Step One: Bitcoin's failure to crack $ 20,000 exhibits that large traders are solely simply arriving
Bitcoin was lower and declining after rising to a new all-time high of $ 19,920 in the past 24 hours, based on CoinDesk's Bitcoin price index.
Cryptocurrency analysts predicted that bullish traders could head for the $ 20,000 line next, although the market may struggle to break through if large potential holders decide to take profits at that level.
The "resistance to $ 20,000 could be more psychological than anything," said Denis Vinokourov, head of research at prime broker Bequant for digital assets. "It would make sense that the rally would have legs as soon as we finally crossed that threshold."
In traditional markets, European stocks rose, led by banks and energy companies, and US stock futures pointed to a higher open on the first day of the final month of a turbulent 2020. Gold rose 1.2% to $ 1,798 an ounce.
All sorts of reasons were cited on Monday as Bitcoin hit a new all-time high ranging from PayPal's recent entry (PYPL) to the collective market's shrug in response to the massive outflows from OKEx cryptocurrency exchanges after a five-month withdrawal suspension canceled.
What is clear is this is the first time most analysts, traders, and industry executives are talking about the sudden influx of large investors and Wall Street companies entering the Bitcoin and digital asset markets. As already mentioned on Monday in First Mover, the “institutional adoption” is one of the most important buzzwords of Bitcoin bulls and marketers.
The main driver of their interest seems to be a desire for a hedge against inflation during a year when the US Federal Reserve and other central banks pumped trillions of dollars in emergency liquidity and monetary incentives around the world due to the heavy economic burden of the coronavirus.
"With so much excess liquidity in the system, the original Bitcoin investment case is confirmed." Rich Rosenblum, who heads trading at crypto firm GSR, told CoinDesk's Daniel Cawrey.
On Monday, just before Bitcoin prices began their one-day rise of 8.3% at the end of the month, the market was full of chatter about a new confirmation from an analyst at $ 631 billion investment firm AllianceBernstein. ("I changed my mind about Bitcoin.") Later in the day, CNBC reported that strategists from another Wall Street company, BTIG, said the cryptocurrency had grown up and that Bitcoin should hit $ 50,000 by the end of next year.
"The stream of institutions commenting and assigning BTC turned into a barrage of good news that added to the narrative," Matt Blom, director of sales and trading at cryptocurrency-focused financial firm Diginex, told subscribers in an email.
CoinDesk's Muyao Shen reported that support from institutional investors could help sustain the recent rally, unlike the bull run of 2017, when prices briefly touched these levels before falling rapidly and then for most of 2018 all in one Hibernate bear market.
"By and large, institutional positions and high net worth individuals are leading the way this time around," Jason Deane, an analyst at Quantum Economics, told Decrypt.
Another difference from 2017 is that the digital asset markets appear to have moved dramatically in recent years and seem to have managed the recent surge in intensity and transaction volume without too much disruption. (The proven Foin-to-Cryptocurrency-On-Ramp-Coinbase reported delays in processing some Bitcoin withdrawals due to network congestion.)
"The trading, settlement and custody services are far more sophisticated and mature, which creates trust," said Rosenblum of GSR.
The major spot exchanges, where retail customers occasionally buy the world's oldest cryptocurrency, saw an upward trend. The combined daily volume for Coinbase, Bitstamp, Kraken, Gemini and ItBit was $ 1.5 billion at the time of going to press on Monday, well above the $ 488 million average for the past six months, reported Dan Cawrey of CoinDesk.
Jeff Dorman, Chief Investment Officer at Arca Funds, wrote on his weekly blog that due to regulatory concerns, some major investors may be using futures on U.S. commodity exchanges or publicly traded investment vehicles on traditional stock markets to get exposure to Bitcoin – instead of just jumping in the digital asset markets. He provided a graph showing how major closings in US public markets over the past week coincided with large swings in cryptocurrency markets around the clock, seven days a week.
"The institutions are fine, but they take the local bus while the rest of us are on the express," wrote Dorman.
The result is that Bitcoin is making new highs when institutional adoption, in the true sense of the word, has not really gotten off the ground.
Chart showing hourly price changes for Bitcoin from Wednesday to Sunday, with yellow lines indicating when the CME was closed and white lines indicating when it opened. According to Arca's Jeff Doramn, the CME was only open for a short period of time and missed both the descent and the subsequent ascent.
Source: Arca Funds
Bitcoin's implied volatility is rising to a multi-month high.
Bitcoin's implied volatility for one month has risen to a 6.5-month high, reflecting increased expectations for price turmoil over the next four weeks.
According to data source Skew, the metric affected by demand for call and put options has risen to 89%, its highest level since May 18, after hitting a low of nearly 44% in September. The doubling in implied volatility occurred alongside the Bitcoin rally from $ 10,000 to $ 19,920 and appears to be due to the relatively higher demand for call options (bullish bets).
This is evident from the record lows in put and call calls of one, three and six months, which measure the cost of puts (declining bets) in relation to calls. The options market appears positioned for another rally.
Some analysts say a healthy retreat is imminent as Bitcoin inflows into exchanges have exceeded outflows since the Thanksgiving sell-off, according to data source CryptoQuant. "This on-chain metric could indicate a short-term bearish trend and send Bitcoin back to around $ 16,000 levels," said Ki Yong Ju, CEO of CryptoQuant.
At press time, Bitcoin is trading near $ 18,800, down 4% on the day.
Read more: Google searches for "Bitcoin price" and hits an 18-month high
What is hot?
- The Ethereum 2.0 Beacon Chain will go live while the "world computer" begins the long-awaited overhaul (CoinDesk).
- Coinbase reported delays in processing Bitcoin withdrawals on Monday as the price of the cryptocurrency hit an all-time high on the blockchain network (CoinDesk).
- Over-the-counter cryptocurrency trading firms report surge in purchases from institutional investors during recent Bitcoin rally (The Block)
- While a short-term price correction is expected, analysts who spoke to CoinDesk said that Bitcoin's recent rally compared to 2017 (CoinDesk) will be more sustainable in the long term.
- European Central Bank President Lagarde says stable coins pose "a serious risk" to financial security (CoinDesk).
- The 100x Group, holding company for the competitive cryptocurrency exchange BitMEX, has appointed the former head of the German stock exchange as its new CEO (CoinDesk).
- Upstart Bitcoin exchange LVL, backed by Anthony Pompliano, Jimmy Song and Willy Woo, is cutting trading fees to intensify competition with Coinbase and Gemini and is planning a new debit card with Mastercard (CoinDesk).
- Authorities have cut off electricity for Bitcoin miners in China's Yunnan Province (CoinTelegraph).
The latest on economics and traditional finance
- "Instead of trying to create a Chinese-style digital dollar, Joe Biden's aspiring government should recognize the benefits of integrating Bitcoin into the US financial system," writes economic historian Niall Ferguson in his statement (Bloomberg Opinion).
- Fed chairman Powell called the economic outlook "extremely uncertain" in prepared remarks ahead of its scheduled appearance on Tuesday before the US Congress (CNBC).
- China's new anti-dumping rules for Australian wine could escalate tensions and signal far-reaching efforts to contain dissent among trading partners (Bloomberg).
- With the rise in coronavirus cases in Hong Kong, banks like Goldman Sachs, Standard Chartered, UBS and Citigroup are bringing back work-from-home policies (Bloomberg).
- Tech Startups Help Modernize Indian Agriculture (Nikkei Asia Review)
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