The positive dynamics of Bitcoin supported the entire altcoin market. The leading alternative cryptocurrency Ethereum (ETH) shows an increase of 5% per day and is traded at about $ 1,750. ETH jumped an impressive 22% over the week. Thus, we saw that there is unrealized purchasing potential in the market. Even more positive is the fact that bargain hunters found the price level around $ 1,300 to be acceptable to boost shopping.
The popularity and prominence of cryptocurrencies continues to grow. According to BDCenter Digital, 12 out of 100 Twitter posts are about cryptocurrency. In just the week of February 7-14, Twitter users mentioned bitcoin over 675,000 times. The last record was set on January 10, when the weekly number of posts mentioning bitcoin reached 576,000. In total, the number of cryptocurrency users has stepped over 200 million people from more than 150 countries.
Yesterday's decline occurred against the background of an increase in the flow of bitcoins to exchanges. According to CryptoQuant, over the past 24 hours, trading platform balances have grown by 37 thousand BTC, which was the largest inflow this year and is comparable to the levels of March 2020, when the market experienced a major collapse. The enthusiasm for bitcoin is becoming "more and more sectarian" and is grounded in "magical thinking," said Will Hobbs, investment director at Barclays Wealth & Investments. The first cryptocurrency could turn out to be a wingless bird if interest rates rise. One of the main barometers of greed in the market, the S&P 500, has begun to decline, which raises the degree of fears about the possible start of a wide correction, which, no doubt, will spread to the crypto market.
The supply / demand balance also remains in favor of Bitcoin, since 150K BTC were mined in the last 5 months of 2020, and almost 360K were bought back. In addition, the infrastructure for institutional investment continues to develop. Bitcoin ETFs have been approved by regulators in Australia and Canada. In addition, the statement by St. Louis Fed Chairman James Bullard that Bitcoin is a rival for gold, not the dollar, can be considered positive for BTC. Now we have come to the point where even the pessimists have paused their selling decisions. Perhaps the market has moved to a stage where most are aiming in one direction: up. However, this situation is so dangerous because massive FOMO and greed bring to the market a shadow layer of large investors who, using the investment infrastructure created over the past years, can start playing against the market. Thus, it is absolutely not necessary that the growth will stop in the near future, but right now, at the moment of general enthusiasm for the prospects of the crypto market, it is worth taking special care.
After Musk's statement, Twitter's interest in bitcoin, promotion of launches of various bitcoin exchange-traded funds, we can talk about the formation of legal loyalty to the first cryptocurrency. Of course, regulators may well change their minds, but at this stage everything is moving towards opening ways for corporate investors to invest in bitcoin.
According to experts of the analytical service Glassnode, the bitcoin market has left the initial phase of the accumulation of the bull market. A similar situation, but in a less dynamic manner, was observed in 2017 - six months before the formation of the peak of the bull market. The rally of altcoins, the decline in the bitcoin dominance index, the growth in the number of cryptocurrency analyst followers on Twitter and the traffic to resources such as CoinMarketCap, speak of increased interest from retail investors. In early December, Glassnode CTO Rafael Schulze-Kraft suggested that the price of Bitcoin could exceed $ 200,000.
We will probably soon see new statistical tools emerge from established data providers in the traditional market, which will be perceived by institutional investors as more reliable than existing ones. CoinMarketCap is often accused of data being out of date, mainly as a side of overstating trading volumes by the largest exchanges on the list. Transparent data will have to become another element on the way to the recognition of the crypto market as a destination for investment by smart money.
All speculative bursts usually end in the same way: a fall. In fact, such episodes only worsen the already controversial image of cryptocurrencies, highlighting the high speculative component of the price dynamics of the crypto market. There is a certain pattern in these recent pumps. Doge, BTC and so on rise for about a day or less, after which they return to where they started.
The Greed and Fear Index for Bitcoin and the largest cryptocurrencies has been in "extreme greed" mode since early November. The values shown by the indicator are similar to those that participants in the crypto market saw in June 2019, when the next stage of the market correction began. However, no technical indicator can overcome the strength of demand for the asset, which pushes the price of BTC up. It seems that it is big capital that makes the price dynamics more moderate and consistent, since smart money is not prone to impulsive decisions, unlike retail investors, many of whom have recorded profits of $ 20K, and now may consider opening positions already at the current very high levels.
The cryptocurrency market must decline significantly more for the index to move to neutral. In the meantime, we see that even rather insignificant corrections are used by crypto market participants as an opportunity to open positions at a discount.
Institutional investment in Bitcoin is on the rise. Last week, British investment firm Ruffer Investment, a £ 20.3bn (~ $ 27.3bn) asset manager, confirmed that it was the owner of the first cryptocurrency worth more than $ 740m. One River Digital Asset Management hedge fund bought another $ 600m worth of bitcoins priced at $ 16K without public disclosure. In addition, in 2021 they plan to increase the volume of crypto assets to $ 1 billion.
Since August, MicroStrategy has been supporting Bitcoin by reporting large purchases. The company now plans to raise another $ 400 million to buy bitcoins through a bond placement. MicroStrategy has already invested $ 475 million in Bitcoin, and thanks to this news, the benchmark cryptocurrency was able to show recently seen highs. Probably, now this news does not lead to the same violent reaction due to the overbought market. However, in the future, this will help the first cryptocurrency, due to the influx of new investors who are unlikely to be content with modest growth results.
In mid-December, another deadline comes for the submission of a civil rehabilitation plan for the Mt.Gox cryptocurrency exchange. Almost 138,000 BTC (worth $ 2.5 billion) remain in exchange-linked wallets to be distributed to former users. Market participants fear that the recipients of these assets will rush to liquidate them, because at the time of the bankruptcy of the exchange in 2014, the cost of bitcoin was about $ 600, and after so many years of waiting, many will not dare to further store these coins near the historical peaks of BTC.