April 13, 2021
6 minutes of reading
This story originally appeared on ValueWalk
Institutional investors have been driving demand for bitcoin and fueled price increases for months. However, it is starting to seem like retail investors are returning, according to research from CoinDesk.
That means the stability in the bitcoin price increase could be coming to an end, although it shows no signs of slowing down.
Many funds and financial institutions began investing their time, money, and reputation in crypto assets in the fourth quarter. For example, Goldman Sachs Group Inc (NYSE: GS) is relaunching its crypto trading desk and will begin offering crypto exposure to its private wealthy clients.
In addition, Deutsche Bank AG (NYSE: DB) and Bank of New York Mellon Corp (NYSE: BK) are planning to supply electronic money care. Several private banks in Europe have also started offering crypto services. Furthermore, BlackRock, Inc. (NYSE: BLK) currently allows its two largest funds to invest in bitcoin futures.
Despite all institutional interest, CoinDesk said in a recent report that there are indications that retail investors are starting to pick up momentum in the crypto space in the first quarter. The report examines some market and on-chain fundamentals for the largest cryptocurrency by market cap and the timelines of key developments.
Bitcoin on the company’s balance sheet
According to CoinDesk, not many people predict that large corporations will start holding bitcoins on their balance sheets, but that trend is on the rise. MicroStrategy Incorporated (NASDAQ: MSTR) and Square Inc (NYSE: SQ) were the first to do so, although many have jumped into the bitcoin race this year.
Tesla Inc (NASDAQ: TSLA) bought $ 1.5 billion worth of bitcoins in February, and a surprising number of companies followed in its footsteps. Before Tesla even joined, Marathon Digital Holdings Inc (NASDAQ: MARA (bought $ 150 million worth of bitcoins at the end of January. $ 170 million worth of bitcoin, followed by MicroStrategy, bought another $ 1 billion in cryptocurrency.
In March, Meitu Inc (OTCMKTS: MEIUF) bought $ 17.9 million worth of bitcoin and $ 22 million ether, followed by Aker SAS, which holds 100% of the reserves for its new subsidiary. in bitcoin. Meitu bought additional bitcoins worth $ 21.6 million and $ 28.4 million ether in mid-March.
Look for the first bitcoin ETF
CoinDesk notes that three bitcoin exchange-traded funds launched successfully on the Toronto Stock Exchange in the first quarter. Additionally, the over-the-counter price for Grayscale Bitcoin Trust (OTCMKTS: GBTC) starts trading at a discount over its net worth; Both of these factors are increasing pressure on the US Securities and Exchange Commission to approve a bitcoin ETF in the United States. The question now is whether Gary Gensler, who is nominated to lead the agency, will rule favorably over the cryptocurrency if he is confirmed. . He already has a relationship with this industry, so that’s good for it.
Efforts to offer EFT bitcoin in the United States have been and are underway. Valkyrie applied in January, and Bitwise applied for a “cryptocurrency innovators” ETF in February. NYDIG also applied for a bitcoin ETF in the US in February. Valkyrie applied for another ETF that would invest in companies in bitcoin on their balance sheets in March. SkyBridge and WisdomTree also applied for a bitcoin ETF in March.
Additionally, Simplify has applied for a bitcoin ETF that will invest in the Grayscale Bitcoin Trust, and the SEC has published VanEck’s bitcoin ETF application. An affiliate of Fidelity Investments also applied for a bitcoin ETF in the US last month.
Bitcoin price and market cap
Bitcoin’s market cap surpassed $ 1 trillion in the first quarter, hitting $ 1.1 trillion by year end; This marks an important milestone because, for many institutional investors, an asset is only worth considering when it reaches its minimum size. With a market cap of $ 1 trillion, bitcoin could attract even more attention from large institutions, further increasing its appeal to smaller investors.
Bitcoin’s price performance has been weak for a number of weeks this year. However, the cryptocurrency broke that trend of underperformance in March with a 30% return, bringing its return to 100% in the first quarter. Bitcoin’s returns in January and February were also well above the averages during those months. For the first time since 2013, the cryptocurrency had a positive first quarter with three months.
Bitcoin started the year at a 12-month high, but its market dominance as measured as a percentage of total market cap continues to decline, falling below 60%; This makes a difference as it indicates that the crypto industry is becoming more diverse. It’s also a good sign as more use cases and technologies are explored and as more investment opportunities emerge.
However, when considering bitcoin’s dominance among the top 20 crypto assets by transaction volume, it is clear that its dominance has remained stable at 73% over the past 12 months. Meanwhile, Ethereum’s influence on the cryptocurrency market is growing.
Bitcoin transaction volume
Spot bitcoin trading volume soared at top transparent exchanges starting in Q3, but that slowed down in the first quarter after hitting a record daily high of more than $ 7 billion in November. January. Coinbase leads in spot trading volume, followed by LMAX Digital and Kraken.
The increase in bitcoin’s futures volume in the fourth quarter slowed down in the first quarter, though it still ended that quarter with almost three levels seen a year ago. Open interest in bitcoin futures also decelerates despite increased volatility. At the end of the first quarter, the open interest rate on futures was almost 350% higher than last year at this time.
An increase in the open interest rate relative to the trading volume indicates an increase in leverage, which is remarkable. The strongest growth has come from offshore highly leveraged exchanges Deribit, Bybit and FTX.
CME also kicked off a good year, growing to become the largest bitcoin futures exchange based on open interest, which signals increased institutional activity. CME has continued to grow, but more retail-focused exchanges like Binance and Bybit have surpassed it. The report predicts that CME could see growing competition for the US-based institutional market as Cboe is thinking about offering a bitcoin derivative. Meanwhile, they are expanding their suite of products and addressable markets by launching bitcoin micro futures contracts in May.