The end of 2020 was remembered for the start of the global bull run of the crypto market, during which Bitcoin managed to reach a new all-time high of 64.8 thousand dollars. In May, the main cryptocurrency experienced a major crash – its price fell by more than 50 percent .
However, it is too early to talk about the beginning of a new bearish trend, especially since recently BTC has shown a confident recovery. The latter is unique in its fundamental characteristics: this is the opinion of Pete Humiston, manager of Kraken Intelligence Research.
Note that today the coin market went through a stage of a slight correction. The local high on the hourly chart was $ 48,144, recorded on August 14, while the cryptocurrency dropped to $ 44,203 this morning.
Bitcoin hourly chart for the last days
In general, analysts hoped for a deeper correction, taking into account the intensity of growth the day before. However, there is a possibility that this was enough for many traders to take profit.
Why is the price of Bitcoin going up?
Despite the fact that Bitcoin has grown from 29 to 48 thousand dollars in just one month, the demand for the main cryptocurrency is still at a low level. BTC has consolidated above 40 thousand dollars, but this fact does not yet guarantee that the price of Bitcoin will not return to the short stage of correction that we have observed over the past few months.
To assess demand, the analyst studied the dynamics of the value of the shares of the Bitcoin Trust (GBTC) fund Grayscale Investments, which this week continues to trade at a discount of about 13 percent in relation to the market price. That is, in fact, the equivalent of a cryptocurrency in Grayscale is essentially cheaper than just buying coins on the exchange – and this indicates a low demand among investors.
As a reminder, Grayscale Investments is an American fund that allows accredited US investors to acquire stakes in their trusts. In the case of a Bitcoin trust, the share is equal to 1/1000 BTC , but at the same time its value does not always coincide with the market value of the cryptocurrency itself. Investors buy Grayscale shares and do not own the coins themselves – so they can earn on fluctuations in their value without additional risks of storing the asset itself.
Difference in the cost of GBTC and BTC
Although Bitcoin has gained in value recently, the demand for GBTC has risen quite a bit. If at the peak of the May correction of the crypto market, Grayscale shares were traded at a 20 percent discount to the market price of Bitcoin, now the discount has decreased to about 10 percent. Accordingly, 1,000 GBTC are worth 10 percent less than 1 BTC .
Here is a quote from Humiston on the matter, in which he shares his vision of the situation. The replica is given by the news outlet Cointelegraph.
Once demand does start to pick up again, which doesn’t seem to have happened yet, the price differential between GBTC and BTC will quickly narrow as investors seize the opportunity to purchase the Bitcoin equivalent at a lower cost.
Accordingly, the current growth of BTC to $ 48 thousand occurred without the participation of a large number of so-called retail investors, that is, non-professionals. This means that there is still enough free capital for the cryptocurrency industry, which creates growth prospects for the value of the cryptoasset in the future.
We checked the actual data: the popularity of searches for Bitcoin and Ethereum on Google is well below their historical highs. That is, until ordinary investors began to invest in digital assets – at least actively.
Graph of the popularity of requests for Bitcoin and Ethereum in Google
Another difference is the relatively low volume of open positions in Bitcoin trading, which was observed over the entire period of the local rally. It is clearly demonstrated in the graph below. Notice how with the rise in the price of BTC in early 2021, the activity of traders also increased.
Difference in the cost of GBTC and BTC
In any case, over the past week, Bitcoin has made several attempts to climb to the $ 50K line, which have not yet ended with success. Usually such a factor is perceived as «exhaustion» of buyers and a signal for a local correction. At the same time, a possible collapse is a normal situation after such an intensive growth for several weeks. Accordingly, it is clearly not worth worrying about a possible market drawdown in the near future.
We believe that analysts’ findings regarding the current stage of growth in the digital asset industry are positive. Yet according to them, it becomes obvious that most of the liquidity – that is, the free funds of investors – is still outside the market. Most likely, they are held in stablecoins or coins pegged to the value of the dollar.
And when money starts to be transferred to other cryptocurrencies, the niche may face even more massive growth. It is clearly worth preparing for it in advance.
