What has been driving recent Bitcoin price action? Or perhaps more importantly, who? And why does it matter?
Lead Digital Strategist at Fundstrat David Grider and Platinum Account Manager at eToro Simon Peters break down Bitcoin’s next move, how the coronavirus and financial crisis may impact the halving, and how Bitcoin’s fundamentals will affect its long-term prospects.
Who Is Behind Bitcoin Price Movements?
Bitcoin has experienced an incredible amount of volatility over the past two weeks amidst the coronavirus pandemic and global financial crises. A Chainalysis report found professional traders and investors were usually the drivers behind recent major price movements, despite only moving about 5% of the total supply of Bitcoin.
David took issue with the vague label of “professional trader/investor”. He reminded us that traditional or institutional players are not the only ones who can drive the market with high volume trades:
“I think that probably you’ve seen an onboarding in 2016/2017 of a traditional, probably institutional, fund class to some degree but not very large, right. But still prior to that this was a very small market and I think that it’s still probably mostly dominated by early larger crypto whales, right.”
How Will the Coronavirus Crisis Strengthen Bitcoin?
Since the beginning of March Bitcoin has been heavily correlated with large movements in the stock market. When asked if the Bitcoin price drops in the past two weeks were the result of professional players liquidating their positions, Simon nodded his head in agreement.
He went on to explain how this shedding of weak hands could allow Bitcoin to eventually evolve into a hedge asset:
“We’ve seen this conversion of assets into cash, regardless of which market it is, but there will come a point where, due to this increasing amount that’s been pumped into the system, the cash is going to lose its value. Then as the virus no doubt stems down and the number of new cases that are being reported tails off, the question to investors then is, ‘what do I do with all this cash that I have?’ And then they may look into other assets that can hedge against that, essentially, with crypto possibly being one of them.”
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