Bitcoin defended the psychological support of $18,000 during Asian trading hours and is currently at a 35-month high above $19,000. The cryptocurrency market leader is now only 4% away from testing the record high of $19,783.
As a result, most alternative cryptocurrencies (still well below their respective life cycle highs) began to appear relatively cheap. For example, Ethereum, the second largest cryptocurrency by market value, has fallen by at least 57% from its peak of $1,431 in January 2018, even though it has risen by more than 50% this month alone.
If Bitcoin’s upward trend slows down, investors can transfer funds to cheap alternative cryptocurrencies. “During the radical rebound in Bitcoin prices, market participants sold their alternative cryptocurrencies to gain the upside of Bitcoin. Once Bitcoin slows down, funds will flow back to other cryptocurrencies and find a valuation equivalent Position.” said Nicholas Pelecanos, head of trading at NEM Ventures.
In the traditional market, US stock futures flashed green, while gold and US dollars were nursing losses. The risk sentiment remains firm. Coronavirus vaccine optimism and fading political uncertainty in Washington, DC President Trump said his aides will cooperate with the president-elect Biden in the transition to the White House, alleviating a long period of uncertainty. Period attention.
What is behind the current Bitcoin price increase? This is a question that many people want a clear answer. So far, it is difficult to have a unified theory.
What we do know is that since mid-October, the price of Bitcoin has soared from $11,000 to $19,000. Although the price is several hundred dollars lower than the historical high, the market value of Bitcoin recently broke through 345 billion dollars, setting a record. Since the mass rally in 2017, more bitcoins have been mined and put into circulation.
For a large number of market observers, the reason for the rally is obvious: more buyers have more wealth. If so, it indicates continued growth. But there is also a reasonable theory that the abnormal situation temporarily limits the supply, which makes people question the endurance of the pull.
Demand case: new money
There seems to be no day without the story of large financial institutions embracing Bitcoin as they wish. A CIO of BlackRock stated on CNBC that it “can replace gold to a large extent.” Citibank analysts said that by the end of 2021, the price of Bitcoin will reach $318,000. A report by JPMorgan stated that the number of bitcoins purchased by institutions was three times that of the previous quarter.
The world is in the midst of a pandemic, and this pandemic is causing economic turmoil on every continent, even Antarctica. The central bank is printing fiat currency as soon as possible (interestingly, Hewlett Packard’s stock price has risen 3% so far this year). Governments are also taking actions, investing trillions of dollars, euros and other things they can borrow, with the aim of avoiding an economic disaster that causes social unrest and street violence, and more.
Since the birth of the abyss of the global financial crisis more than a decade ago, this potential inflation measure is precisely what Bitcoin advocates warned or even secretly hoped when they began to reserve digital assets.
Then comes the data. In a recent article, Galen Moore of CoinDesk elaborated on the four ways the current rebound differs from 2017. More “whale” accounts hold 1,000 or more bitcoins than ever before, and unlike three years ago, their numbers are increasing in price. Bitcoin and its closest competitor, Ether, are jointly setting new highs in the near future, and in the months after Bitcoin’s rise, the record price of Ether in 2017 is in the rearview mirror. The regulated market is part of this transaction. In the past few months, daily futures trading volume on the Chicago Mercantile Exchange has reached more than $1 billion. Since the beginning of 2020, East Asian investors have sold approximately 200,000 Bitcoins to meet the growing demand of their North American counterparts.
These are profoundly bullish signals. However, there is still a troubling “why” question: why only now?
After all, preliminary data on three vaccines against COVID-19 show that the effective rate is 90% or higher. The material threats looming over the workplace and every aspect of everyone’s life may soon disappear. Even in terms of politics, the US’s uncertainty about who will be in charge of the federal government within a few months is beginning to disappear.
Supply Case: Bottled Bitcoin
Part of what makes current story narratives so attractive is that they focus on the demand side of explanation. However, as we all know, supply is the other side of the equation. Is there enough Bitcoin to meet the needs of all new buyers who enter the market due to economic concerns and analyst stimulus?
A few months ago, among those talking about cryptocurrency, supply was the biggest topic. Bitcoin is undergoing a halving, so the reward for successfully mining a block has been reduced by half. The theory is that this will automatically lead to a price spike because the daily supply of new bitcoins will decrease by 900, but there will be new buyers every day. That was in early May. In the following months, the price of Bitcoin has remained at around $9,000. The halving event has been programmed into the Bitcoin code since the beginning, so when the market actually happened, the market was obviously not surprised.
Going back to other things we know, one thing to add to the list is that in China, the site with the greatest hash power of Bitcoin, the government’s crackdown is harming some cryptocurrency transactions that cater to miners and miners in the country. The loss. Traders. The crackdown is not necessarily to stop encryption, but to stop money laundering. As it happens, the use of cryptocurrency exchanges may be suspected in the portfolio. Therefore, the executives of the exchange have obtained the third degree.
