in an effort to gain access to block rewards and make profits. Year-to-date, the hashrate has had two notable declines: around Black Thursday on March 12th and following the May 12th block reward halving.
Bitcoin Hashrate historical chart, 6 months via Bitinfocharts
Number of Bitcoin being locked in DeFi surpasses rate of mining
As the popularity of DeFi protocols continues to increase, bitcoins are being tokenized faster than they’re being mined. wBTC, or wrapped bitcoin, tokenizes BTC using the ERC-20 standard, creating smart contracts for bitcoin. “This makes it easier to write smart contracts that integrate bitcoin transfers,” explains wbtc.network.
“Since Sunday [August 9th], 1,043 more bitcoins were tokenized through wrapped bitcoin than were actually created by bitcoin miners,” CoinDesk reported on August 15th. Approximately “31,000 bitcoins have been tokenized on Ethereum, according to Dune Analytics, 75% of which were minted by wrapped bitcoin (WBTC).” In mid-May, there were about 3,000 tokenized bitcoins.
Three Arrows Capital CEO Su Zhu tweeted in July that within a year, “wBTC will be a first class asset in DeFi, just as USDC and USDT are now.”
Where do you think bitcoin is going?
In our poll, 58.5% of you said we’ll see $14,000 by the end of August. Follow us on Twitter for crypto analysis and to take part in our next poll.
In the news
BTC behaving like a tech stock?
Forbes recently reported on a CoinShares report saying that bitcoin is behaving like a tech stock. James Butterfill, a research strategist at CoinShares, noted in the report that “as a disruptive technology, bitcoin’s risk profile is rather similar to that of a technology stock: if it reaches its potential, the value could be immense, but at the same time, there is a chance it fails entirely, leaving the value of bitcoins close to zero.”
CoinShares noted that the firm believes “Bitcoin is integral to the secular growth trend in technology.” Read the report.
Grayscale encourages investors to move into digital currencies
Grayscale continues to grow their mainstream promotional presence with new television ads aimed at motivating investors to buy BTC and ETH. According to Grayscale now “is the time for digital currency.” Will the ads work? Grayscale has increased their amount of total assets under their management to $5.6 Billion. Read the article from The Block.
As more institutional investors look at Bitcoin as a hedge to US dollar inflation, it’s likely that the price of BTC will rise in the coming months.
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