Bitcoin’s rise from $12,000 to nearly $20,000 came through
5. Dezember 2020
Report: Bitcoin’s rise from $12,000 to nearly $20,000 came through „institutional hunger
Bitcoin has experienced a strong upturn in the past two months, taking the coin from $11,000 to $12,000 to new all-time highs of almost $20,000. The strength of the rally is almost at the level of the rally at the end of 2017.
According to market data, this more than 65% rally was driven almost exclusively by a single group of investors: the institutions.
What has driven Bitcoin from $12,000 to $20,000?
In recent months, traders have noticed something different in this rally than in previous ones.
While previous rallies were characterised by Bitcoin Capital sharp rises in the futures market (as evidenced by high funding rates and high open interest rates), this rally has been relatively muted. As one analyst who shares the chart below points out, this rally was relatively muted:
„The price has almost doubled since the summer high, but the OI (open interest) is now at the same level in both the USD and BTC deposit markets“.
Chart of BTC price movement since February with futures market data shared by „Edward Morra“. Chart from TradingView
In previous bull markets, rallies were characterised by a sharp rise in open interest rates and financing rates, suggesting that many traders took long positions. This indicates that the rally was led by derivatives, with the spot market following the futures markets.
This current rally was driven by spot buyers, as the chart above shows. Spot buyers usually buy Bitcoin for the long term as opposed to short term flips.
This is far from being conjecture: There are clear signs that institutional actors were involved in the recent rally.
Ari Paul, CIO of BlockTower Capital, comments on the rally as follows:
„For most of this rally, we have seen a clear pattern of algorithmic-style buying during the US hours and flat activity during the Asian hours. These are mostly HNWs (High Net Worth Individuals) buying large amounts of money facilitated by Algos (or via an OTC desk using Algos)“.
Although it took a little longer than many expected, Paul said, „the trend for hedge fund managers like Paul Tudor Jones BTC to accumulate both personally and for their hedge funds has accelerated“.
There are also many billionaires and other Wall Street celebrities who have pledged their support for Bitcoin in recent weeks.
These include Paul Tudor Jones, Stanley Druckenmiller and a CIO at BlackRock, Rick Rieder, who has over $1.6 trillion in assets.
Retail investors are exerting increasing influence on Bitcoin
The tides have started to shift, at least within the week.
For example, the BitMEX funding rate recently experienced a sharp rise to multi-month highs. Analyst Tyler D. Coates comments:
„The daily funding rate on Bitmex is a major concern & it is a signal that weak hands buy what strong hands sell. The last funding peak occurred on 24 November“.
This indicates a rise in retail investors speculatively lunging Bitcoin into the $20,000 resistance – which has already triggered a drawdown, as seen on Tuesday evening.