Bitcoin’s price had crossed $35,000 at press time (On the back of Elon Musk’s Twitter update), amid high volatility on the stock and crypto-market as the likes of GameStop Corp and Dogecoin pumped across the board over the last 24 hours. According to many on-chain analysts and market watchers, this surge in trade activity is actually a positive sign for Bitcoin as there will likely be an increase in investment flows and Bitcoin may finally break past its range-bound price trend with more momentum.
GBTC premium || Source: Ycharts
The entire narrative of Bitcoin’s price rally at the moment is based largely on institutional demand. The burning question ergo is – With dropping Grayscale premiums, is there enough institutional demand for Bitcoin’s price rally to continue? Will there be further investment flows into Bitcoin?
Konstantin Anissimov, Executive Director at CEX.IO, was one of those to comment on the subject, with the exec claiming,
“Institutional investors are not so much the key to driving Bitcoin’s bull run as they are a path through which this market as a whole can be tempered, becoming more stable and efficient. The price movement itself will be affected by their presence to a degree, yes – but, if anything, that effect would be positive. Institutions aim for long-term deals, which acts as a preventive measure, protecting Bitcoin from crashing in a manner, similar to what we saw in 2018.”
This is an interesting development since the number of both retail and institutional participants in the market has increased, but so has the number of wallets HODLing over 1000 Bitcoins. According to Anissimov, the active corporate client base at CEX.IO has practically doubled in 2020.
Further, legal entities are highly active and specifically, 60%-80% of such clients are constantly present on the platform and conduct trading operations every day. Such an increase in clients on exchanges signals a rise in institutional interest that may continue into 2021.
Here, it is important to note that the share in turnover in certain periods of 2020 climbed to 51.3% compared to 2019, where the maximum share of corporate clients’ turnover was only 22%. During periods of explosive activity on exchanges, institutional clients may behave in a more restrained manner and their share would grow at a slower pace, compared to retail clients.
This would explain the current testing of waters as Bitcoin continues to be (mostly) range-bound below the $35000-level. On account of increased investment flow and institutional interest, it won’t be surprising if Bitcoin does indeed sustain a breach of the aforementioned level in the near-term, a sustained breach not precipitated by a tech entrepreneur’s bio updates.