Since falling from over $11,000 over the weekend, bitcoin has been stuck around $10,500. The digital currency is actually moving in the opposite direction of the US dollar, which seems to have broken out of its consolidation.
The USD index is pushing for fresh highs with the 200-day moving average, indicating plenty of room for the dollar to get stronger.
According to analyst Mati Greenspan and team at Quantum Economics, USD has the “potential to turn into a massive tidal wave on this unsuspecting market,” which “could have a rather negative impact on … everything else.”
As we saw this week, from stocks, bonds, precious metals, to crypto, everything fell to a rising USD.
#Bitcoin is a standout fixed-supply asset that should be a primary beneficiary in a period of limited potential further upside in equity and bond prices, in our view. #QE juxtaposed vs. tightening Bitcoin supply leaves adoption and demand as the top price-outlook metrics.. pic.twitter.com/NLHXlaZuuM
— Mike McGlone (@mikemcglone11) September 22, 2020
It’s all about volatility!
Bitcoin particularly is having a rough time this month, although it is no different than many other September over the years. As a matter of fact, this volatility in the bitcoin market is reminiscent of the currency markets in the early 1990s when they were more manic and ripe for manipulation.
“It’s very similar to what you’d see in crypto these days,” said Brad Bechtel, global head of foreign exchange at Jefferies LLC. “It wasn’t for everybody; it was a very difficult market to trade. You could lose a lot of money very quickly.”
With volatility having waned since then, there isn’t much money to be made. While FX’s low volatility limits profits, cryptos’ wild move captures people’s attention.
During the March crash, “it was more busy than any day I saw in 20-odd years in FX,” Rob Catalanello, head of the U.S. unit of London-based electronic trading firm B2C2, told Bloomberg. “Just the amount of deals, the violence of the move, the unpredictability of the move, and the amount of risk that we had to hedge.”
According to Ture Johnson, who made the leap to Floating Point Group, a crypto trading platform, last year, where he runs the trading desk, “a lot of systematic, hedge fund trend-following guys sitting on the sidelines right now watching” and waiting to get involved in crypto “because there’s an opportunity to trade here and make money.”
“People love volatility,” he said.
The Bitcoin market is currently seeing a lot of interest from big players, with the on-chain transactions greater than $100k being on an uptrend throughout 2020.
“Since January 1st, the total volume in USD for on-chain transactions greater than $100k has increased by 1495%,” noted IntoTheBlock.
As we saw, even public companies are turning to Bitcoin as a reserve asset, MicroStrategy being the first one. According to its CEO Michael Saylor, “Bitcoin is less risky than holding cash, less risky than holding gold.”
Saylor also predicted that other companies will jump in as well, starting with private ones because “they don’t have as much inertia” and then the mid-sized companies.
Although the number of bitcoin addresses depositing funds to exchanges every day has doubled to about 100k since the beginning of the year, last seen during the 2017 bull market’s peak, retail interest has waned.
Recently, despite an upward move in BTC price, the sentiments on Twitter remained “surprisingly at an all-time low” as well.
When it comes to ownership, it has consolidated as well, with about 2.1% of accounts controlling 95% of all Bitcoin supply at the end of August, as per Flipside Crypto. Also, almost 29% of BTC is in wallets that held 1k to 10k BTC.
As per CryptoQuant, the weekly active users in exchanges has hit a 3-year low. “We can't go to the moon if we failed to gather more noob investors. Fewer exchange users mean fewer scapegoats for whales,” said Ki-Young Ju, CEO of the crypto data provider.
However, it is to be noted that many users are flocking to DEXs, which has the number of ETH weekly active users increasing.