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(picture fromRawpixel）
Bitcoin's Rally Is Confusing
"Bitcoin has risen these days, and the company seems to be a lot more lively." A blockchain practitioner said.
"In addition to going to work, I spend two days on the weekend meeting with players in the currency circle." A currency speculator told 31QU, "This feeling is very similar to 2017."
More and more activities, more and more enthusiasm, this atmosphere seems to return to the great bull market in 2017.
On May 12th, Mr. Li Xiaolai, who had been away from the currency circle for a long time, posted a rare Weibo, announcing his return in a high-profile manner. Almost at the same time, the news of "Bitcoin's rise above $8,000" appeared on Weibo's hot search .
On May 14, Bao Erye also posted on Weibo saying, "Buy a bitcoin and we will grow old together." On the same day, the news of bitcoin's rise appeared on Baidu's hot search.
From the little leeks in the currency circle to the big guys, everyone expressed their emotion at the rapid progress of the price of Bitcoin.
But let's calm down and let the data speak first.
According to the Baidu Index, since April, the search index for Bitcoin has tripled from the previous 20,000. On May 15, it even rose to around 110,000, which is only short of the highest search volume in Bitcoin history. 6000.
It is worth noting that although the search index for Bitcoin has grown exponentially, the search index for cryptocurrencies and blockchains on the Baidu Index has remained calm as always, with no significant ups and downs.
At the same time, according to data from the Coinmarketcap platform, the transaction volume of Bitcoin has more than tripled since April. It has risen from less than US$10 billion before April to US$34 billion now.
Not only transaction volume, but the number of users is also on the rise. According to statistics from statista, the number of bitcoin global blockchain wallet users has maintained rapid growth, with an increase of 8.6% in the first quarter of this year compared with the previous quarter and a year-on-year increase of 44.7%.
New users bring new money to the cryptocurrency market.
Mati Greenspan, an analyst at eToro, said: On May 14, the Bitcoin futures of CME Group hit a record high of 33,677 contracts, while the total transaction volume of the platform that day was 167,385 Bitcoins, or about 9.2 billion yuan.
Users, funds, search volume, transaction volume, no matter how you look at it, the bull market seems to have come.
This "bull market" came unexpectedly. Last year, industry leaders expressed that the currency circle should prepare for the long-term cold winter.
"What caused the price of Bitcoin to rise sharply?" Tone Vays, a cryptocurrency analyst, was puzzled at this year's Consensus Conference in New York. reason.
“Bitcoin and other markets had an unprecedented boom. The same thing happened at the end of the bear market in 2015, but now everything is not quite right. I thought Bitcoin would go from $4,000 to $5,100 and then slowly Down, but it's confusing to see it go up to $8,400," Tone Vays said.
This kind of worry represents the psychology of a considerable part of the currency circle. They racked their brains to find the reasons behind the surge in Bitcoin.
There are different opinions on this bitcoin surge. Some people think that it is the effect of the "consensus conference", which means that the price of bitcoin will rise during the conference. Some people think that it is the good news released by the cryptocurrency exchange Bakkt. It's because Bitcoin is about to halve.
But more people believe that the main reason for the price increase of Bitcoin this time is the strong entry of off-market institutions.
CNBC issued an article stating that the reason for the rise of Bitcoin comes from the increasing interest of large investment institutions in Bitcoin transactions, such as the Bakkt trading platform of Intercontinental Exchange ICE and Fidelity’s cryptocurrency trading services, etc., which indicates that the mainstream adoption of Bitcoin will gradually increase. expand.
Barry Silbert, CEO of Digital Currency Group, made it clear that more than 70% of the funds on Grayscale Investments, a Bitcoin investment analysis platform, come from institutional investors.
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The currency circle is a chessboard, and the off-site institutions are chess players
The pace of institutional deployment of cryptocurrencies is accelerating. Just this year, many Internet giants and financial tycoons have entered the market.
Facebook has long coveted cryptocurrencies. In March of this year, Facebook announced a large-scale expansion of talents in cryptocurrency-related fields, and reported the possibility of issuing coins.
Almost at the same time, Amazon, the world's retail giant, submitted a patent application for the POW encryption system to the US Patent Office.
In the financial field, at the end of February this year, Nasdaq, the world's second largest stock exchange, officially added the indexes of Bitcoin and Ethereum, which is a sign of the acceptance of cryptocurrencies in the traditional financial market.
On May 14, Intercontinental Exchange ICE launched Bakkt, a cryptocurrency exchange. This move indicates that the traditional financial market is not satisfied with passively accepting cryptocurrency, but chooses to take the initiative to enter the currency circle.
In addition, JPMorgan Chase announced its "marriage" with cryptocurrency and released its own cryptocurrency, JPM Coin.
