According to OKEx market data, at around 22:18 on December 16, Bitcoin fell back after hitting 20,800 USDT in the short-term, reporting 20546.1 USDT, a 24-hour increase of 6.02%.
Tonight, Bitcoin broke through $20,000, making history again.
The price of Bitcoin is soaring all the way, who is behind the “injection needle” and what risks are hidden in it?
Odaily Planet Daily believes that the main driving forces for the long-term rise of BTC this year include four: the new crown epidemic, the central bank’s massive release of water (mainly in the United States), grayscale holdings, and DeFi lock-up. In the short term, after BTC exceeds $20,000, it will trigger a new round of FOMO sentiment. Bitcoin will inevitably have high volatility and market risks will rise sharply. Traders should remain vigilant.
COVID-19 prompts more people to invest in Bitcoin
Grayscale stated in the report “The Great Wealth Transfer Promotes BTC to Become a Mainstream Investment Target”: Among the Bitcoin investment respondents surveyed, 63% stated that the decision to invest in Bitcoin was due to the impact of the new crown virus. 37 % Said it was not affected by the epidemic. According to the respondents’ answers, Bitcoin seems to have some things in common with safe-haven assets, such as:
1. Scarcity;
2. Verifiable;
3. There is not much correlation with the traditional financial market and it is out of control.
We further compare the gold and Bitcoin charts:
The candle chart trend represents the trend of gold, and the line chart trend represents the trend of Bitcoin. There is an interesting phenomenon and timing. We use yellow arrows to represent gold trends, and red to represent Bitcoin trends. We can find that Bitcoin has a strong correlation with gold from May to mid-September, but overall it is weaker than gold; from September to mid-October, Bitcoin and gold still have a strong correlation. , But at this time the trend of Bitcoin began to be stronger than that of gold; starting from October 23, Bitcoin and gold went out of completely opposite trends, Bitcoin continued to rise sharply, and gold began to fall. This huge difference is mainly caused by the increase of holdings by institutions such as Grayscale. The demand for Bitcoin by institutions has exceeded that of gold , which we will introduce in detail later.
Central banks of major countries release water to highlight the value of Bitcoin
The sudden outbreak of the new crown epidemic this year has led to large-scale releases by central banks of major countries. The release of water by central banks of major countries is easier for everyone to understand, because Bitcoin itself is a scarce resource, so the tide is rising, but at present, the rise of BTC is a bit too high. Is it deviating from its own value?
There are two problems here: The central bank is actively developing the central bank’s digital currency while releasing a lot of water. There are many discussions about the competition between the two. What I want to say is that in the blockchain world, much like the Internet, the leading siphon effect is obvious. The technical value of Blockchain 1.0 is mainly concentrated on Bitcoin. If there is new innovation, it will regenerate new value, such as the public chain Ethereum, such as the application of Uniswap (transaction). For finance and currency, security and stability are the most important. The longer Bitcoin survives, the higher its value, and the stronger its future competitiveness. This is because the longer the chain, the harder it is to tamper with, and the safer it will be.
The second very interesting phenomenon: On January 3, 2009, Satoshi Nakamoto wrote in the Bitcoin genesis block: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks (January 2009) On the 3rd, the Chancellor of the Exchequer was on the verge of implementing the second round of emergency bank assistance)”, Bitcoin at the time was worthless; and now, a new round of US fiscal stimulus measures to deal with the epidemic is likely to be achieved.
Grayscale accumulates, directly boosting Bitcoin
Grayscale itself is a trust company. It mainly earns management fees for trust products and does not specialize in “currency speculation.” The main buyers behind it are mainly institutional investors.
According to the data disclosed by Grayscale in the third quarter of 2020, users of Grayscale’s products are mainly institutional investors (81%), followed by qualified investors and family offices (8% each). 57% of purchase users are from outside the United States.
(Note: The statistical caliber is the information publicly disclosed by institutions in the US SEC. The trust shares held by institutions will change in different reporting periods. This article counts institutions that still hold trust shares as of November 9, 2020). The 23 companies include crypto asset lending companies, hedge funds, mutual funds, private wealth companies, consulting companies, and family offices.
Picture from Qianfeng Capital
The previous bull market speculation and speculation were more serious, and institutional investment was more biased towards value investment. Generally, the holding period would be relatively long, and most of them were strategic holdings. At present, the market is still in the early stage of “Gray Bull”, the buying volume is still increasing rapidly, and the possibility of gray selling is relatively small. The following describes this serious imbalance between supply and demand in detail.
After the compliance of Grayscale Trust products, more and more restricted institutional investors have provided channels to buy BTC. In January of this year, Grayscale Bitcoin Trust was approved as the first digital asset tool that meets the standards of the US Securities and Exchange Commission. On October 12, the application for registration of Grayscale Ethereum Trust was officially approved. The compliance of Grayscale Trust products is one of the important incentives to attract institutional investors to enter this year, and this trend will accelerate in the future. Behind the continued purchase of grayscale bitcoin trust products by institutional investors is an irreversible wealth transfer.
(Odaily Planet Daily Note: In the United States, some institutional investors with investment restrictions cannot enter the cryptocurrency exchange to buy BTC in the name of an institution. They can only buy bitcoin through trust channels. In addition, institutional investors are more accustomed to trust this A traditional investment method.)
