Despite the volatility that has been seen in Bitcoin (BTC) over the last two days — trading seems robust in the apex cryptocurrency.
What Happened: Bitcoin trading volumes on the eight major exchanges tracked on the CoinDesk 20 index have exceeded $11 billion — a new all-time high from the previous record set during the 2017 bull market, CoinDesk reported on Monday.
“Some of this volume is definitely from new and unexperienced (sic) investors entering the market for the first time and panicking when the price starts falling,” Bendik Norheim Schei, head of research at Arcane Research, told CoinDesk.
“These corrections are necessary and healthy, even in a bull market,” said Schei.
On-chain data analytics firm Glassnode noted that — at last week's peak — over 1.3 million Bitcoin addresses were active in a single day.
“This continued spike indicates an impressive level of new adoption and activity for bitcoin, and suggests that the number of market participants in the network may be higher than ever before,” wrote Glassnode.
Why It Matters: The slowdown in the Bitcoin rally may be due to the cryptocurrency approaching a local top, according to Ki Young Ju, CEO of CryptoQuant.
Ki based his take on the analysis of Miners’ Position Index (MPI), a ratio of BTC leaving inserts to the cryptocurrency’s one-year moving average.
Institutional investors — who have fueled the latest rally — were buying into Bitcoin even as the currency crossed $30,000 levels, as per Ki.
However, Darius Sit of QCP Capital told CoinDesk that the price drop could be due to hedge funds taking short-term profits, post the spike in BTC at the beginning of the year.
Sit pointed to the price gap between the Chicago Mercantile Exchange, which is mainly used by institutional investors, and other exchanges that traditional money managers could be the ones selling.
Price Action: Bitcoin traded 9.83% lower at $34,498.80 at press time. On Monday, Grayscale Bitcoin Trust (OTC: GBTC) traded 15.8% lower at $37.40.
Benzinga's Take: The current trends related to Bitcoin are certainly mixed. The cryptocurrency has seen a wild run of late and a pull-back isn't surprising to anyone in the industry. Despite the crash, it is worth noting that Bitcoin is still trading at immense year-over-year and month-over-month gains.
The present rally is markedly different from the one seen in 2017 when the cryptocurrency landscape was largely dominated by retail investors. The presence of whales in the cryptocurrency ocean is the new X factor. Downsides could be severe if one of the big institutional names decides to take a profit on their coins.
This does present a conundrum for people looking to enter the market at this point but the number of new Bitcoin addresses does seem to suggest that investors are showing a risk appetite and are willing to jump on the Bitcoin-wagon even at slight pull-backs.
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