Analysts argue that much of Bitcoin’s recent price hikes are a by-product of institutional players throwing themselves into the fray.
The open interest in CME’s Bitcoin Profit futures market and the trends in the chain suggest that a number of major players are accumulating the coins and driving up prices.
One analyst now believes that BTC is likely to exceed $20,000 once retail investors begin to enter the crypto-market en masse, which will trigger pricing.
Who is causing the price of Bitcoin to skyrocket?
“Light”, a pseudonymized crypto-trader celebrated by investors like Su Zhu of Three Arrows Capital, says that according to his analysis, the buying pressure that has affected the Bitcoin price in recent weeks has clearly been “institutional”:
“Much of the buying pressure that has been competing for the shortage of BTC sell-side liquidity in recent weeks comes from institutional investors. They are buying from people who are in the credibility phase”.
Several news events indicate that this is the case.
In August and September, MicroStrategy BTC, an enterprise services firm, purchased $425 million of BTC for long-term holding, citing the crypto-currency’s ability to hedge macroeconomic risks. The news followed that Square, the $80 billion Fintech giant, had acquired $50 million worth of Bitcoin for a similar purpose to MicroStrategy.
In addition, a $10 billion asset manager announced that it had purchased 10,000 Bitcoins, while Grayscale Investments, the Digital Asset Manager arm of the Digital Currency Group, absorbed $1 billion worth of crypto currency during the third quarter.
Also, on-chain trends (such as declining Miner reserve balances and Miner coins sent to exchanges) indicate that there are forces accumulating Bitcoin under the counter.
The influence of retail investors to send BTC over $20,000
Light believes that the crypto currency will be “over $20,000 in pricing” as soon as retail investors invest heavily in Bitcoin:
“The retail investor segment is currently in no way overheated. That will be it however soon… The price leads the public interest. This is a telltale sign that Smart Money is entering while the retail investors have buried their heads in the sand. As soon as the latter catches up with the former, we will be over $20,000 in pricing.”
This raises the question of what will trigger the expected buying demand among small investors.
According to JPMorgan, the news that PayPal is supporting Bitcoin, Ethereum and other digital assets is a good starting point.
The company’s analysts write in a recent report that PayPal’s support could encourage more millennials to invest in the crypto currency, arguing that it provides a better hedge against currency devaluation than gold for investors in this age group.