Bitcoin lost 14% of its market value after the crash that occurred in recent days. After its highest point in the last week, Bitcoin shows an appreciation of 11%.
After reaching the price of USD 19,200, Bitcoin recorded a strong correction of 11% in recent days. In just 24 hours, the price of Bitcoin reached a weekly low of USD 16,326. This represented a deterioration in its price close to USD 3,000, in addition to its market capitalization declining by around USD 60,000 million.
Bitcoin’s abrupt correction occurred when the deterioration of the price was already around 15%. Possible reasons include the increase in BTC on exchanges due to whales selling their positions for profit.
Another possible reason for Bitcoin’s correction is the reactivation of withdrawals on OKEx after more than a month of suspension. In addition to this, Coinbase CEO Brian Armstrong warned about potential new regulations against cryptocurrencies.
However, the price of Bitcoin resumed its upward trend, to reach and slightly exceed its pre-crash price. Bitcoin’s fundamentals appear healthy despite that correction. At the time of writing this article, the price of Bitcoin is above USD 18,507.
Dissecting Bitcoin’s Boom
According to a study by Coin Metrics, the current upward cycle of the pioneer cryptocurrency is due to two factors: China’s strict regulations on the sale of Bitcoin in that country and the growing institutional investment in this crypto asset.
Concerning the fact that miners and exchanges in China cannot sell their coins; data from Coin Metrics shows evidence of the decrease in the amount of Bitcoin that miners are holding. The increase in the BTC that they transfer is also evident.
Concerning the influence of institutional investments in the current boom, Coin Metrics contrasts the evolution of the BTC held during the bullish run of 2017 with that of this year.
During the 2017 bubble, the BTC held increased as Bitcoin progressed towards its all-time high. That year, the BTC held to show a significant decline. Coin Metrics concludes that institutional investments have grown significantly and seem to be a key factor in the boom. However, they are not reflected in the exchanges as they occur in OTC markets.
More Whales Than Ever and Bitcoin Decoupling from Gold
Entities (people or institutions) with more than 1,000 BTC are also a relevant indicator of the growing adoption of Bitcoin, which is tied to institutional adoption. Those whales reached 2,000 BTC, a figure not seen since 2016, according to data from Glassnode.
Wealthier whales own more than 10,000 BTC or an equivalent of more than USD 180 million. According to Glassnode, there are only 114, but although they slightly exceed a hundred, they also represent an all-time high. Another important fact is that most whale’s coins have not moved for around 52 weeks.
They support Bitcoin as a store of value and coincide with the decoupling between the price of Bitcoin and that of gold. The correlation between the two assets recently reached a low of –0.7.
Mike Novogratz Recommends Investing in Bitcoin
Mike Novogratz, the founder of crypto bank Galaxy Digital, says that every investor, large or small, should invest between 2% and 3% of their assets in Bitcoin. The investor highlighted the difference between the current bullish cycle and the bubble of 2017, in which he noted that “a speculative mania” prevailed.
Institutional investors who have been gradual are currently supporting Bitcoin’s boom, Novogratz states. Stan Druckenmiller is a highly relevant investor in the institutional investment space. Druckenmiller is one of the most successful investors and hedge fund managers in the United States.
Regarding the all-time high of the price of Bitcoin, there is no consensus on the peak that occurred on December 17th, 2017. What experts agree on is that it was very close to USD 20,000. However, there are many versions of that record, which does not allow specifying how close it was to that value. There are even exchanges that record values above USD 20,000, although most record figures below that value.
By Alexander Salazar
