Bitcoin is edging closer to its 2017 ATH on the momentum of institutional investors seeking an asset with a strong store of value
After peaking at $18,950 last week, bitcoin has begun to push higher toward new year-to-date highs at $19,400. Bitcoin is now just a few percent shy of its all-time high price of $19,783. Over the weekend, the cryptocurrency was whipsawing between the lows and highs, failing to break decisively in either direction.
Analysts are optimistic that bitcoin will set new all-time highs in the coming days as the price looks to turn $19,000 into support.
Altcoins, especially 2017-era coins such as XRP and ETH, came into their own this past week. XRP has gained 80% in the past three days while ETH has gained approximately 25%. Bitcoin’s weekend consolidation has given some time for capital and attention to cycle from it to these altcoin plays.
Many also see this as a sign that there has been an influx of retail participants, referencing the fact that many of these investors have likely been quick to jump for coins they recognize from the previous bull market such as ether and XRP. Some also suggest that since XRP and ETH were lagging bitcoin, they are finally catching up now.
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TL;DR
- After surging to $18,950 late last week, bitcoin has continued to surge higher, pushing to $19,400.
- Dips are being bid heavily, seemingly by institutional players according to analysts.
- Altcoins were bid heavily this past week, with names like ETH, XRP, XLM, and many more rallying by dozens of percent.
- Notable institutional players continue to announce their support and double down on bitcoin, including BlackRock’s Fixed Income CIO and PayPal’s CEO.
- Signs of retail participation are starting to return as cryptocurrencies are being covered by global media.
Here’s your market snapshot:
All prices are in USD and time zones are PT. Prices are as of 9:45am PT.
Bitcoin price overview
OKCoin COO Jason Lau highlighted that BTC’s recent price action has begun to snowball in that as its price has increased, it has garnered more attention from media outlets. This could result in further capital inflows as those that thought bitcoin was a passing fad will return in light of recent coverage.
Jason added that the increase in the open interest of the bitcoin futures market, along with a risk-on sentiment as evidenced by bullish price action in the stock market, suggests BTC “remains very bullish.”
Our chief executive, Hong Fang, also recently discussed her outlook on bitcoin and cryptocurrency in an interview with Kitco, a leading commodities news outlet.
Institutions are actively bidding bitcoin, traders say
Top traders and analysts purport that there is an institutional bid pushing bitcoin up. This is made evident by the fact that the price action of bitcoin has seemingly been driven by the spot markets, as opposed to the derivatives market.
Ari Paul, CIO of BlockTower Capital, commented on this market trend:
“For most of this rally, we’ve seen a clear pattern of algorithmic style buying during US hours and flat activity during Asia hours. Those are largely HNWs (high net worth individuals) buying large amounts facilitated by algos.”
As can be seen with historical volatility indicators, bitcoin’s volatility is actually extremely low despite the upward price action. For the most part, the past six weeks have been filled with two types of price action: strong moves higher and flat periods of consolidation.
Paul suggests that over-the-counter desks that need to accumulate coins for their clients are slowly using algorithms or a simple TWAP bid to keep consistent capital flowing in, preventing bitcoin from seriously moving lower.
The investor added that this is more than just speculation. “I’ve been on a number of calls in the last few weeks with billionaire hedge fund managers discussing” bitcoin, he added, noting how bitcoin is benefiting from a spike in interest from those looking to hedge their portfolios.
“These buyers are only interested in BTC and they’re buying on a monetary narrative. A blend of, ‘this hedge’s inflation and fiat depreciation’ and ‘It’s an under-owned SoV likely to appreciate by multiples even if only because other portfolios add a small %’.”
One of Mexico’s top billionaires buys bitcoin with 10% of his investment portfolio
While many of these billionaires aren’t disclosing their interest in bitcoin, at least not yet, there some that are.
Mexico’s third most wealthy billionaire, Ricardo Salinas Pliego, just announced to Twitter that he put 10% of his investment portfolio into bitcoin. Notably, this does not mean 10% of his $13 billion net worth, as much of his capital is locked up in the corporations he runs.
When disclosing this investment, Pliego added that he has the rest of his investment portfolio, 90%, in gold-related stocks such as mining companies.
His belief is that both bitcoin and gold represent investments that hedge “government expropriation,” seemingly referencing trends like corruption, inflation, and otherwise poor management around fiscal balances.
