There are many investors feeling vindicated in the cryptocurrency market after the price of Bitcoin hit a new all-time high of $ 34,778.
The last time Bitcoin (BTC) traded near this level was during the bull run of 2017 when it peaked at around $ 19,783. Even the mainstream media, including the New York Times, noted that the current rally “felt very different from last time”.
Many in the cryptocurrency community would agree with that. Hence, it is important to take a closer look at the factors that are driving the current rally.
The “average Joe” no longer runs the show
Bitcoin hits a new all-time high with a very different feeling than last time. https://t.co/N5M4EzblOW
– Nathaniel Popper (@nathanielpopper) November 30, 2020
In 2017, the upward trend in Bitcoin was fueled mostly by retail investors placing speculative bets on an emerging BTC market and other cryptocurrencies with smaller market caps.
At the time, there were reportedly millions of retail investors in South Korea, Japan, and China becoming a force in the market. Back then, it was the “average Joe” who gained Bitcoin more than 1,300% that year, as the Wall Street Journal by Chris Weston, chief market strategist at IG Group, pointed out.
Share of Bitcoin trading based on the currency involved. Source: The Wall Street Journal
US dollar trading spikes with the arrival of Wall Street
Fast forward to 2020, and the investor landscape has changed dramatically. This time around, institutional investors, who largely stayed on the sidelines during the first bull run, were the face of the rally.
These investors are largely expected to take long-term holdings with no intention of selling them anytime soon. They are also flocking to the bitcoin futures markets, where open positions on the Chicago Mercantile Exchange recently exceeded $ 1 billion, and they are bolstering their balance sheets with BTC rather than leaving them in cash.
While it isn’t uncommon for institutional investors to be ahead of the curve, it is worth repeating that they weren’t the first to hit the market in crypto. In fact, many of the leading companies in America who are now getting into Bitcoin for the first time are the very people who laid off Bitcoin back then.
For example, in October PayPal announced it would support cryptocurrency transactions for 26 million merchants on its platform. Users can also buy, hold, or sell cryptocurrencies on the PayPal platform, including Bitcoin, Ether (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).
The irony is that Bill Harris, former CEO of PayPal, warned in 2018 that Bitcoin had no value and was heading towards zero – he even called it a scam. PayPal is only rivaling Jack Dorsey’s Square at the pace that big companies are buying up Bitcoin.
Previously, Wall Street companies shied away from Bitcoin because of its volatility, calling it a risky asset at best and “rat poison squared” at worst, according to Berkshire Hathaway’s Warren Buffett. While Buffett isn’t yet familiar with crypto, other big investors are diving in.
Billionaire traders from Paul Tudor Jones to Stanley Druckermiller have been optimistic about Bitcoin. Both have touted the leading cryptocurrency for physical gold.
In 2017, JPMorgan CEO Jamie Dimon threatened to lay off employees who traded bitcoin. Now the company is releasing bullish analyst reports on the digital asset. Larry Fink, CEO of BlackRock – the world’s largest asset manager – also appears to be getting involved with Bitcoin, suggesting that Bitcoin cannot “become a global market”. He explained:
“Bitcoin has drawn the attention and imagination of many people. Still untested, quite small market compared to other markets. ”
Meanwhile, Michael Saylor, CEO of MicroStrategy, was a pioneer among American companies in the bitcoin space, but he wasn’t always a fan. Back in 2013, Saylor said the days of bitcoin were numbered and the market would suffer a similar fate going to like online gambling.
Then, in an unexpected turn of events, Saylor decided to make Bitcoin the primary asset of the company’s treasury reserve, raising $ 425 million worth of BTC for the balance sheet. That investment was valued at $ 1.56 billion at the last review. On December 4th, Saylor increased the stake by buying even more BTC.
MicroStrategy bought approximately 2,574 bitcoins for $ 50.0 million in cash at an average price of approximately $ 19,427 per bitcoin, as per its Treasury Reserve Policy. We now hold about 40,824 bitcoins.https: //t.co/nwZcM9zAXZ
– Michael Saylor (@michael_saylor) December 4, 2020
That was then, this is now
Another key difference is that Bitcoin was priced at around $ 1,000 at the beginning of 2017. In 2020, the price of BTC started trading at $ 7,200. As a result, it’s much more expensive today, and not all retail investors may realize that they don’t have to buy a whole bitcoin to get exposure to the asset.
However, the fly in the ointment in 2020 was COVID-19. For individual investors, the economic slowdown may have affected investment plans. Unemployment in the US, for example, is 6.7%, which means the economy still has a steep spike to deal with if mom and pop investors want to get their way out of the pandemic hole.
High unemployment leads to low disposable income, and Uncle Sam was not too helpful. While BTC could be conceived as a great democratizing force, that control cannot be used by people grappling with the economic realities of 2020.
Unlike 2017, East Asian investors have reportedly been discharging their Bitcoin at an unprecedented rate this year.
While #Bitcoin hit ATH this week, a trend has emerged that could change the face of the crypto market: a massive flow of coins from East Asia to the US. Shift of focus due to increasing appetite of larger US investors for Bitcoin https://t.co/8Zo3CBbjBW pic.twitter.com/8hoCiTfT0i
– Holger Zschaepitz (@Schuldensuehner) December 3, 2020
Bitcoin ATMs are at the door
While the cryptocurrency market may still be in its infancy, it is more mature than 2017. Much of the foam has been discarded and in many ways is no longer viewed as the Wild West.
Despite the reluctance of private investors, the access channels are increasing rapidly and new exchanges are being brought online, including those that are decentralized in nature. Meanwhile, Bitcoin ATMs, which are becoming a competitive and convenient gateway for retail investors, are expanding their presence around the world.
Unlike institutional investors like Jack Dorsey, whose approach to buying Bitcoin is so complex that he published an investment whitepaper about it, retail investors can turn to something familiar with Bitcoin ATMs or BTMs.
As the BTM market begins to mature and the list of real operators expands, retail crypto investors may finally have an easy gateway to entry. For example, CoinFlip, one of the largest BTM operators, has launched thousands of BTMs in the US, focusing on locations where people are without a bank account or internet access.
This cash-to-bitcoin approach provides retail investors with an easy and convenient way to enter the bitcoin market and is designed to empower those excluded from the traditional banking system, according to Ben Weiss, CoinFlip’s chief operating officer.
However, not all Bitcoin ATMs are created equal, and there are some shady operators who charge fees in the 20% range – a practice that goes against the democratization principles on which Bitcoin is based. Fortunately, more and more companies are tending to cut fees, with CoinFlip and CoinSource taking 6.99% and 11% respectively.
More important than Square investing 50mm in #Bitcoin is to share how we did it (so others can do the same): https://t.co/35ABYHuz4f
– jack (@jack) October 8, 2020
As the moderate businesses cut their fees and the predatory Bitcoin ATM operators slacken, retail investors can once again easily access digital assets, which are growing in popularity.
Joshua Harrison is a London-based entrepreneur and crypto investor. He is the co-founder of Harrison & Keen Trade – a cryptocurrency trading and forecasting company. Harrison also works in the digital payments space, where he advises entrepreneurs on their go-to-market and compliance strategies.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading step is associated with risks. You should do your own research when making a decision.