Bitcoin has surged more than 35% in the last month and the race to $50,000 is being fueled by institutional interest
- After a two month bearish trend,
Bitcoinhas shown a quick recovery in August and experts are confident that a bull run could soon be imminent.
- Bitcoin broke the $42,000 resistance level at the beginning of August, breaching its 200-day moving average.
- Now, experts believe that breaching the $50,000 is essential for Bitcoin.
- Higher adoption among institutional investors has instilled confidence and with lawmakers open for discussion, leading the market sentiment to be extremely positive.
- The effect of China’s bans has been numbed and with a successful miner migration, the path looks clear for the cryptocurrency in the long run.
According to experts, whether or not Bitcoin is able to break past that barrier, will depend on the ‘whales’ of the market. A whale refers to individuals or entities that hold large amounts of Bitcoin, and these 1,000 individuals are said to control 40% of all coins in circulation. Considering their massive holding, each movement creates ripple waves that can push or pull the momentum.
Historically, longer consolidation opens a path for greater expansion as we see Bitcoin price extend towards 50K, which is also a psychological price level for Bitcoin to break
Bitcoin broke the $42,000 resistance level at the beginning of August, breaching its 200-day moving average. In May, China's ban on cryptocurrency activities played a critical role in sending Bitcoin prices off the cliff. But miners were able to migrate out of China by July, and Bitcoin's hash rate recovered. The rally also continued because of macroeconomic factors such as the buoyant stock market, high-yield credit, and low default rates.
Bitcoin’s recovery run in the last three weeks is a reiteration of the confidence that investors hold in the asset after a 55% dip from its peak in May 2021. We believe that Bitcoin went through a consolidation phase and is now ready to continue its run towards its prior all-time high
Bitcoin whales are in action
During the bull run, the balance on exchanges fell in late 2020 and early 2021, then immediately bounced back during the price correction of May and June. It has stayed flat since, indicating big institutions stopped buying Bitcoin in bulk and moving it off exchanges. Removing coins from exchanges means storing them in cold wallets, where they're safer.
"Bitcoin’s fixed supply and declining annual growth are important financial properties that should make it a hedge against inflation." NYDIG, a digital currency firm specialising in Bitcoin, said in a report. "For most of bitcoin’s history, it was an asset predominantly owned by retail investors. It has only been in the past 12-18 months that institutional investors have taken to the asset. Given the $100 trillion managed by the world's largest asset managers, there is a significant secular bull case for price appreciation in this scarce asset. "
Rising institutional adoption of Bitcoin.
Some of BItcoins’ most significant institutional holders are; Microstrategy, a business analytics platform; Tesla, the infamous EV maker; Galaxy Digital Holdings, a digital currency focused merchant bank; and Voyager Digital, another firm specialising in digital assets.
While their holding or investment is directly tied to Bitcoin and other cryptocurrencies, institutional banks have also been rapidly pouring money into digital assets as well as blockchain-based technology firms. Bitcoin's correction was an opportunity for all of them, and
Other factors that affected Bitcoin’s price over the last one month
While Elon Musk took another u-turn and gave an optimistic outlook on Bitcoin — him and two of his companies Tesla as well as SpaceX have Bitcoin holdings — Twitter’s Jack Dorsey and Ark Invest’s Cathie Wood also confirmed their long-term investment.
The world’s oldest cryptocurrency also surged on rumours of Amazon accepting it as payment, a claim later refuted by the company. Even after the cryptocurrency industry failed to win a change to crypto tax reporting rules in a U.S. infrastructure bill, the upward momentum showed no signs of stopping.
The longer large investor hold, the closer Bitcoin gets to $50,000
With countries — most prominently El Salvador — slowly adopting measures to recognise cryptocurrencies and regulate them, long term investors are confident that Bitcoin's doomsday theories are gradually evaporating permanently. A few governments like China may not play along. Still, much of the world is now opening up to the concept of decentralised currencies and how they can be a successful hedge against inflation in runaway economies.
At the same time, banks have turned to custodial services as a viable way of embracing cryptocurrencies and expanding their offering. South Korea is a leading example, and among the first to have crypto regulations, a model expected to help shape many other national laws.
Lastly, retail investors have once burned their hands with meme-based cryptocurrencies such as Dogecoin, which offer little except hype. Experts are confident that rampant pump-and-dump schemes shall reduce as the market matures.
For a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
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