I’m A Teenage Bitcoin Millionaire
It looks like big investors new to cryptocurrencies are behind the Bitcoin rally.
According to analyst firm Chainalysis, investors who bought at least 1,000 bitcoins worth approximately $ 23 million at Friday prices and opened an account over the past year have generated significant demand for the flagship cryptocurrency since September. New cohort of investors jointly purchased half a million bitcoins worth $ 11.5 billion in the last three months.
As these new investors accelerated their buying activity, the price of bitcoin more than doubled from the $ 10,000 level. According to Philip gradwell, Chief Economist at Chainalysis, New Demand Pushed Cryptocurrency Growth To An All-Time High.
«The role of institutional investors is becoming increasingly clear, Gradwell said in a note to clients on Friday. – Demand is driven by North American investors on fiat exchanges and demand from institutional buyers is growing».
The rise in demand from wealthy Wall Street investors marks a sharp turn from the first surge in bitcoin three years ago. The 2017 rally was driven by retail investors, many of whom were betting on bitcoins and other small cryptocurrencies for speculative purposes. Bitcoin became a household word, then it first approached 20 thousand dollars. It collapsed shortly thereafter, losing 80% of its value within a few months..
Bitcoin surpassed $ 23,000 for the first time in history this week, resulting in more than 200% annual growth. The cryptocurrency has recovered about a quarter of its value since Friday and is showing its best week in trading since May 2019.
The price recovery in 2020 was driven in part by the activity of prominent Wall Street billionaires who publicly supported Bitcoin. This has instilled confidence in skeptical mainstream investors, analysts say..
Stanley Druckenmiller and Paul tudor jones invested in cryptocurrency and highlighted its potential as a hedge against inflation. Meanwhile, Square, MicroStrategy, and Mass Mutual used their own balances to buy cryptocurrency. PayPal also added the ability for customers to buy bitcoins, opening up the market for millions of new buyers..
«We are seeing institutional capital flowing in at the fastest pace in our business history, being deployed by some of the world’s largest organizations and some of the most prominent investors.», – stated Michael Sonnenschein, managing director of Grayscale Investments in a telephone interview with CNBC on Friday. The inflow to the publicly traded Bitcoin Trust in Grayscale has increased by about 6 times compared to last year, he said..
Chainalysis also indicated less liquidity in the market and fewer sellers than it was many years ago..
Last week, 801 thousand bitcoins were sent less than in 2017. Of course, not all «sent» bitcoins are on sale. But Gradwell of Chainalysis said it was «good example», as there are a limited number of use cases otherwise, especially when prices go up. According to him, the lesser availability of bitcoins «explains the rapid rise in prices this week».
As bitcoin neared its peak this week, the rapper Megan phi stalion Tweeted a Bitcoin giveaway using the Square Cash app, retweeted by the CEO of Square and Twitter Jack dorsey. The endorsement coincides with the peak of the price of bitcoin on Thursday.
«Celebrity endorsement tends to be a signal for market leaders, so perhaps this sign will overcome the basic principles that I demonstrated in the data presented.», – said Gradwell.