New Capital & Old Money from Crypto Market All Moving into Bitcoin
Bitcoin is above $12,000 yet again.
The leading digital currency went as high as $12,317 on Bitfinex and, at the time of writing has been trading just above $12,200.
In these two days, Bitcoin has jumped nearly 9%, and it is to be seen if today we will continue this momentum upwards or things would be different.
The market consensus is that $12k will lead Bitcoin’s price to $14k from where we are off to the $20,000 peak and all the white space to run to.
Trader and economist Alex Kruger leans toward Bitcoin outperformance until December. At this point, the rally would also resume across risk assets driven by government stimulus, and this risk-taking appetite will further spill into cryptocurrency — “helps all coins resume trading like high betas.”
But he expects the results of the US Presidential elections to be held on Nov. 3 to be contested, which then would result in a “shrimp risk-off move'.”
$BTC price action has been very strong and orderly, against a backdrop of negative funding for *all* perpetuals' open interest, which speaks of a spot driven market. No interest in fading this move. Would need to see a massive spike before hedging any longs, maybe above 13K. pic.twitter.com/BvDPCL5rMr
— Alex (@classicmacro) October 20, 2020
Keep it all Coming
While bitcoin climbed above $12k for the first time in more than a month, the same can’t really be said of the altcoins, which we have been reporting, are either in the red or barely in the greens.
Large caps are the ones that are leading the way this month as interest in DeFi tokens and small-cap coins wanes.
“Money is rotating from altcoins back into BTC. This rotation is ongoing and will give BTC decent near term momentum that will likely carry it to $14-15K,” said a partner at a crypto fund, the Spartan Group.
While some money surely is moving from altcoins to Bitcoin, there could also be new money coming into the market.
Crypto Market Cycle Capital Flows
Below I've highlighted periods where $BTC market cap increased but $ALTS did not. This suggests the capital entering #Bitcoin is new money rather than a rotation from #Altcoins.
Black: BTC Market Cap
Blue: Total Market Cap
Orange: Alts Market Cap pic.twitter.com/sZUybEsZIQ
— Alex Saunders 🇦🇺👨🔬 (@AlexSaundersAU) October 21, 2020
The Fundamentals Side
When it comes to Bitcoin usage, it was a little down on the week, with transactions decreasing by 3.1% and active addresses declining by 2.7%. Bitcoin daily transaction fees have also fallen by 31% week-over-week after averaging $1 million a day the previous week.
Bitcoin balance on exchanges that fell throughout 2020 is currently down 15.5% from its March top.
However, the number of addresses holding at least $1 of BTC topped 24 million for the first time last week.
Stablecoin active addresses, meanwhile, are also hitting a new all-time high, led by the surges in Tether (USDT) and USDC. The total amount of stablecoin daily active addresses topped as well at 265k.
In the meantime, the bitcoin difficulty reached a new all-time high, grown by 1,570% over the last three years, which resulted in a drop in hash rate.
Overall, the Market is Moving
The bullish thing is the increasing volume backing up the currently rising price. From under $700 million on Monday morning, we have moved up to over $2.4 billion.
This week market sentiments have also turned to “greed,” which were neutral last month; they did turn to “fear” briefly at the beginning of this month as BTC price went to nearly $10,000 level after the news of KuCoin hack, BitMEX criminal charges, and US President Donald Trump testing coronavirus positive hit the market.
But then we also saw Square investing $50 million in Bitcoin, Fidelity Investments launching a Bitcoin fund, Grayscale record inflow hattrick surpassing $1 billion, and a couple of other companies investing in the coin. Even Bakkt had a record-breaking month.
“We see a significant increase in institutional players entering the crypto market,” said Eric Demuth, co-founder, and CEO of Bitpanda. “There is a lot of capital available that is not only going into the traditional financial market.”
Federal Reserve Chairman Jerome Powell talking about the central bank assessing the risk and benefits of a digital currency also played a role.