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Four metrics showing how the current Bitcoin spike differs from 2017

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The crypto market has historically been led by individual investors, followed by professional investors. Will it change? After all, tech innovation over the last 15 years has turned the corporate-led pattern into a consumer-led pattern and has done the opposite.

Retail leads were revealed in the fourth quarter of 2017 as media hype soared with prices. There is no doubt that retail hype is quiet this time around. CNBC had nearly 100 “Bitcoin” headlines in the first half of the fourth quarter of 2017. Over the last six weeks, Bitcoin has reached a record high market value, falling below 40. Hell is a day trader and an investor in the “Robin Hood effect”? Have they run out of stimulation checks?

It is premature to diagnose long-term trends in crypto investment, primarily because the retail / institutional dichotomy is problematic and simplified. Below, we’ll discuss four aspects of the market that show that participants in this run-up are behaving differently than investors in 2017.

Trading with Bitcoin Whale vs. Holding Bitcoin vs. Ether and All Other Regulations vs. Offshore Futures Market N. America vs. E. Asian Investors

1. Deal vs. holding with Bitcoin Whale

From the end of 2013 to the 2018 crash, the number of addresses holding at least one Bitcoin increased at a relentless pace. It recovered again in 2019 and leveled off again this spring. This is different from the end of 2017, when Bitcoin prices peaked.

Compared to the number of Bitcoins that can be called “millionaires”, it is an address that holds at least 1,000 BTC. These whales were for sale in 2017. This time, the Bitcoin blockchain Forbes list is expanding rather than shrinking.

The address should be balanced with a grain of salt. Corresponds to the entity. Action is a better signal. If there are whales, where are they swimming? Whenever they spend the winter, they bring a Bitcoin bag. Orange coins are accumulated more in wallets that have historically been purchased and held, and less in wallets that show trading trends.

Twice since 2017, the slowdown in holder accumulation has been a leading indicator on the market. In 2020, there are no signs of a slowdown yet.

2. Bitcoin vs Ether and everything else

The bull market in 2017 is remembered as a phenomenon caused by the enthusiasm for the Initial Coin Offering (ICO) at Ethereum. But by the time the frenzy reached its heat pitch, Ethereum (ETH) had almost completed its execution. At the midpoint in the fourth quarter of 2017, Bitcoin returns were 23.9%. The ether return was 6.9%. It was Bitcoin’s fourth-quarter catch-up run that fed the Bulls.

If you compare it to 2020, you can see the similarities and differences. Again, ether led the rise, but this time it is in step with Bitcoin, bitting 23.2% so far in the fourth quarter, even before it exceeded $ 500 at the beginning of Friday. It is back to 28.4% of coins. If the 2017 pattern repeats, Bitcoin bulls can run longer.

So is the crypto market integrated? The answer is yes, no. Bitcoin, which has a cumulative market capitalization share of orange coins, has an advantage in its late 50s. It usually means a shorter list of assets that make up the majority of the market. Not this year.

The top five assets of CoinDesk 20 are growing on Bitcoin, but the long tail is more fragmented than it was since the aftermath of the 2017 bubble. (This aggregate includes stable coins and other fixed assets.)

3. Regulated futures market and offshore futures market

“The institution is here” The choir can sing about the growth of the CME Bitcoin futures market, demonstrating the growing demand for regulated exposure to Bitcoin through established operational channels. Open interest to CME reached $ 1 billion this week, a record high.

However, much of that growth is due to Bitcoin price execution. And overall, lightly regulated derivative contracts traded by individuals, prop desks, and liquidity providers diminish CME. It is unwise to write an institutional flipping treatise based on CME-only growth. It’s safe to say that institutional participation is growing alongside other markets.

4. North American vs. E. Asian Investors

In parallel with the growth of CME futures, there is a Bitcoin flow to North American exchanges and a Bitcoin flow from East Asian exchanges.

As long as the exchange flow represents the activity of the participants, East Asian investors have been selling Bitcoin to this bull market at unprecedented rates. Meanwhile, North American interest in Bitcoin is greater than in 2017.

One important caveat is that the flow here may represent a trader’s preference over the long-term activity of an investor. Stable coin tethers are moving at a pace of more than $ 10 billion in market capitalization this quarter. Some of the East Asian tides probably indicate that Tether (USDT) is moving towards dominance of the quoted currency, as traders prefer it to Bitcoin in the crypto-to-crypt market. ..

