This week started around $10,350 and recorded an increase of 13.5% to now trade around $11,500 while keeping the ‘real’ volume stable around $2 billion.
However, there were much more exciting things than the price that happened in the bitcoin market this week.
For starters, JPMorgan strategies revealed that while older investors go for gold, younger ones prefer bitcoin. Also, over the past five months, both gold and bitcoin ETFs saw strong inflows as old and young both see the case for an “alternative” currency.
Institutional Investors are Back
It’s not just the retail investors that all up in bitcoin’s business, institutional investors have also entered the market. After a long time, Bakkt finally made progress and set new records twice in a row that eclipsed the previous ATH.
“The trading activity on Bakkt has exploded after bitcoin crossed $10,000 again. Both open interest and volume saw new all-time highs last week,” noted Norwegian cryptocurrency analysis firm Arcane Research.
In the first half of July, trading volume on the ICE-backed exchange remained around $30 million which has since surged to $80 million in August. Open Interest on Bakkt contracts saw even more explosive growth of 575% from mid-July level.
Similarly, volume on CME has spiked from around $100 million to now over $650 million. OI on CME bitcoin contracts meanwhile is slowly making its way to $1 billion, with 120% jump from last month, as per Skew.
San Francisco-based crypto exchange Coinbase, which has been recording trading volume between $30 to $100 million up until July 27 the day bitcoin broke the key levels of $10,000 and $10,500, has now made its way to $275 million.
Explosive Q2 Reports
Square all but gobbled all the BTC mined in Q2 as it reported a revenue of $875 million from bitcoin, up 600% year over year, accounting for a big chunk of the company's $1.92 billion in revenue.
What’s interesting is that much of this revenue is the Square burning the BTC for its customers as only a “small margin” is charged from the users on each sale. The company recorded $17 million gross profit, less than 3% of total gross profit, from trading bitcoin last quarter.
Another bullish Q2 report came from Genesis Lending, which saw $2.3 billion loans in the origination, hitting new all-time highs.
“BTC loans increased as a result of the flattened futures curve enticing traders to long basis by borrowing BTC, selling it spot while buying short-dated futures,” noted Jack Purdy of Messari.
With crypto getting more institutionalized, prime brokers like Genesis have a “pivotal” role to play by providing a full suite of products just like in the traditional financial world.
Bitcoin is the Choice
Wolfe Research wrote a technical analysis of the largest digital asset titled “Bitcoin — More than just a bit,” where it talks about bitcoin chart set-up looking “pretty darn good.” Not only is it above upward-sloping moving averages, but it also has “positive momentum readings across all periodicities.”
As per the research, the first reasonable target for BTC is $13,850 from June 2019 and is expected to make a new all-time high in this cycle.
As we reported, $1.2 billion publicly-traded company MicroStrategy also disclosed in its Q2 2020 earnings call that it is diversifying its cash holdings to include bitcoin. This movie has been made in the company's search for yield, as it expects yields on government bonds to turn negative all over the world thanks to all the money printing by the central banks.
The Fed Tailwind
The biggest driver of all the bullishness in the markets will continue to push them higher as already, another fiscal stimulus is on the way, which would be a trend changer because “nobody is expecting it despite the negative headlines,” said economist and trader Alex Kruger.
Moreover, the US Federal Reserve is also expected to make a harder commitment to ramp up the inflation soon, until it hits at least 2%. Markets are already betting on higher inflation as seen in the falling dollar, surging gold prices, and people looking at bitcoin as an alternative currency.
Blue = BTC/GLD correlation coefficient
Red = BTC/SPY correlation coefficient pic.twitter.com/NUurm5dRdk
— Lucid (@Lucid_TA) August 5, 2020
Such a case would be “widely bullish” for alternative asset classes, said Ed Yardeni, head of Yardeni Research.
“This is the scenario bitcoiners have waited for,” said trader Scott Melker.