Bitcoin bull market advances, mainstream currencies follow suit

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Bitcoin triggered a bull run, and mainstream currencies have followed suit

When BTC started to rise, other mainstream currencies were lukewarm. After PayPal officially announced BTC in October, BTC started to stand out from the crowd. When everyone in the currency circle was hesitating whether the bull market had really arrived, the crazy rise of many cryptocurrencies in the third week of November gave the answer of "hundreds of coins rising together".

In the third week of November 2020, BTC hit a new high, reaching 18,900. As the highs continue to advance, the bull market has begun to accelerate. Mainstream currencies such as ETH, LTC, BCH, BSV, XRP, etc. have followed the bull market's surge and have taken turns to rise rapidly. The weekly increases of ETH, Link, LTC, and XRP are all between 20-50%, and even exceeded the increase of BTC in a single week. The cryptocurrency market has risen from BTC being the only one to a bull market with hundreds of currencies roaring together.

As the bull market progressed, DeFi experienced a super rebound. After the heat wave in June and July, when many people who paid attention to DeFi suspected that DeFi was going to die out in September and October, DeFi fought back in November. The tokens of DeFi leaders Uniswap, Maker DAO, Aave, Curve, Synthetix, and Yearn.finance increased by 100%, 18%, 190%, 167%, 96%, and 279%, respectively.

The bull market triggered by BTC has accelerated and escalated. Now retail investors' enthusiasm for investment has increased sharply, funds have poured in, and almost all currencies are soaring.

Very different from the 2017 bull market

History does not repeat itself, but it does rhyme.

The price of BTC in this bull market is approaching the high point of 2017. The market conditions are similar, but the driving reasons are very different. The bull market in 2017 was mostly dominated by retail investors, who bought with their own funds, while the bull market in 2020 was triggered by the influx of institutional funds into the BTC market - the currency circle calls it "institutional bull".

In 2020, the epidemic was raging, the global economy was flooded, and the stock bubble was booming. People once again re-recognized the value of digital assets represented by Bitcoin. Many foreign listed companies purchased Bitcoin on a large scale in order to hedge against pressure.

As of now, the amount of liquid BTC in the market is similar to that in 2017, but there are much more BTC held in illiquid wallets. BTC holders need to deposit BTC into exchanges if they want to sell Bitcoin, but since the beginning of 2020, the amount of BTC held by exchanges has fallen by 18%.

This means that more and more people do not want to sell their BTC. Although the price of Bitcoin has risen from $3,600 to $18,900 in just 8 months, there is almost no Bitcoin outflow from the top BTC holding wallet addresses, and BTC is still in short supply.

The generally recognized reason for the bull market in BTC this time is due to the compliant purchases by professional institutions. A public report by Pantera Capital pointed out that the current daily output of Bitcoin is simply not enough to meet the daily purchases of platform institutions through multiple channels.

BTC is in short supply, but institutions are still buying it

According to data from Bitocin Treasuries, 15 listed companies have chosen to use Bitcoin as a reserve asset. In this round of bull market, institutional investment represented by Grayscale is definitely the biggest driver. Grayscale, which continues to "buy, buy, buy", is also a hot topic in the entire currency circle. Grayscale is still significantly increasing the scale of its cryptocurrency assets.

After PayPal launched the cryptocurrency function, it helped American users trade Bitcoin on the partner itBit platform. According to nomics data, itBit's daily trading volume increased by 380% in the third week of November compared to before November, of which BTC/USD trading volume accounted for 87% of the entire platform. BTC output is about 900 per day, while American users PayPal purchase 630 per day, accounting for 70% of BTC's daily output.

Square - Also a US payment company, the company sold $1.63 billion worth of Bitcoin through Cash App in the third quarter of 2020. Data shows that the value of newly mined BTC in the third quarter of 2020 was approximately $810 million, which means that the amount of Bitcoin purchased by Square through Cash App is twice the amount of newly mined Bitcoin in the same period.

MicroStrategy - Large-scale reserve of BTC. In August 2020, MicroStrategy announced that it had purchased $250 million in BTC; in September, the company invested another $175 million in BTC. Michael Sayler, CEO and founder of MicroStrategy, said that before the company purchased BTC, he purchased 17,732 bitcoins as personal assets. Previously, MicroStrategy's market value was $1.2 billion, and the company owned 38,250 BTC. This means that once the price of Bitcoin reaches $30,000, the BTC assets held by the company will be as high as its market value!

There are also other companies whose main business is not related to cryptocurrency, but they are also continuously increasing their holdings of cryptocurrencies, led by BTC, and intend to hold them for a long time. The shortage of BTC has directly led to the frenzy in the secondary market.

How long can this bull market last?

Investors should do a better job of risk control when making profits in a bull market, and institutions should not short sell when they are bearish.

At the beginning of the bull market, due to the panic caused by BitMEX being regulated and OKEX suspending withdrawals, there were not many retail investors participating. The rapid rise of BTC and its breakthrough of $18,000 was beyond the expectations of most people. At present, institutional investors are still entering in large numbers. In addition to the soaring prices, there are also continuous positive news. BTC once again appeared on CCTV Finance CCTV-2. After explaining the rise of BTC, this report stated that BTC's network construction, development environment and investment ecology have changed dramatically since 2017.

Led by Grayscale, the investment effect of Bitcoin has resonated among Wall Street and technology giants. In addition to investment institutions, a group of wealthy or famous bigwigs have poured into the BTC market, such as: the well-known US hedge fund "Skybridge Capital", Tesla's CEO, Mexico's third richest man, etc. After institutions and bigwigs have supported BTC, the possibility of BTC crashing is relatively low, and when retail investors pour in in large numbers in the later stage, it will be the real climax of this bull market.

In the prediction model of cryptocurrency analyst PlanB, the price of Bitcoin will reach 100,000-288,000 US dollars in 2021-2022. The market may underestimate the Bitcoin halving in 2020. This price currently seems incredible. Only time can tell whether it is a fantasy or not.

The global economy shrank in 2020. With the rapid advancement of Bitcoin prices, more and more international institutions have joined the Bitcoin market. The role of these institutions in the cryptocurrency market will become increasingly stronger, which can reduce the volatility of the digital currency market dominated by Bitcoin. Even if the market fluctuates, short selling cannot be easily done in a rising trend.

However, this wave of market is still bullish for institutions. The influx of funds and investment focus of institutions are on BTC and a few mainstream coins led by ETH. It is unlikely that a coin can increase tenfold or even a hundredfold like in 2017. With Grayscale and other institutions clearly long BTC, retail investors can more surely get a piece of the pie of this institutional bull market by buying BTC.