The most popular today is the international investment giant Fidelity. In May, Fidelity held a special conference on cryptocurrencies at its Boston headquarters, and invited well-known domestic mining bosses. The outside world believes that Fidelity has quietly deployed Bitcoin mining and related energy industries.
In fact, we can also spy on the pace of institutions entering the market from the data.
There are two ways for OTC institutions to enter the currency circle. The first is the stable currency USDT.
USDT, which connects fiat currency and cryptocurrency, has also experienced a huge increase in transaction volume with the popularity of Bitcoin, soaring from US$8.3 billion in early April to US$34 billion in mid-May.
In addition to USDT, over-the-counter transactions also carry a huge amount of capital circulation, "big investors choose over-the-counter transactions, retail investors choose exchanges."
In fact, for institutional investors, large bitcoin orders lack liquidity if purchased on an exchange. They prefer a stable price and a large trading volume, and OTC trading is more in line with their needs.
According to data from the Coindance platform, it is on LocalBitcoins, the world's largest bitcoin over-the-counter trading platform. We found that in the three months before the Bitcoin surge, the volume of Bitcoin OTC transactions soared from about 8,000 last year to 15,000. It shows that before the bull market, off-market institutions have already started the layout of Bitcoin.
"Our over-the-counter trading business has achieved triple-digit growth." Circle Internet Financial CEO Jeremy Allaire said publicly.
Coindance’s OTC data reveals more details.
After Bitcoin reached $8,300 in May, the number of over-the-counter bitcoin transactions began to decline, while the number of over-the-counter dollar transactions began to rise. However, as the price of Bitcoin gradually stabilized, in addition to some off-market funds dormant, waiting for the next outbreak, more funds began to make a deep layout in the currency circle.
There is another phenomenon worth noting. At present, despite the continuous flow of funds into Bitcoin, the market value of Bitcoin has not increased in the proportion of the entire cryptocurrency, and it remains at 50%.
One explanation is that after entering Bitcoin, OTC funds left Bitcoin and entered other cryptocurrencies.
According to statistics, starting from May 5th, Bitcoin has seen outflows ranging from a billion to billions of yuan almost every day. On the contrary, cryptocurrencies such as Dash, Ethereum, and TRON have seen capital inflows almost every day.
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Is a blessing or a curse?
The activity of Bitcoin and the entire currency circle this time is a big explosion at the right time, place and people. What impact will these new institutions and funds have on the cryptocurrency market?
Analyst Mati Greenspan once said that Fidelity, which is actively deploying bitcoin, currently manages US$2.46 trillion in funds. If only 1% is used for bitcoin hedging, about US$25 billion will flow into the market.
But the current market value of Bitcoin is only 140 billion US dollars, and even the entire cryptocurrency market value is only 260 billion US dollars, which is comparable to the market value of Amazon. This means that as long as a large and wealthy traditional investment institution puts in 1% of its energy, it can stir up the entire cryptocurrency market.
At present, the cryptocurrency market represented by Bitcoin is already attractive enough to traditional institutions.
The two-year investment income data shows that the S&P 500 index is 19.9%, gold is 1.3%, oil is 31%, and Bitcoin has an astonishing 457%.
As early as the end of October last year, Binance founder Zhao Changpeng said that if a fund like Fidelity allocated 5% of its portfolio to cryptocurrencies (about 350 billion U.S. dollars), it would increase the market value of the entire cryptocurrency by two. times.
However, in addition to raising the currency price, the entry of large institutions and capital will also change the original ecology of the currency circle.
Traditional exchanges themselves have strong resources and connections, and can lobby government officials and members of Congress to change the views of regulators on cryptocurrencies.
To a certain extent, the entry of traditional over-the-counter exchanges is a threat to native exchanges in the currency circle.
Nasdaq CEO Adena Friedman said: "Once the emerging digital currency industry is regulated, Nasdaq may become a cryptocurrency exchange in the near future."
In contrast, BitMEX, one of the cryptocurrency exchanges in the currency circle, received a ban from the US SEC, which stipulates that "when any exchange provides services to US residents, it needs to strengthen supervision through the platform and promptly shut down those that violate US regulations. Accounts of American traders."
As a result, BitMEX had to close US user accounts under pressure from the authorities, resulting in a sharp decline in trading volume. Contrary to BitMEX, the daily trading volume of the U.S. compliant and regulated Chicago Mercantile Exchange (CME) is growing against the trend.
Institutions that are well versed in financial methods and have a large amount of funds will gradually encroach on the right to speak in cryptocurrencies, and the relationship between the cryptocurrency world and the traditional financial field will become closer and closer.
This close connection will make the cryptocurrency market bigger, but on the other hand, it will also slowly disappear the "financial safe haven attribute" that cryptocurrencies have always been proud of.
The continuous entry of off-market institutions has promoted a new bull market in the cryptocurrency market and also planted new risks.
