Bitcoin shortage continues – Long-term investors buy heavily
The supply of Bitcoin is dwindling due to the buying strategy of institutional investors, which should fuel the long-term price trend. Bitcoin (BTC) may have lost $10,000 this week alone, but the “tightening” of the available circulating supply, or supply, of the market-leading cryptocurrency continues to grow.
Accordingly, as data from crypto market research firm Glassnode shows, bitcoin assets stored on crypto exchanges are currently at a record low. The reserves of crypto trading platforms are emptying more and more, which is clear evidence of the long-term intentions of investors, because the less BTC deposited on crypto exchanges, the less can be traded.
So “HODLn” (hold) is the order of the day. Although the market-leading cryptocurrency recently reached a new record high of $60,000, many investors do not want to sell yet. On Coinbase, the largest U.S. crypto exchange, BTC stocks have declined by nearly $8 billion, or 150,000 BTC, since January.
The platform is particularly used by institutional investors, so we can see from this figure that they would rather lock away their Bitcoin than make a quick profit. As News previously reported, large tranches have been moved from the crypto exchange recently, which further supports this thesis.
What we are seeing here is that American institutions and wealthy investors are buying up the available currency units from short-term investors and holding them with long-term intentions to protect against inflation,” as crypto analyst Willy Woo explains to that effect. To this he adds: Supply for bitcoin is going steeply down on Coinbase, suggesting that U.S. institutional investors are buying particularly heavily. If you are looking for the best broker to short BTC, visit https://www.bestbitcoinbroker.net/en/to-short-bitcoin/.
Woo suspects that these long-term investors have been buying every downturn for a year now, which he interprets as an extremely positive” sign for the price going forward. The reasoning behind this is that even if demand remains steady, diminishing supply will drive the price up.
GBTC could fuel rally
On the other hand, influential crypto asset manager https://grayscale.co/ has less reason to be happy, as its Bitcoin Investment Fund (GBTC) is currently 14% below Bitcoin’s price value. However, this could be another positive sign for crypto investors, as the price differential between GBTC and BTC is near record lows, which could in turn catapult the cryptocurrency’s price towards $100,000.
One reason for the current weakness of GBTC could be that there are more and more bitcoin investment products. For example, https://nydig.com/ could soon benefit from the fact that the major bank Morgan Stanley wants to open up for its Bitcoin products.
Gold with handbrake on
When panic gripped the financial markets in March 2020, it looked only briefly as if gold, the commodity that has become known as a crisis currency, could escape the price slump. But the gold price also corrected sharply in the midst of the crisis; between February and March, the precious metal lost around nine percent of its value.
Here, too, however, there was a massive price recovery in the months that followed, driving gold to new highs. The commodity cost over 2,063 U.S. dollars per troy ounce in the summer of last year.
But the price rally was short-lived; instead, disillusionment returned to the gold market quite quickly: While shares and digital currencies are now significantly more expensive than before the Corona crash, the price of gold is currently hovering above its pre-crisis level at 1,732 U.S. dollars per troy ounce, but is clearly underperforming compared with other forms of investment.
Even if experts believe that a further increase in the gold price is possible, it must be noted that gold must at least share its status as an original safe haven asset. After all, Bitcoin is now also said to have similar properties as a protection against inflation. The fact that the digital currency has performed so much better than gold could also be explained by the fact that many investors have shifted their investments.
Oil – A phase-out model?
While the sell-off in March last year cut across all asset classes, there is hardly an asset that felt the crisis as much as the price of oil. In April 2020, the price of black gold was negative for the first time in history – on that day, oil traders were forced to pay investors on the commodity exchange to sell them oil. At its peak, the price of a futures contract fell to -40 U.S. dollars, a development that had never happened before, not even in times of global economic crisis.
And even though the price of oil began to recover in the following months, by the end of the year the price of black gold had not yet returned to its pre-crisis level, by which time the stock market had long since returned to record levels. In the meantime, a barrel costs more than it did in February 2020 before the abrupt market crash, but new price records are a long way off. Oil is currently trading at around 60 U.S. dollars; in 2008, investors were still paying 147 U.S. dollars per barrel – a price that has never been reached again since then.
This raises the question of whether oil has already seen its best days. Many industries still rely on energy from fossil fuels, but their share is declining. The Corona crisis has exacerbated this problem, as the halt in production at numerous factories around the world has caused demand for crude oil to fall. Added to this is the increasing environmental awareness of many people, which also plays a role in this context, as the call for renewable energies is becoming louder and louder.
Analysts’ estimates of the oil price trend are correspondingly mixed: While some experts believe that an oil price north of the 100 dollar mark is possible, the International Monetary Fund (IMF), for example, believes that a price region between 40 and 50 US dollars is more likely.
Corona crisis already over?
A look at the development of various assets during the pandemic reveals one thing above all: the crash around a year ago affected almost all asset classes, with investors dumping investments across the board. But the markets reacted hesitantly to COVID-19, and it was not until about a quarter after the first infections in China that uncertainty spread across the stock markets.
While governments around the world reacted with lockdown measures, central banks around the globe made enormous efforts to cushion the impact of the crisis, which acted as a chill pill for many investors. In fact, the traces of Corona on the financial market were not as deep as might initially have been feared, with many asset classes having regained their pre-crisis levels or in some cases even significantly outperformed them.
Even though the market looks surprisingly good for stocks, commodities, cryptocurrencies and the like about a year after the crash quarter, the question of long-term consequences remains. Not all companies have survived the crisis well, and experts expect a wave of bankruptcies. Companies that lose touch with digital transformation could also only have to file for insolvency after a time delay, the business development of some groups will probably be worse than before the crisis for the foreseeable future, and the global economy will probably continue to suffer from the consequences of the crisis for some time to come.
But as things stand, we can say that many investors have come to terms with the crisis, the market has gained numerous new shareholders, and the pandemic has acted as a catalyst for digital transformation.