Bitcoin price flies solo? Institutional crypto push may be overrated

In the history of financial markets, there are few tradable assets that have crossed this frontier. Currently, Bitcoin has the eighth highest market capitalization among any tradable asset in the world, including stocks and commodities. In the top 10 exchange-tradable assets, it sits just above Tencent, which overturned Bitcoin if it rose above the $ 1 trillion mark. Among them is Facebook, which was tipped earlier this month.

Bitcoin is just one step away from Google and two steps away from silver. Given the history of commodities such as silver and gold that have been traded for centuries, the history of Bitcoin is extremely short and doesn’t begin as an experiment until January 2009. Even stocks like Google and Tencent have a history of more than two decades, while Apple and Microsoft have a history of more than four decades.

Was Bitcoin’s recent surge organic?

Analyzing the point in time when Bitcoin finally shattered this milestone, it becomes clear that there were no major institutional announcements that resulted in a surge in market cap. On-chain data provider CryptoQuant’s Bitcoin Coinbase Premium Index – if the premium is high, indicates a strong spot buy on Coinbase – suggests that the Coinbase premium was negative at the time of this breakthrough.

Ki Young Ju, CEO of CryptoQuant, told Cointelegraph what this suggests: “Purchasing power appears to be coming primarily from coinage whales and retail investors, not institutional investors or high net worth individuals in the US.”

Bitcoin (BTC) finally crossed the $ 1 trillion market cap on February 19, tripling its market cap in just three months. This important landmark came nearly a year after it hit less than $ 100 billion on March 12, 2020 in what is commonly known in the cryptocurrency community as “Black Thursday”.

It is also important to consider BTC’s share of the circulating supply before accepting the price impact of the bitcoin quantities. According to research by Glassnode, 78% of Bitcoin supply is illiquid, meaning that the economics of supply and demand for the asset is only a small aspect of how its price is affected.

Fortunately or unfortunately for the marketplace, the price of Bitcoin is still largely based on sentiment. This can be seen in the fact that Robinhood has already attracted more than 6 million private crypto investors this year alone.

Recognizing the presence and overall influence of institutional investors, Jay Hao, CEO of Cryptocurrency Exchange OKEx, told Cointelegraph that a Twitter trend could be responsible for the $ 1 trillion surge: “This madness that Elon Musk was about Belonging to Michael Saylor and Senator Cynthia, Lummis could have helped BTC break its $ 1 trillion market cap without any final pressure from institutional investors, who generally don’t buy when markets look overwhelmed. ” He added:

“At this point, many technical indicators are suggesting that BTC was beginning to look overbought as retailers due to the ‘laser eye’ trend that stormed Twitter with attendees shooting for $ 100,000 in BTC, including many top CEOs and politicians , got going. ”

Institutional exposure to Bitcoin could be overrated

Crypto venture capitalist Brock Pierce told Cointelegraph that he believes the institutional exposure could be “overvalued” but it is still there, as evidenced by their long positions:

“There was a mix of retail and institutional and other factors driving the markets higher. In terms of on-chain metrics, we see large amounts of Bitcoin leaving the exchanges and miners reluctant to sell – both of which serve to reduce supply and ease selling pressure in the market. ”

He went on to suggest that companies adopt “programmatic buying” when trying to reach a certain allocation. In addition, as noted by both Pierce and Hao, it is often the sentiment in the market that drives retail investors to get involved, resulting in significant price movements in the BTC market.

Ju recently pointed out on Twitter that celebrity miners often have private purses that are separate from their mining purses. Therefore, their performance could be greater than the analysis in the chain suggests. He went on to explain what impact this could have on the price of Bitcoin:

“Affiliated miners (whales) seem to be selling bitcoins on exchanges, not through OTC deals. They have different personal wallets than mining wallets so it’s important to see the trend, not an absolute number. The significant runoff happened when the price was 58,000 and it has been cooling lately. “

Institutions continue to buy the dip?

After breaking the $ 1 trillion mark, Bitcoin quickly hit its all-time high of $ 58,352 on February 21. But the very next day, the BTC price, along with several other cryptocurrency assets, fell 20% as “Bloody Monday” in the cryptocurrency community. The price continues to hover between around $ 45,000 and the previous support level of $ 50,000.

During this price drop, institutional investors seem to have taken the green light into buying the drop in bulk. Jack Dorsey’s Square bought another round of Bitcoin, roughly 3,318 BTC, for $ 170 million. Square first bought bitcoin in October 2020, buying 4,709 bitcoin for about $ 50 million at an average price of $ 10,618 per BTC. Square’s motivation to buy the dip in a second round of investments could be driven by the fact that profits are around 400% in the first round of investments.

In addition to Square, Michael Saylor’s MicroStrategy bought $ 1 billion worth of Bitcoin, an additional 19,452 coins at an average price of $ 52,765. This investment in Bitcoin comes just six months after the initial investment of $ 250 million in August 2020.

Now MicroStrategy owns over 90,000 BTC, which is 63% of its total market capitalization. Saylor announced that MicroStrategy “continues to focus on our two corporate strategies of growing the enterprise analytics software business and acquiring and holding Bitcoin.” Hao further commented on the purchase:

“The MicroStrategy debt offering and subsequent purchase of an additional $ 1 billion BTC was a massive announcement, even though we already know what a giant Bitcoin cop and evangelist Michael Saylor is! […] Institutional investors don’t follow trends, they just wait for corrections to come in and buy at an acceptable price. I assume that we will soon hear of more and more institutional activity. “

David Donovan, executive vice president of Publicis Sapient – a digital transformation company – told Cointelegraph his concerns about the lack of regulation, especially because investing in BTC is risky and volatile: “Individuals shouldn’t invest their money in Bitcoin if this is the case is not the case in a solid financial situation as there is currently no FCID protection for stored Bitcoin. “

JPMorgan Chase was the latest financial giant to cautiously back Bitcoin when it advocated in a notice to clients that “Investors can likely add up to 1% of their allocation to cryptocurrencies for an efficiency gain in the total risk-adjusted returns of the portfolio. “Most would see this as a bullish announcement; however, with the price of Bitcoin remaining below $ 48,000, institutional investors’ influence on the market may be overrated in the minds of the average crypto consumer.

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