Bitcoin’s present is reminiscent of its 2017’s action. However, it is still completely different. The dynamics around Bitcoin has massively changed. There is a sense of stability surrounding the digital asset, which was largely absent three years back. At press time, Bitcoin is just below $19,000 under its final resistance range.
After the inevitable step above, we’d be turning a new chapter in Bitcoin’s financial history. In order to understand the present and future interests, we will divide the explanation into two parts, in order to achieve a better market lucidity.
Bitcoin in 2020: Liquidity and Derivatives
Between 2017 and 2020, there are two clear distinctions. First, the supply of Bitcoin has increased from 16.77 million in January 2018 to 18.55 million at press time. That is an influx of 1.78 million BTC, currently valued at $32.28 billion. That is higher than every crypto asset’s market cap other than Ethereum.
The liquidity brought in by such a significant supply has led to the current explosive trading volume between on-ramp platforms. According to Skew’s recent data set, Bitcoin spot trades north of $500 million against the U.S dollar on exchanges like Coinbase, Kraken, Bitstamp, Gemini, LMAX Digital, and ItBit.
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This brings us to the 2nd difference, which is self-explanatory after the above example; higher liquidity.
Another financial product associated with Bitcoin is BTC futures traded with high leverage on offshore platforms. The report added,
“It’s common to see days where they trade in total north of $10bln. CME bitcoin futures traded on average $500mln notional a day in the last three months. Most bitcoin futures contracts are cash-settled using BTCUSD and BTCUSDT spot indices.”
It is important to note that its market was completed non-existent in 2017 and developed above the existent spot market as well.
The Origin of Institutional Investors
The major inference that can be drawn from the above-mentioned rising interest is organic growth in this particular market. And here in the last few years, the institutional interest has begun to move at a rather real pace.
CME can be appreciated for its major role. Many high net-worth individuals have identified this parabolic incline in BTC futures, attracting high levels of cash and carry strategies, on its sport and futures platform.
However, this has definitely led to institutions whose capital is solely dependent on crypto assets, and they are basically “cash poor”. Since banks have been completely absent in this market, there has often been US dollar scarcity since 2017.
The next part of this article will describe the possible expectation of Institutional Investors on BTC and what possibly lies in the future. End of Part 1.