First Mover: Bitcoin ‘Rich List’ grows as Whales HODL and Price takes back $ 18K

Bitcoin reached new 35-month highs above $ 18,400 during European trading hours. The cryptocurrency has failed to maintain gains above $ 18,000 in the previous two trading days. It will be interesting to see if prices establish a foothold above that level on Friday.

“The market has shown a lot of resilience and reduced buying interest to shake off any immediate questions about the sustainability of the recent rally. So much so that bitcoin is back above the $ 18,000 level and remains on track to retest the highs since the beginning of the week, “said Denis Vinokourov, head of research at London-based prime brokerage Bequant.

Other cryptocurrencies also rallied, with the ether penetrating the $ 500 psychological hurdle for the first time since July 2018.

In traditional markets, European equities rose, ignoring the faded prospect of further US fiscal stimulus and the escalating coronavirus crisis. U.S. stock futures, however, declined and gold gained gains when the Secretary of the Treasury announced plans to expire several Federal Reserve emergency lending programs on December 31.

Bitcoin has risen for seven consecutive weeks, the longest streak since early 2017, as prices began their drive towards an all-time high near $ 20,000 in December of that year. And cryptocurrency traders are wondering how long this latest rally can last.

The upward move began in early October when prices were around $ 10,700 and bitcoin is now trading around $ 18,000. On an annual basis, the cryptocurrency gained an astonishing 150%, the most from the 14x gains recorded in 2017.

The rise has been so rapid and powerful that analysts are starting to use terms like “parabolic,” where the increases become exponential.

“Bitcoin’s recent ongoing uptrend shows strong similarities to the 2017 bull run, where a parabolic trend led up to $ 20,000,” Lennard Neo, head of research for the structured products company wrote in a weekly report Thursday. focused on cryptocurrency Stack Funds.

To get clues as to what will happen next, some cryptocurrency analysts are looking for data extracted from the blockchain, making inferences about what types of buyers are entering the market and who is selling, if any.

These indicators seem to show how few investors are willing to part with their bitcoin, even with signs that a growing number of large traditional markets institutional fund managers are seduced by outsized gains, during a year when few other exchanges seem to be. producing big wins. The Standard & Poor’s 500 index of large US stocks has risen 11% this year and fixed income yields are hard to come by, with 10-year Treasury bills yielding less than 1%.

“The price of Bitcoin is rising because the demand for [b]itcoin is rising at a time when there are relatively few bitcoins available for purchase, “blockchain data firm Chainalysis wrote in a report Thursday.

The firm has produced a chart that plots what appear to be “investor held” portfolios – those whose coins rarely, if ever move, compared to “trader held” portfolios, where sales occur more frequently. The number of bitcoins in portfolios held by traders, or those theoretically more likely to make profits as prices rise, has declined this year. The amount of bitcoin held by investors, meanwhile, has steadily increased.

Another blockchain data company, CryptoQuant, is tracking bitcoin ‘whales’ – those accounts large enough to send a giant sell order to an exchange, typically swamping buy orders from smaller traders.

The “whale exchange ratio”, calculated by dividing the value of the 10 largest stock exchanges by the total amount of deposits, is currently below the 90% level, which would signal an extreme likelihood of a sharp decline in stock. prices. The indicator currently sits around 85%, where “the possibility of prices continuing to rise is high,” CryptoQuant wrote in an email Thursday.

“Looking at the movement of whales, it appears that the price increase will continue,” according to the report.

Hong Fang, CEO of San Francisco-based cryptocurrency exchange OKCoin, wrote Thursday in an editorial for CoinDesk Opinion that “the burning question is whether bitcoin is getting too expensive.”

He said it’s not unreasonable to expect a price tag of around $ 100,000 next year, assuming 1% -2% of total US household wealth of $ 112 trillion goes to bitcoin.

“This is a timing risk,” he wrote. “It is entirely possible that it may take much longer than expected for bitcoin to become mainstream.”

Whales pose a short-term threat. If bitcoin continues its parabolic rise, they could splash around.

Bitcoin’s rich list, or the number of addresses holding at least 1,000 BTC, continues to rise along with the price, suggesting increased interest from institutions and high net worth investors.

The metric recently hit a record 2,237, marking a 5.6% year-over-year increase, according to data source Glassnode. The rich list has grown more than 2.5% along with bitcoin’s rice from $ 10,000 to $ 18,000 in the past six weeks.

A single person can contain multiple addresses. Crypto exchanges also store coins belonging to traders in multiple addresses. As such, the rich list is not an accurate metric of increased institutional participation or user adoption.

That said, there is strong reason to believe that the recent increase in the number of large addresses is a result of the influx of high net worth individuals. Several public companies like MicroStrategy and Square have made a foray into the bitcoin market over the past eight weeks or so.

With strong hands supporting the price rally, the cryptocurrency looks set to challenge record highs before the end of the year, as some analysts anticipate.