But this time it’s different?
Market Recap
Bitcoin surged another astonishing 16% last week and traded just below the 19k mark at $18,984, a level not seen since January 2018. Over the last 252 days, Bitcoin has rallied 386% since Bitcoin Black Thursday (at $3,870) March this year. Other major altcoins also rebounded significantly after a small correction on Sunday. ETH and XRP are both up by more than 8.5% from the low, the altcoin rally has increased the total cryptocurrency market capitalization by 5% to $545 billion. BTC dominance, meanwhile, is sitting just over 62.9%.
Bitcoin (BTC) is now in its seventh straight week of price appreciation. Although the price has risen by nearly $2,000 this week, there is still no clear signs of overheating as we deduce from several key data. The margin lending ratio dropped significantly as spot leveraged traders started taking profit. However, buying interest from institutions are still strong and is one major driver of Bitcoin’s continuing ascent. As of Nov. 18, the Grayscale Bitcoin Trust’s assets under management had surged to $10 billion from $1.9 billion at the beginning of the year, a whopping 426% increase.
With quarterly futures set to expire in about a month, premium levels are starting to come down due to the impact of time decay. Despite the $2,000 increase in BTC price this week, the premium level now remains low at $140, or 1.04%, which is still healthy and reflective of bullish market sentiment.
On the macro side, equity markets flip-flopped, driven by positive vaccine news and ever-growing economic restrictions aimed at curbing the recent spike in virus cases and hospitalizations. The rotation out of the technology sector and into more cyclicals stocks continued as the vaccine developments improved investor sentiment and confidence on next year’s outlook. Employment data showed worse-than-expected initial jobless claims, which, in our view, confirms that this economic recovery is likely to be choppy before ultimately returning to pre-pandemic levels. Reports that the Treasury department is not extending certain funding for the Fed’s lending facilities established earlier in the pandemic is catching attention, though we don’t interpret this as a signal that monetary-policy support will be significantly or permanently scaled back.
What is Happening?
On Thursday, 19 Nov OKEx has finally announced that withdrawal services of all digital assets will be resumed on or before Nov. 27. They claimed that due to security measures to safeguard users’ funds, withdrawals from the exchange were temporarily suspended since Oct. 16, while other functions on the platform remaining unaffected. Elsewhere, Galaxy Digital announced that it has partnered with major Canadian investment company CI Global Asset Management to launch a public Bitcoin (BTC) fund in the country. A $9.2 billion investment fund SkyBridge Capital — the investment firm founded by Anthony Scaramucci “may seek exposure to digital assets”. A filing note has been made to SEC that indicates that the company is eyeing investments that can give it exposure to digital assets.
In Japan, more than 30 major companies will begin the CBDC/digital Yen trials in 2021; participants include the three biggest banks, brokerages, telecom companies and more; Japan currently has one of the lowest percentages of cashless payments — making up only 20%.
Conclusion
Seven consecutively weekly gains is quite a stretch. Since 2016, there have been a total of 5 seven-week winning streaks and only 1 eight-week streak. The median decline in the week ending these runs is ~ 20%, and it typically takes about four weeks to recover back above the closing price of the last week. That said, overall market positioning and the broader macro environment continue to look extremely constructive. One of the most significant differences between the current market and the 2016–2017 bull run is the relative lack of retail hype. Google Trends searches for Bitcoin are well below one-fifth of what they were during this price level in 2017. The last cycle was driven primarily by individual investors and a handful of quasi institutional — family offices, relatively small crypto dedicated hedge funds, etc. Paul Tudor Jones called BTC ‘the fastest horse,’ because there’s potentially a wall of money competing to squeeze into an asset that is still tiny relative to other asset classes. Good Luck!
