Wall Street institutions continue to announce support for bitcoin as it pushes towards an all-time high
Bitcoin faced a strong correction in the middle of last week that took it from its $19,000 highs toward $17,600 at the worst of the sell-off. There were many signs that a short-term drop was incoming. As we covered in last week’s Bitcoin Moves, analysts had indicated there were on-chain and technical signs indicating that a drop was inbound.
What caught most off guard, though, was the speed at which bitcoin rebounded. Bottoming at $17,600, the price of bitcoin shot back toward $19,000 by the end of the weekend. Now, some have said that new all-time highs are possible as BTC pushes $19,500.
This optimism about the short-term trajectory of the crypto market has been bolstered by news about continued Wall Street support for bitcoin.
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- Bitcoin currently trades for $19,500 after facing a strong bounce late last week.
- The cryptocurrency fell as low as $17,600 last week as it appeared that there were some whale addresses selling bitcoin.
- Bitcoin sees continued Wall Street support as the U.S. dollar continues its descent.
- This past week, a number of insurance firms joined the space, purchasing bitcoin for their general investment accounts.
- MicroStrategy confirmed last week that it will be purchasing $650 million worth of bitcoin with funds raised in the sale of debt.
- Investors are concerned as regulation is expected and because more than a billion dollars worth of bitcoin recovered from the Mt. Gox hack may be distributed to creditors.
Here’s your market snapshot:
All prices are in USD and time zones are PT. Prices are as of 1:00pm PT.
Analysts bullish as bitcoin forms convincing reversal at $17,600
When bitcoin dropped to $17,600 last week, it was only for mere minutes.
The leading cryptocurrency underwent a strong bounce once it reached that price point, rallying from those lows set on Wednesday toward $19,000 by Saturday.
The convincing change in trajectory has made analysts optimistic that further growth is on the horizon for bitcoin.
One technical trader known as “Bitcoin Jack” commented that with each dip getting rapidly absorbed as seen with the drop to $17,600, he has begun to buy back in:
“Market looking strong, weakness getting absorbed again and again. Price is back at where I last ditched my spot and very close to my invalidation levels. I’ve bought back my spot exposure because the market keeps buying dips back in to resistance.”
The investor added that with the amount of institutional money entering the space, any technical bear case seen on the charts could easily be negated.
MassMutual buys bitcoin, along with other insurance companies
The biggest story of the past week by far is that of MassMutual purchasing $100 million worth of bitcoin.
MassMutual, also known as Massachusetts Mutual Life Insurance Company, is an American life insurance provider servicing five million individuals. As an insurance company, the firm naturally has a large amount of capital on its balance sheet. The company held $675 billion as of 2016, per Wikipedia, and currently has around $230 billion in its general investment account.
According to The Wall Street Journal, the company purchased $100 million in bitcoin from NYDIG, an institutional service provider in the space. It simultaneously took a $5 million stake in the company. For some background, NYDIG was founded by Stone Ridge Asset Management, which itself owns around $200 million worth of bitcoin.
The company said in a statement that the bitcoin investment was a result of discussions that saw the company want to take “measured yet meaningful exposure to a growing economic aspect of our increasingly digital world.”
The investment represents less than five basis points of its general investment account, though many still see this as a validation of the macro bull case.
Ross Stevens, the founder of NYDIG, said to The Wall Street Journal that “other return-hungry insurance companies have also bought bitcoin for their general accounts through his firm.” These firms were not listed.
Stevens attributed this adoption of bitcoin to the lack of interest offered by bonds and a declining U.S. dollar, which should boost the adoption of stores of value.
MicroStrategy completes $650 million raise for bitcoin purchase
As we reported in last week’s Bitcoin Moves, American business services company MicroStrategy began work on a $400 million debt raise to buy bitcoin.
On Friday, the company disclosed that it had concluded the round, having raised $650 million instead of just $400 million. It raised $650 million from the sale of 0.750% convertible senior notes that will be due in 2025 to qualified institutional buyers.
The proceeds of this sale will be used to purchase bitcoin, according to MicroStrategy and its bitcoin-loving CEO Michael Saylor:
“MicroStrategy estimates that the net proceeds from the sale of the notes will be approximately $634.9 million, after deducting the initial purchaser’s discounts and commissions and estimated offering expenses payable by MicroStrategy. MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending identification of working capital needs and other general corporate purposes.”
