Is the Current Bull Run on Cryptocurrency Driven by Retail Investors, Institutions, or Both?
The cryptocurrency market has witnessed significant growth and volatility, prompting discussions around the sources of this current bull run. While some argue that it's driven by retail investors, others believe that institutional participation plays a crucial role. This article examines the evidence and explores the factors influencing this market.
The Role of Retail Investors in 2017
The 2017 bull run in cryptocurrency, particularly Bitcoin, was largely attributed to retail investors. At the time, there were limited institutional investment vehicles, and few options for over-the-counter trading or alternative investment vehicles tailored to the nascent cryptocurrency market. Grayscale's Bitcoin Trust and the Bitcoin futures products from CME and CBOE were the primary avenues for institutional investors. However, the narrative has evolved, and the current market's composition suggests a significantly different landscape.
Institutions Are Wading in Bitcoin Waters
In 2018, a shift was observed as institutions began to enter the cryptocurrency market, albeit slowly. Major Wall Street firms, along with counterparts in Asia, made significant moves. For example, the Intercontinental Exchange announced Bakkt, and Fidelity Investments launched a Bitcoin-friendly division. These moves marked the beginning of a period where institutional involvement steadily increased.
A recent report from JP Morgan analyst Nikolaos Panigirtzoglou highlights the shift in market dynamics. He suggests that the role of institutions in recent Bitcoin price action is significantly more pronounced than previously believed. The CME and CBOE futures contracts have played a crucial role in enabling short exposures and arbitrage opportunities, contributing to the increased participation of institutional investors.
Evidence of Institutional Involvement
Several data points confirm the increased involvement of Wall Street and other big firms in the cryptocurrency market. For instance, Diar reported that "firm size" now addressing 1000 to 10,000 BTC under management owns 26% of the circulating supply, up from under 20% in August 2018. This accumulation implies inflows of hundreds of millions and billions of dollars into the market. The size of the wallets further suggests that big investors are behind these transactions.
More convincingly, the value of Bitcoin has rallied while Google search interest for "Bitcoin" has decreased. This divergence indicates that those already knowledgeable about and accessing information about cryptocurrency through other means are driving its value. This suggests that the current bull run is being pushed by institutional investors and those with a deeper understanding of the market.
Strategies for Profitable Investment
Despite market volatility, there are still ways to make profits. For instance, companies like Coinstarhaven offer investment strategies where users can double their cryptocurrency investments in just 7 days. Such platforms are designed to providing arbitrage and other profitable opportunities, even during down markets.
It's clear that the current bull run on cryptocurrency is influenced by both institutional and retail investors. As the market continues to evolve, it will be interesting to see how these dynamics shift and shape the future of digital assets.