Bitcoin prices zoomed to $28,000 last week, but one key element of the market remains missing.
Where’s the retail at?
Data suggests a critical driver of the cryptocurrency market from 2017 is yet to step into the vicious realms of the infamous, volatile, and oft-excruciating space.
Analytics service skew tweeted Sunday that “retail interest hasn’t surged back” despite the prices of Bitcoin reaching record-high levels and other cryptocurrencies seeing price pumps over the weekend.
2017 vs 2020 – retail interest hasn’t surged back pic.twitter.com/fnPHSYEbwr
— skew (@skewdotcom) December 27, 2020
Citing data from Google Trends, skew found retail searches for “Bitcoin” remained at pre-2017 levels, a time when Bitcoin surged from under $1,200 to over $19,000. The asset fell by over 80% to under $3,500 at the start of 2019, post which the market picked up again.
The institutions are here, and they want Bitcoin
So if not retail, who is buying? As per skew’s data, it’s institutions. Data for institutional fund manager Grayscale showed assets under management for its various, popular exchange-traded funds reached $16 billion this year.
GBTC, the firm’s Bitcoin offering, accounts for $13 billion of that warchest alone. The product trades over-the-counter and is a very liquid market, with over $12 million traded each day. Each GBTC “share” holds a small amount of spot Bitcoin, with Grayscale charging a small premium on top of that value for that convenience.
The product, offered by Grayscale Investments, is one of the only publicly-traded Bitcoin offerings for US citizens and has gained popularity amidst a broader positive sentiment for Bitcoin among institutional funds, tech companies, and family offices in 2020.
Some fund managers, such as Harris Kupperman of Praetorian Capital, say Grayscale’s GBTC accounts for much of Bitcoin’s price movement in 2020 as well. In a blog earlier this year, he said the GBTC creates an endless buying loop of institutions purchasing the shares, Grayscale purchasing spot Bitcoin to cover those shares (driving up prices), and market participants further buying up more Bitcoin as prices move up.
I didn’t realize this wrinkle. Guess nothing really changes… to infinity and beyond… https://t.co/flYin3en8E
— Kuppy (@hkuppy) December 23, 2020
Meanwhile, Wall Street firms have taken a greater interest in Bitcoin and are rushing to capitalize on its gains amidst a bleak economic outlook and fears of inflation. These include Guggenheim Partners, which for instance, recently said it might invest up to 10% of its $5.3 billion Macro Opportunities Fund in a Bitcoin trust.
Some others are on the bandwagon already. Software player MicroStrategy picked up $1 billion in Bitcoin over three purchases this year, while fund manager Paul Tudor Jones said in May that he holds over $70 million worth of the asset via BTC futures.
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