Addressing the Tesla-sized elephant in the Bitcoin room

Bitcoin Moves - Weekly Bitcoin Market Report

Addressing the Tesla-sized elephant in the Bitcoin room

Bitcoin Moves #32 — A weekly review of what’s moving Bitcoin and crypto markets

Bitcoin underwent a serious push higher this past week after consolidating under $40,000 over the past 30 days. The leading cryptocurrency is currently trading for $47,000, after reaching a new all-time high of $48,200 yesterday, per OKCoin market data. The rally in the BTC price happened on Monday, Feb 9, after Tesla announced that it had purchased a whopping $1.5 billion in Bitcoin and that it planned to accept the cryptocurrency as a payment option in the future.

Bitcoin also experienced a number of other positive fundamental events this past week that is driving demand for the asset higher. For instance, the mayor of Miami revealed that the city is considering purchasing BTC to hedge its balance sheet from inflation.

TL;DR

  • Bitcoin saw a strong surge higher this past week, pushing above $48,000 to set a new all-time high.
  • Tesla announced the purchase of $1.5 billion worth of the top cryptocurrency, adding that it may soon accept BTC for payments.
  • On-chain trends indicate that Bitcoin has further to go.

Market snapshot

All prices are in USD and time zones are PST.

  • Current BTC price: $46,800, up 29.84% from last week ($36,150)
  • 24H high: $48,200
  • 24H low: 44,842.87
  • 24H change: +0.5%
  • 24H BTC volume sits around $82 billion, up 65% from last week ($50.8 billion)
  • Total circulating BTC: 18,624,318
  • Bitcoin dominance: ~61.6%
  • 30D high / low: $48,000 / $29,500
  • 90D high / low: $48,000 / $16,000
  • Bitcoin Volatility Index (BVI), 30D: 2.5%, flat on the past week (2.5%)
  • Hash rate: 164.88 EH/s, up 11.5% over last week (147.41 EH/s)
  • Network value to transaction ratio (NVT): 78.6
  • U.S. dollar index (DXY): 90.48, down 0.7% from last week (91.1)
  • SPX-BTC 90D correlation: 0.0811

The 2017 Bitcoin rally vs. now

While over the past couple of months Bitcoin has reached new heights over 100% higher than its previous 2017 all-time high, some have attempted to draw parallels between the previous bull market top and the ongoing one — especially since the timing is so similar.

Yet there are clear differences between the 2017 bull market top and the ongoing price action.

First and foremost, in 2020 and leading into 2021, we’ve seen a clear buildup of institutional momentum. In 2017, bearish headlines were rife with billionaire head fund managers like Warren Buffett and Ray Dalio arguing against the value of Bitcoin. Buffett famously called bitcoin “rat poison,” adding later that there is no more intrinsic value in the crypto asset than in his suit button. 

This time around, major names in traditional finance have either invested in, or at least expressed their support for Bitcoin. As we wrote last week, Dalio said last month that Bitcoin is “one hell of an invention” and a potential “alternative gold-like asset.” This marks a serious 180 for the investor, who had previously stated that Bitcoin does not serve a function as a store of value or as a medium of exchange.

Other supporters of BTC on Wall Street include Stanley Druckenmiller and Paul Tudor Jones, two other macro-focused hedge fund managers that have made a name investing in gold and calling key macro market shifts.

Secondly, crypto market infrastructure has improved. The 2017 bull market was extremely frothy as a result of less developed infrastructure, information and rules, generally speaking. Now, the market is marked by more regulated exchanges, like OKCoin, and generally more visibility, guidance and attention from global governments and investors. 

Guggenheim readjusts Bitcoin target 

Guggenheim Partners, a Wall Street investment firm that manages billions of dollars, has adjusted its already-lofty price target for BTC even higher than $400,000.

In an interview with CNN, Scott Minerd, the company’s global chief investment officer, said to viewers that the firm’s proprietary research indicates that BTC could hit a price as high as $600,000 per coin in the coming years. 

“If you consider the supply of bitcoin relative […] to the supply of gold in the world, and what the total value of gold is, if bitcoin were to go to those kinds of numbers, you’d be talking about $400,000 to $600,000 per bitcoin,” he said to the outlet.