The design of Grayscale Bitcoin Trust makes it difficult to sell BTC, and its position planning is more biased towards long-term holding. Institutional investors will get gray-scale GBTC after buying gray-scale Bitcoin. Investors can exchange BTC for GBTC (with half a year’s unlocking time), but cannot exchange GTBC for BTC. Grayscale Bitcoin Trust currently does not have any redemption plan, and the trust can seek regulatory approval to implement the redemption plan. This means that neither Grayscale nor institutional investors are likely to directly sell the BTC spot market through GBTC held in their hands.
Generally speaking, institutional investors are still entering in large numbers, and the possibility of BTC hitting the market is relatively low. With huge institutional funds flowing to the limited-scale Amber, this bull market is bound to emerge from the long and slow bull market.
Why are institutions pouring in?
The traditional financial system is being deconstructed, market risks are increasing, and funds are looking for a way out. In this year, the United States only took two months to expand its balance sheet by more than US$2 trillion; the scale of US debt has also rapidly expanded to US$27 trillion. As of the end of October, the Federal Reserve’s budget deficit has reached US$3.1 trillion, which has tripled compared with the same period last year; this time the budget deficit has hit a record high in 11 years. Not only that, the budget deficit as a proportion of GDP has hit a record high in 56 years, reaching 16%. As the hegemon of the global financial system, the US dollar has such a high risk that it is hard to return. This not only makes ordinary people worry about turning to digital currency, but also makes central banks intensify their development of their own digital currencies and try to form a new set of financial Payment system, and digital financial system is undoubtedly the best alternative.
Decentralized finance is being established, and it is booming, and innovation continues. The rise of DeFi this year, in which the lending leader Compound innovatively introduced governance tokens to kick off the prelude. In fact, the essence of Compound business is margin trading. The activity of Compound application makes digital asset trading more active. Users can borrow digital currencies from Compound applications at low interest rates, and then apply them to digital asset transactions that can obtain higher returns. The data shows that Uniswap, the leading DEX, saw a substantial increase in transaction volume during the same period.
Uniswap adopts the [constant product] model, which allows users to exchange tokens directly in the exchange pool, which not only changes the previous order book transaction mode, but also lowers the threshold of market making, so that every user can become a certain trading pair Market makers, and share the fee income. This is very attractive to borrowers who have successfully financed money in Compound. Uniswap’s innovative mechanism has seized some users and traffic of traditional centralized exchanges to a certain extent.
yearn.finance is also financially innovative. As a decentralized financial platform, it covers complex functions such as aggregated liquidity pools, leveraged trading platforms, and automatic market making. It can combine the tokens lent by investors with dYdX, Aave and Compound. Automatically allocate and transfer between to achieve the highest profit.
This series of financial innovations have jointly contributed to the DeFi boom. These innovations have important value. They successfully migrated the original centralized financial facilities to the blockchain, and the wealth in the traditional financial market has also migrated with it.
A large amount of BTC is locked in DeFi, giving Bitcoin new value
BTC has acted as a gold reserve in the DeFi boom, which is also one of the important drivers of the continued rise in BTC prices. WBTC issued with a 1:1 peg is already the sixth largest token on Ethereum. According to data from the official website, there are currently 122,281 WBTC, and the custodian holds the same amount of Bitcoin. In mid-September, only 80,000 Bitcoins were anchored to tokenize.
With the rise of DeFi, people can not only enjoy the long-term value-added purpose of holding Bitcoin, but also enjoy stable income from liquidity mining. This is a brand-new empowerment for Bitcoin, giving Bitcoin more For a wide range of value, as more applications land, Bitcoin will continue to be empowered, and its intrinsic value will continue to grow. The figure below shows the rapid growth of Bitcoin locked positions. It is worth noting that the massive increase in Grayscale also started at this stage.
Digital megatrend
The four main drivers mentioned above are actually derived from a larger trend-the digital megatrend, in which humans and their wealth are migrating to the Internet. The traditional financial order is being deconstructed, so central banks in various countries are stepping up the research and development of digital currencies and stepping up the establishment of a digital currency system; institutional investors are transferring traditional assets to digital assets; blockchain-based decentralized finance is on the rise, and this year’s new crown The epidemic has accelerated this digitalization process, and the future has just begun.
How much room for future growth
Grayscale stated in the report “The Great Transfer of Wealth Promotes BTC to Become a Mainstream Investment Target” that although Bitcoin was only a niche asset that attracted a few investors in the early stage, it is now becoming more and more accepted by mainstream investors. . Survey data shows that the number of potential investors in the Bitcoin market in 2019 was approximately 21 million, but in 2020 it has grown to 32 million. In 2019, 53% of investors said they were “familiar” with Bitcoin, but this has increased to 62% in 2020. More than 50% of respondents predict that digital currencies will become mainstream before 2030. Although most bitcoin investors currently do not have much income, in the next 25 years, 68 trillion US dollars of wealth will be transferred to the younger generation who tend to invest in digital currencies.
Nick Panigirtzoglou, a market quantitative analyst at JPMorgan, believes that “Over time, millennials will become the most important part of the investment world, so Bitcoin and gold will Intense competition is good for Bitcoin’s long-term upward trend. From a technical point of view, Bitcoin’s market value should increase by at least 10 times in order to match the gold market based on physical gold bars and coins.”
In the long run, there is still a lot of room for Bitcoin to rise, but the short-term BTC breakthrough of $20,000 will surely trigger a new round of FOMO sentiment. Bitcoin will inevitably have high volatility and market risks will rise sharply. Traders should pay attention to risks. Control.
