The current bitcoin bull run could be much less of a roller-coaster ride for investors than 2017’s spectacularly volatile ascent from $1,000 to $20,000.
Institutions scooped up a lot of bitcoin in the $12,000–$15,000 range, according to the blockchain analytics firm Whalemap. This trend is positive because institutions and whales normally purchase assets with a view to holding them for a long time.
Also, institutions, unlike retail investors, are not highly prone to panic-selling in times of turbulence, which is conducive to a smoother ride to the top of the cycle.
Over the past month, the price of bitcoin has risen thousands of dollars. But its ascent has so far been much more incremental than in previous bull runs, which saw investors buckling their seatbelts and clenching their teeth in anticipation of a very rough ride.
This time, however, the trip to the top, assuming the bull run continues as many have predicted, might be much less stressful. Analysts including Real Vision’s Raoul Pal and MicroStrategy’s Michael Saylor believe the growing influx of corporate money will help to reduce bitcoin’s legendary price volatility over time.
Saylor, who earlier this year oversaw the transfer of his business intelligence firm’s US dollar treasury into bitcoin, recently said, “I think that as the institutions come in and they buy bigger amounts, they’re damping the volatility.” Saylor intends to stay in bitcoin, which he believes is vastly superior to gold as a store of value, “for 100 friggin’ years.”
Larger players – “the smart money” – buying bitcoin explains why the price is soaring even though retail investors aren’t showing much interest. Google Trends, considered a reliable indicator of market sentiment, shows that general interest in bitcoin is nowhere near the levels seen in January 2018, the last time bitcoin was in the $16,000 price range. The chart below shows the search volume for “How to buy bitcoin” over the past five years.
Whalemap analysts described the recent surge in demand for bitcoin from big players as “institutional FOMO,” a phenomenon that has been part of the crypto hype narrative since the end of the last bull run nearly three years ago.
The institutional money that many crypto analysts thought would flood into the market in 2018, taking bitcoin far beyond its all-time high of $20,000, never materialized. But thanks to the maturation of the asset and improved regulatory clarity and custody services, among other factors, that institutional money is finally flowing in. Grayscale, Fidelity, MicroStrategy, Square and PayPal are among the corporate heavyweights that are now bringing bitcoin into the mainstream – and profiting handsomely in the process.
Referring to a chart showing whale clusters and inflows of bitcoin into wallets held by whales, Whalemap tweeted: “These are the levels and this is what institutional fomo looks like.”