In addition to the meteoric rise in cryptocurrency in the second half of 2020 and early 2021, a strange phenomenon has developed. increased profit taking and conversion to fiat currencies. The data collected by Simplex, a fiat crypto gateway, underline this apparently paradoxical development.
A strange race to convert crypto to fiat has accompanied Bitcoin’s latest Drive Higher
Share exclusive data with Bitcoin.com, simplex Netanel Kabala, Co-Founder and Chief Analytics Officer, says:
While international coverage of Bitcoin’s rally has seen many new users flock to the industry and shop, the outflows have been equally significant. Of the total amount of cryptocurrency sold in the past six months, 43% was shut down in December alone.
A quick look at Google Trends for the term “Bitcoin” reflects these developments, especially now that new equity instruments like Grayscale Bitcoin Trust and well-known funds like Blackrock are raising awareness and increasing crypto awareness.
Given the increasing ability to convert crypto and withdraw it into fiat currencies quickly, the surge in funds leaving the ecosystem is astounding. Part of this is due to the growing fungibility of the cryptocurrency, largely aided by the support of players like Simplex, which allows users to buy, sell, and spend crypto through Visa partnerships.
While some of the crowd at the recent rally saw the rapid surge in crypto valuations as evidence that a bubble is forming in this emerging asset class, others in the industry see it as a harbinger of the times ahead. One of the areas where this is most evident is in altcoins.
The data compiled by Simplex shows that daily altcoins purchases increased by approximately 65% as Bitcoin prices fell above $ 30,000. Interestingly, the data shows that newer users account for nearly 20% of that volume, which means a sharp increase in the number of inexperienced retail investors expanding and diversifying their exposure within the ecosystem.
Poloniex, one of the top 20 global cryptocurrency exchanges that has acquired the Simplex platform, has seen these results firsthand. Karen McHenry, Director of Product at Poloniex, attributes this development to better access within the ecosystem, in particular to the Simplex purchase option, which promotes instant account funding in addition to the improved ability for quick payouts.
It also does not see the possibility of converting from crypto to fiat faster than detrimental to the interest in, although the apparent amounts have been withdrawn from the exchange.
It may sound surprising, but adding the “Sell” option also has a positive effect on the number of crypto transactions.
While this slight offramp and increasing volume of sell orders may seem negative to prices, it can also be viewed as a healthy reflection of the growing use cases of the ecosystem. Growing areas such as decentralized financing (defi) and greater fungibility not only make it easier to get in and out, but also contribute to the value proposition of a cryptocurrency.
If institutions line up to increase engagement when retail accumulation rises, the bitcoin momentum may actually accelerate and raise the altcoins that the newcomers looking for opportunities outside of the groundbreaking crypto coin are looking for.
McHenry adds:
If the bull market can maintain its momentum, some of those BTC gains will flow into altcoins, which are particularly popular with retail investors. This creates a positive feedback loop where traders who make a profit tend to tell their friends about crypto, which brings more investment into the room.
Do you think offramping will continue through 2021? Let us know in the comments below.
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