Minerd did admit that BTC is likely overvalued in the near term, though caveated that by saying the asset has “come into the realm of respectability and will continue to become more and more important in the global economy” — evidently referring to recent momentum from institutional buyers 

As we noted in last week’s Bitcoin Moves, the major money manager had revealed at the end of 2020 that it sees lots of potential in Bitcoin as an investment. The firm subsequently filed with U.S. regulators to be able to purchase BTC, a filing that evidently became effective on Jan. 31, 2021.

Tesla goes big on Bitcoin with a $1.5 billion purchase

Speaking of institutional supporters behind bitcoin, Tesla made quite the splash on Monday morning (U.S. time) when it revealed that it had purchased $1.5 billion worth of BTC to supplement its balance sheet. The move pushed the price of BTC up over 23% in 24 hours, reaching a new all-time high over $48,000 per coin.

According to SEC filings, the firm is buying Bitcoin as part of its updated investment policy, to provide “more flexibility to further diversify and maximize returns on our cash.” The filings also indicated that Tesla may soon accept BTC as a means of payment for its vehicles and other services “in the near future,” depending on the laws and regulations in jurisdictions where it operates.

$1.5 billion represents about 8% of the firm’s stated cash position of $19.3 billion, as of the end of 2020. 

This bullish move comes after Elon Musk, the company’s CEO and an early investor, has been making increasingly positive statements about Bitcoin and other cryptocurrencies — namely Dogecoin.

Last week, days after making the bio of his extremely popular Twitter account “#bitcoin,” he said during an event in invite-only social media app Clubhouse that he thinks Bitcoin is a “good thing” and that he supports the cryptocurrency’s development. Musk added that he thinks that the cryptocurrency is “really on the verge of getting broad acceptance by conventional finance people.” 

At the end of 2020, Musk said in a tweet that “Bitcoin is almost as bs as fiat money”

MicroStrategy hosts event for potential institutional Bitcoin buyers

A week after purchasing $10 million worth of BTC to add to its treasury’s existing over $1 billion position, business services company MicroStrategy hosted an event to educate corporations across the world about the leading crypto asset.

Ran Neuner, blockchain investor, advisor and host of CNBC Africa’s CryptoTrader show, recently noted that he noticed representatives from Tesla and SpaceX at the virtual event. Neuner also indicated that there were other representatives from firms like JPMorgan Chase, Amazon, MGM Resorts and Goldman Sachs. 

Last week, OKCoin’s CEO, Hong Fang, spoke to MicroStrategy’s founder and CEO, Michael Saylor in a fireside chat about Bitcoin. 

Miami is considering adding BTC to its balance sheet

Miami mayor Francis Suarez announced that he is looking to add BTC to the city’s balance sheet.

The mayor of the increasingly crypto-friendly city announced on Monday that he is “working on a resolution for our commission for this Thursday’s meeting to get the ball rolling” in regards to investing in the cryptocurrency.

Suarez has been meeting with prominent crypto investors and innovators over the past few weeks as he attempts to position Miami as a tech- and crypto-friendly hub in the United States. Some analysts see this as a way to attract crypto innovators, which have become a notable subset of those that are leaving California in search of greener pastures. 

On-chain trends

According to blockchain analytics firm IntoTheBlock, BTC is “mostly bullish” at the moment, with four out of seven of the service’s seven core metrics currently printing a “bullish” reading. The bullish metrics are in the money, smart price, bid-ask volume imbalance, and futures market momentum. These four metrics signify that there is an increase in demand for BTC across spot and futures exchanges, coinciding with what separate analysts have noted  is a lack of BTC sellers at the moment. 

Both net network growth and large transactions, two on-chain metrics, are currently “bearish,” according to IntoTheBlock. But, as we have indicated in previous editions of Bitcoin Moves, this “bearish” signal may be a byproduct of an influx of retail investors keeping their coins on centralized exchanges instead of moving them to self-custodied addresses. 

Bitcoin market signals. Source: IntoTheBlock

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