Stanley Druckenmiller (L) and Paul Tudor Jones
CNBC
A flock of new, large investors are scouring bitcoin this year as the price more than doubles.
Investors who bought at least 1,000 bitcoins – worth about $ 23 million at Friday’s price – and who have been open for less than a year, posted strong demand since September, according to data firm Chainalysis. The new group has collectively bought half a million bitcoins, or $ 11.5 billion worth, in the past three months.
In the period when these new investors accelerated their buying spree, the price of bitcoin more than doubled from the $ 10,000 level. The new demand has helped fuel the cryptocurrency’s rally to an all-time high, according to Philip Gradwell, chief economist at Chainalysis.
“The role of institutional investors is becoming increasingly clear in the data,” Gradwell said in a note to clients on Friday. “Demand is driven by North American investors on fiat exchanges, with increased demand from institutional buyers.”
The rise in demand from wealthy Wall Street investors marks a sharp reversal from the first bitcoin run three years ago. The 2017 rally was led by retail investors, many of whom bet on bitcoin and other smaller cryptocurrencies out of profitability. Bitcoin became a household name when it was close to $ 20,000 that year. It collapsed shortly afterwards, losing 80% of its value in the following months.
Source: Chainalysis
Bitcoin surpassed $ 23,000 for the first time ever this week, bringing its gains so far to more than 200%. The cryptocurrency has recovered about a quarter of its value since Friday, and is on track for the best week since May 2019.
The price recovery in 2020 was partly driven by Wall Street’s notorious billions publicly supporting bitcoin. Analysts say that gave skeptical mainstream investors reassurance.
Stanley Druckenmiller and Paul Tudor Jones have both invested in the cryptocurrency and demonstrated its potential as a hedge against inflation. Meanwhile, Square, MicroStrategy and Mass Mutual have used their own balance sheets to buy cryptocurrency. PayPal also enabled clients to buy bitcoin, which has opened up the market to millions of new customers.
“We are seeing institutional capital flowing in at the fastest pace in the history of our industry, and it is being used by some of the world’s largest institutions and some of its investors. most famous, “said Michael Sonnenshein, managing director at Grayscale Investments. CNBC in a phone interview Friday. Inflows into the publicly traded Bitcoin Trust at Grayscale have risen about 6x since a year ago, he said. .
Chainalysis also indicated less market liquidity, with fewer retailers than in previous years.
Last week, 801,000 fewer bitcoins were compared to 2017. To be sure, not all bitcoins are “sent” for sale. But Chainalysis’ Gradwell said it was a “good substitute” because usage issues are otherwise limited, especially when prices are spinning. Less access to bitcoin “would explain the rapid rise in prices this week,” he said.
As bitcoin approached the high this week, rapper “Megan Thee Stallion” tweeted about bitcoin’s offering with Square Cash App, which was repeated by Square and Twitter CEO Jack Dorsey. The deal coincided with the bitcoin price high on Thursday.
“Famous deals have usually been a bell-ringer for the market top, so this omen may be overriding the fundamentals I’ve shown in the data,” Gradwell said.