At OKEx, a key supervisor-literally, the person who has the key to the OKEx address-went to MIA and did not reappear until after spending some time with the Chinese authorities. At the same time, the exchange in Malta was allegedly forced to stop withdrawals, because apparently only one person had such keys in one of the largest trading venues in the world, and he happened to be in China. I hope OKEx will work out an emergency plan to prevent someone from being hit by a bus.
Oh, the date this all started? On October 16, just a few days later, the price broke the trading range of US$10,000 to US$12,000, and has been rebounding around this area since July.
Case against supply: business as usual
Again, just because one cannot withdraw bitcoins from OKEx, it does not mean that one cannot conduct transactions. In fact, according to Skew, its open interest in futures contracts is $1.22 billion. This is the largest number of open positions on any exchange. For example, the Chicago Mercantile Exchange is 200 million dollars smaller.
Although Bitcoin can neither flow into or out of OKEx, its price is consistent with that of competitors.
Ki Young Ju, CEO of data provider CryptoQuant, told Muyao Shen of CoinDesk: “The price of BTC on OKEx is not much different from other exchanges.” “…[P]Although withdrawals are suspended, people can still trade their BTC on OKEx. “
The miners are looking for other places to unload their newly minted bitcoins. According to Chainalysis data, Huobi, Binance and other exchanges seem to be slowly relaxing. Unfortunately, due to the crackdown on money laundering, it is not easy for some miners to convert their cryptocurrency into legal tender (in this case, RMB).
The two explanations (new demand and bottled supply) discussed above for the Bitcoin bull market are not mutually exclusive. Soon, at least one of them will be tested: OKEx is expected to allow withdrawals on Friday this week.
George Clayton, managing partner of the investment firm Cryptanalysis Capital, told CoinDesk’s Daniel Cawrey: “Because of all the institutional flows surrounding cryptocurrencies, I don’t think the status of any exchange will affect beyond the typical Prices with daily volatility.”
This may well be the case. We may know this weekend. After completion, we will finally be able to determine whether this is a demand-driven or supply-driven market. In other words, are there really more buyers or fewer sellers?
At the same time, please pay attention to when OKEx allows another withdrawal.
Bitcoin seems to be copying the trend that followed the halving of mining rewards in 2016.
The leading cryptocurrency by market capitalization has risen by $9,000 in the past seven weeks and is expected to challenge the all-time high of $19,783 set in December 2017.
It is worth noting that after the third mining reward halving occurred on May 11 this year, the cryptocurrency is closing at a record high of 6.5 months. Reward halving means that the planned block reward is reduced by 50% every four years to keep inflation under control.
The latest move to record highs looks similar to four years ago.
Bitcoin experienced its second halving on July 9, 2016, when the price was trading around $650. By the end of February 2017, seven months after the halving, the price of the cryptocurrency hit a new peak of $1,163, the highest in November 2013.
The rally did not stop there, and the cryptocurrency continued to reach a record high of $19,783, as mentioned earlier. If history is used as a guide, Bitcoin may see a major rebound in 2021.
Most analysts expect that due to increased institutional participation and Bitcoin’s growing appeal as an inflation hedging tool, Bitcoin will explore more than $20,000 in uncharted territory in the next 12 months.
According to Su Zhu, CEO of Three Arrows Capital, once a cryptocurrency gains a foothold above $20,000, one needs to be alert to the level of $36,000.
“This one [$36,000] It is the largest open position in Bitcoin on the Deribit exchange, the strike of the main market leader in option transactions settled in Bitcoin and Ethereum. ” Zhu Tweet.
- The Ethereum 2.0 deposit contract ensures that there are enough funds to start (CoinDesk)
- PayPal CEO Schulman said he is optimistic about Bitcoin as a currency (CoinDesk)
- Due to the airdrop frenzy, XRP price soared to a 2-year high (CoinDesk)
- An Australian investment group with billions of assets under management began to invest in Bitcoin futures (CoinDesk)
- The IRS once again warned cryptocurrency investors that they underreported profits (CoinDesk)
Economic and traditional finance latest
- Biden appointed Yellen as Secretary of the Treasury President-elect Biden is expected to nominate former Federal Reserve Chairman Janet Yellen to be U.S. Treasury Secretary Geithner, who broke the 231-year gender barrier and put an experienced economist and labor market expert in charge, because Lead the country out of the steepest downturn.
- Vaccine News, Biden’s transition period (Bloomberg), gold price fell to four-month low Gold fell to its lowest level for four months amid optimism about the development of the COVID-19 vaccine and the formal transformation of President-elect Biden’s trigger.
- Driven by new buyers (WSJ), Bitcoin transactions are once again close to record Cryptocurrency has attracted billionaires Paul Tudor Jones and Stanley Druckenmiller as well as momentum investors.
- The Trump administration begins the transition process and the Dow Jones Index rises by 200 points (CNBC) Boosted by positive vaccine news, Wall Street stocks rose strongly, and the New York stock market rose overnight in trading on Monday.
- Wealthy tenants are fleeing American cities (The Economist) The prices of luxury properties are falling, but cheap properties are still needed.