After two weeks, Bitcoin finally jumped above $12,000 on the first day of September but again failed to hold onto its position.
Today, BTC/USD dropped to $11,155, which could be on the back of the news of South Korean authorities seizing one of the country's biggest crypto exchanges, Bithumb, for a $25 million token sale that never materialized.
While price does what it has been doing throughout August, activity on the bitcoin network is still growing with the number of daily active addresses pushing above 1 million, not seen since January 2018 when the BTC price was actually at $14,000.
Still, at the current price level, bitcoin short term holder net unrealized profit/loss (NUPL) has been staying above zero for the last four months. “Historically, holding this level served as an indication for BTC bull markets,” states Glassnode CTO.
— PlanB (@100trillionUSD) September 1, 2020
Also, “the premiums on the retail-focused platforms and CME are starting to align, as they move in opposite directions this week,” noted Arcane Research.
Amidst this, Federal Reserve Governor Lael Brainard said the central bank would need to roll out new efforts “in the coming months” to help the economy overcome the COVID-19 related headwinds and achieve “maximum employment and average inflation of 2% over time.” So, that’s bullish.
Not Succumbing to the Selling Pressure
Michael Novogratz, founder and chief executive officer of Galaxy Digital Holdings, notes that cryptos are not going away. While the rest of the crypto market is still a sandbox where experimentations and cool innovations are happening, bitcoin is a finished product as a store of value and digital gold.
What's interesting is the new bitcoin buyers are institutional buyers, individuals of high net worth. “They're coming in methodically and slowly, and they're not stopping, and so that's keeping the bitcoin price up,” he said.
“A lot of the traditional crypto people right are selling their bitcoin, buying the sexier objects and so in this move of this kind of mania which we're seeing in decentralized finance it's pushing Ethereum price up because it's built on the Ethereum network and other protocols, it's probably putting a little weight on bitcoin which tells you how powerful bitcoin is that even with that selling pressure it's still going up based on the macro story,” said Novogratz in an interview with Bloomberg.
Speculative Pump & Dump
— The Wolf Of All Streets (@scottmelker) September 1, 2020
The market is offering new digital coins such as YFI, Tendies, Spaghetti, Based, Kimchi, and Sushi in which investors have poured billions to rake in easy profits by yield farming.
“I lived through and profited through the 2017 crypto bubble, and this feels somewhat reminiscent to it,” said Novogratz. “It was the ICOs back then. A new ICO every day and the herd would swim to that ICO and jam the price up, and there’d be a frenzy of liquidity and price, and then it would collapse, and they’d move on to the next thing. And it feels a little bit like that.”
However, according to Jeff Dorman of Arca, this time is different because this rally is sustainable, and the projects are launching their tokens after the products have found their market fit.
In the past month, over 500 coins have entered the market, many of which are rallying like crazy. “It sure appears as a speculative pump and dump,” said Mike McGlone, an analyst at Bloomberg Intelligence who said “too much supply, competition and ease of entry” is part of the problem or the broad crypto market. About $9.5 billion are currently locked in the DeFi sector.