This sale basically means that the company thinks the interest it will need to pay on its bonds will be outpaced by the price of an appreciating bitcoin.
Analysts are optimistic that this purchase of bitcoin will have a material impact on the market in the weeks ahead. Nic Carter, founding partner of Castle Island Ventures, said on the matter:
“My point is that the market should logically be anticipating the market impact of the forecasted buy (which will absolutely be nonzero), not that I expect Saylor to smash ‘market buy’.”
This purchase represents the first time a bitcoin purchase of this size has been announced in advance.
JPMorgan hints at further institutional adoption ahead
With these two recent news events, JPMorgan recently indicated that it thinks the wave of institutional adoption has just begun.
Bloomberg recently reported on a JPMorgan strategist group report that has long been following the space.
Referring to the MassMutual news in particular, the group said that MassMutual is a first mover in the insurance space for bitcoin. That is to say that the firm buying bitcoin in such a public manner will likely encourage other companies in a similar situation to make that move:
“MassMutual’s Bitcoin purchases represent another milestone in the Bitcoin adoption by institutional investors,” the strategists said. “One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example.”
They specifically noted that if “pension funds and insurance companies in the U.S., euro area, U.K. and Japan allocate 1% of assets to Bitcoin, that would result in additional Bitcoin demand of $600 billion.”
Such an influx of capital would likely send bitcoin to multiples above its previous all-time high of $20,000.
Mt. Gox moves closer to distributing recovered bitcoin from hack
Mt. Gox was hacked for 1,000,000 BTC between 2011 to 2014.
Some of the funds were eventually recovered but the process to return the funds to creditors only began a number of years ago. With around 150,000 BTC to return, many fear that the funds being returned may represent a material risk to the bitcoin market, as some creditors may opt to sell the coins.
According to a letter published today by Mt. Gox rehabilitation trustee Nobuaki Kobayashi, a draft rehabilitation plan has been filed that will be reviewed by the Tokyo District Court.
Should the plan be accepted, the funds that are remaining will be distributed to creditors of the exchange.
As regulation looms, crypto space gets support from members of Congress
There are still fears that bitcoin and other cryptocurrencies are going to be heavily regulated in the coming months.
Rumors are rife that the U.S. Treasury is working on legislation that would require all virtual asset service providers to disallow withdrawals to addresses without KYC. Further, there has been some talk of banning stablecoins without banking licenses.
But there are some internal debates about the subject. Members of Congress Warren Davidson, Tom Emmer, Ted Budd, and Scott Perry wrote in a letter that this would hinder innovation in the space:
“The real issue is, self-hosted wallets are useful for all sorts of potential blockchain applications. So the ability to move a token without an intermediary is an essential element of true blockchain. If you look at a frictionless system, part of the Bitcoin whitepaper that made blockchain famous and growing as a technology is the ability to do something peer-to-peer. It’s a core tenet of the technology.”
The need for positive crypto regulation has been echoed by SEC Commissioner Hester Peirce. She said in a speech last week that the liberties underlying this technology should be protected to preserve innovation:
“As this technology gains adoption outside and now inside the legacy financial system, we should figure out a way to embrace the personal liberty principles undergirding it. If we were instead to steamroll the technology’s liberty-enhancing features under the weight of regulation, we would lose a lot of the power of the new technology to afford opportunities to people whose autonomy has previously been curbed by, for example, limited access to the traditional financial system, geographic location, social standing, or subjection to a repressive government.”
According to IntoTheBlock, bitcoin is currently “mostly bearish” as per their seven core metrics, which are based on on-chain trends and market data such as order books.
Two out of seven of the core metrics are currently in “bearish” territory, while there are four others that are currently “neutral” and one that is “bullish.” The two bearish metrics are net network growth, which tracks the number of new addresses on the Bitcoin network, and large transactions, which tracks the number of transactions valued at over $100,000.
The bearish signals seen by IntoTheBlock are reflective of the other worrying on-chain signs.
Ki Young Ju, CEO of CryptoQuant, recently noted that whale addresses are still depositing a large amount of bitcoin onto exchanges.
This signal preceded the drop to $17,600 last week. But with further institutional support for bitcoin, as Bitcoin Jack noted, any bearish technical and on-chain case can be negated by one large institution purchasing bitcoin.
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