Conclusion

The point: This blulan is certainly different from 2017, but that doesn’t mean you can’t see another peak and trough cycle. Signals suggesting the types of investors participating indicate that the cycle may be faster than when Bitcoin hit a record high three years ago. Bitcoin’s history is full of stories about upcoming shifts and regulatory changes that will radically change the market. Those stories have been exaggerated in the past, and they are probably now exaggerated. The same is true for the story that predicts the end of the dollar.

Are Traditional Financial Markets Burning Out Their Own Fraternity Houses? Maybe, but it doesn’t suddenly turn Bitcoin into a safe haven or hedge. While the current pattern of increased involvement of new, large and long-term investors may continue, Bitcoin and downmarket crypto are risk-risk investments for the foreseeable future, and investors will take them. You have to keep treating it like that.

Does anyone still know what’s going on?

One of the investments that makes Bitcoin so successful is the lack of infrastructure. Like most retail investors, I tend to profit too quickly. Like many Bitcoin investors, I keep my coins refrigerated. In short, it takes time and effort to prepare for a deal. We Bitcoin investors are more successful than other Fidelity clients, and are similar to Fidelity’s clients who are dead and dead and have stopped tinkering with their portfolios.

That said, this month’s Bitcoin returns put Orangecoin in the stratospheric percentage of my family’s portfolio. Does anyone still have a white knuckle?

(Coinmetrics, FactSet)

(Note: There is no investment advice in this newsletter. The author owns Bitcoin and Ether.)

Chain link

Rick Rieder, CIO of BlackRock Bonds, is thinking about crypto assets. If you lived under a rock, the leader commented on CNBC on Friday morning, showing that the world’s largest asset manager is taking cryptocurrencies seriously. Most? Yes, that’s right. It’s much more functional than handing a gold bar, “says Leader. Takeaway: When BlackRock walks the walk the leader is talking about, we should all wear running shoes to catch up.

IBM has patents for blockchain-based transactions in large-scale multiplayer online video games such as Fortnite and Call of Duty: Warzone. The bottom line: blockchain startups in the gaming industry are promoting similar technologies as a way to ensure player ownership and portability between games for virtual products, but existing incentives for game development and publishing do so. It is unclear if it will support the transition to. In such cases, it is doubly unclear how an authorized blockchain like IBM’s advocate would improve a simple database.

One factor that is often overlooked in the current increase in Bitcoin is Beijing’s crackdown on commercial crypto trading desks where miners convert newly created Bitcoin into cash. After reporting the news on Monday, this week we disassembled it in a new CoinDesk partnership with Axios (check it out). The bottom line: The halving of Bitcoin in 2020 has mitigated the impact of new supply to the market. Demand factors can be the driving force behind this rise as more investors own it. This is a medium-term supply issue to monitor as it can shape the composition of Bitcoin mining.

Former Coinbase general counsel Brian Brooks will head the Office of the Comptroller of the Currency, a major US banking supervisor, with the White House serving a five-year term. Brooks, who has been acting as a comptroller, has already overseen an open letter allowing domestically regulated banks to provide cryptocurrency custody and process stable coin issuer accounts. Takeout: Most of the cryptocurrency air is sent to securities and commodity market regulators. For unregulated currencies at the top of CoinDesk 20’s crypto asset list, banking regulations can become more important as providing the infrastructure needed for professional investors to participate.

Binance, an offshore crypto exchange operator, has reportedly leaked Forbes and two of its journalists from within Binance for defamation over articles in so-called “Tai Chi” documents, resulting in a misregulation in the United States. It details the direction strategy. Zhao was shy about the corporate structure of his company, refusing to say where Binances’ headquarters are. It’s a sign of immaturity of the crypto infrastructure when one of the biggest exchange operators doesn’t tell you under what law they operate.

Goldman Sachs will issue RMB 1.6 trillion ($ 229 billion) within 10 years and a total annual payment of RMB 19 trillion ($ 2.7 trillion), which is China’s planned national virtual currency. ) Is expected to be reached. The bottom line: If you think PayPal’s move to adopt Bitcoin is an exciting gateway to cryptocurrencies, you need to be enthusiastic about the opportunities offered by the Central Bank Digital Currency (CBDC). Its suitability as a gateway drug depends heavily on structure and regulation, but it is possible.

In Japan, 30 companies announced an initiative to jointly issue digital yen, and Mitsubishi UFJ Financial Group (MUFG), one of Japan’s largest banks, announced plans to launch a blockchain payment network in 2021. did. The Chinese digital yen (see above), both are examples of how digital currencies reach mainstream banks and their customers. In this respect, the East Asian economy is ahead of the United States and Europe. If you think the US and EU are adopting this kind of technology, reflect what you said the same about text messaging in 2005.

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