BlackRock CIO promotes Bitcoin, saying it’s likely to encroach on gold
Seemingly boosting retail and institutional interest is prominent investors taking to CNBC and other outlets promoting bitcoin.
The chief investment officer of fixed income at BlackRock, the world’s largest asset manager with $7.4 trillion under management, recently told CNBC viewers that he is bullish on bitcoin. For context, cryptocurrencies were reportedly a sector that BlackRock was looking heavily into in 2017 and 2018, though nothing ever came of that news.
Rick Rieder said in that interview that he thinks bitcoin is “here to stay” largely due to the fact that millennials and younger and acclimated to it, along with fintech as a whole.
He added in that same interview that he thinks that bitcoin has the potential to “replace gold to a large extent,” given that it can be used as a payment mechanism in some capacity:
“[Bitcoin] is so much more functional than passing a bar of gold around.”
His endorsement comes after a number of bullish reports on the cryptocurrency by JPMorgan, Citibank, and a number of other Wall Street institutions.
Pantera Capital finds that retail buyers are causing a shortage
Pantera Capital, a leading blockchain investment firm run by a Wall Street veteran, recently found that retail investors are causing a bitcoin shortage that is likely perpetuating the ongoing rally.
In Pantera’s November letter to its investors, CIO Dan Morehead wrote that PayPal’s crypto exchange alone will soon absorb more bitcoin than is being mined each day. This simple fact should result in an increase in price over time as the supply of the market, meaning the coins being mined and sold, is outweighed by demand for bitcoin:
“If their growth persists, PayPal alone would be buying more than all of the newly-issued bitcoin within weeks… That is THE story in bitcoin right now. When other, larger financial institutions follow their lead, the supply scarcity will become even more imbalanced. The only way supply and demand equilibrates is at a higher price.”
Chinese state TV promotes bitcoin & crypto
This past week, Chinese state television once again promoted bitcoin in a short segment.
As noted by “cnLedger,” a prominent Chinese crypto journalist and analyst, the CCTV spent a number of minutes accentuating that bitcoin is up 70% in the past two months. The channel also purportedly took a few moments to highlight how the fundamentals of bitcoin are better than ever, with an increasing hash rate, increased institutional adoption, and better underlying technology.
“CCTV, China’s Official TV Channel: #Bitcoin price surpasses $17.5k, up 70% in less than 50 days. Compared with 2017’s bull market, bitcoin’s network, development and investment eco-system are now far better. The recent rise is driven by institutional funds.”
Media coverage seems to be increasing in the U.S. as well.
Yesterday, a bitcoin price chart graced the front page of the Wall Street Journal’s online edition. Simultaneously, every major financial news outlet has covered the space in some capacity over the past week.
Analysis of Google Trends data shows that this space is far from the all-time highs in terms of retail users searching “bitcoin” and related terms through Google.
Bitcoin hash rate spikes towards the highs
Bitcoin’s hash rate is on the mend after dropping dramatically due to purported temporary shutdowns in China as a result of hydroelectricity becoming more expensive.
According to Bitinfo, the hash rate of the Bitcoin network is on the verge of setting a new all-time high.
This shows that miners are still long-term bullish on the cryptocurrency. It also appears that there has been an influx of ASIC machines being shipped to mines.
German finance minister pushes back against private cryptocurrencies
German Finance Minister Olaf Scholz is not a fan of private digital assets and cryptocurrencies.
As reported by Reuters, he said that he is against “private sector digital currencies.” This is seemingly in reference to two things: 1) corporate digital assets such as Libra or JPMorgan Coin, or 2) bitcoin, ethereum, or other technologies.
This is a sentiment that has been freely shared by other European politicians and banking officials as the region prepares for the testing of its own central bank digital currency.
But the comment is in contrast to sentiment expressed in the U.S. As we covered in our previous Bitcoin Moves report, prominent politicians are starting to promote bitcoin in hearings and on television including an incoming Wyoming senator and a department head from the U.S. Treasury.
On-chain trends
According to IntoTheBlock, bitcoin is currently “mostly neutral” as per their key core metrics. IntoTheBlock is a blockchain analytics firm that leverages on-chain trends and market/order book trends to try and determine in what direction a market is heading.
Two of the company’s five core metrics are currently “bearish.” These track network growth, looking at the number of new addresses, and large transactions over $100,000 in a day.
Two of the company’s five core metrics are currently “bullish.” These are concentration, which tracks how much bitcoin is situated in “whale” addresses, and futures market momentum, which uses open interest and other market metrics to predict trends.
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