“This time it’s different’ is a hackneyed phrase that sparks alarm bells in a stock market bubble.
But there’s a good case to be made that the widely expected forthcoming Bitcoin price all-time high will be based on very different market conditions to 2017.
The December 2017 Bitcoin price all-time high was driven by retail investors FOMOing into Bitcoin and getting burnt by the sudden crash.
It was a time when everyone from taxi drivers to pharmacists was talking about buying Bitcoin and providing advice on which altcoin to go ‘all in’ on.
But the evidence this time around suggests the latest Bitcoin price surge is being driven by institutional investors.
Google Trends shows that search results for “buy Bitcoin” are 90 percent down from the all-time high and are bumbling along at levels similar to mid-2017.
That certainly doesn’t indicate a groundswell of public support propping up the Bitcoin price.
JPMorgan analyst Nikolaos Panigirtzoglou pointed out last week that market volumes hit $725 billion in May – far outstripping the peak volumes of December 2017 and January 2018 of $420 billion.
While comparing volumes is a useful way to identify the upward trend, those figures probably aren’t accurate due to the massive amount of wash trading identified by Bitwise’s research.
Bitwise estimates that only about 5% of crypto exchange volume is genuine, which would make the “real” volume for May around $36 billion.
This is important because as Bitwise points out, it makes the Bitcoin futures market much more significant in size.
Bitcoin futures volumes have been rising too – from a Q1 average of $1.8 billion, up to $12 billion in May.
That means that BTC futures in May equated to a third of the real spot volume on crypto exchanges.
Panigirtzoglou says that this “suggests that market structure has likely changed considerably since the previous spike in Bitcoin prices in end-2017 with a greater influence from institutional investors.”
Every week seems to bring more news of institutional investment – Facebook has just launched the white paper for its new coin Libra and signed up some of the biggest companies in the world as investors including Visa, MasterCard, and PayPal.
Coinbase Custody, which only accepts institutional investors with more than $10 million in assets, says it expects to hit $2 billion in assets under custody soon.
Bakkt is due to launch physically settled Bitcoin futures in July.
And institutional investors are paying a 37 percent premium to invest in Bitcoin through the Grayscale Bitcoin Trust, which is publicly traded in America.
The trust is now estimated to gobble up 21 percent of the new supply of Bitcoin each month in a promising sign that its institutional investors FOMOing in this time around, rather than retail investors.
ZeroHedge summed it up nicely in an article this week, saying that this bull run may really be different “because with institutions now piling into the crypto space, this is precisely the investor group that bitcoin bulls wanted from the beginning as it creates a far more stable price base for the future.
“Add to this the potential return of retail buying from East Asian (or even US) retail clients, and it is possible that what we predicted in early April, namely that the 3rd Bitcoin bubble may soon be confirmed, and that the next bitcoin bubble peak will be somewhere between $60,000 and $100,000.”
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