Bitcoin, Cryptocurrency

Grayscale: Bitcoin market “looks like 2016.”

August 24, 2020

In 2020, the Bitcoin bull run has sent ripples across the crypto space with market observers calling for the asset to reach all-time highs finally. If one prominent firm is considered, the series is just getting started.

Bitcoin “looks like 2016”

Grayscale Investments, the institutional cryptocurrency fund, said in a recent report that Bitcoin is displaying the same signs before the notorious 2017 run. The Bitcoin market structure “bears parallels that of early 2016 before it began its historic bull run,” it said.

It also recognized several on-chain metrics that point towards an augmented public sentiment on the broader crypto market. An important take away from that was the upsurge in long-term holding over short-term conjecture, indicating a sustainable price rally compared to 2017’s boom and bust.

Image: The Tie

The firm foresaw that both retail and institutional requests for Bitcoin would grow in the near forthcoming as inflation hurries it was caused by governments around the world printing money to jumpstart an economy affected by the ongoing pandemic.

The above helps highlight the need for a “scarce monetary commodity,” with Bitcoin suitable in the bill, said Grayscale. Moreover, it noted that daily active addresses are at their highest level since 2017’s all-time highs. Data from on-chain analytics firm Glassnode confirms this finding:

Bitcoin’s active addresses have risen this year. Image: Glassnode.

Fed’s money printing, is this good for Bitcoin?

The increasing dependence of the US economy on quantitative easing to stay afloat show “it’s an addiction difficult to quit,’ according to Grayscale.

Bitcoin is not the only market to have gushed this year, the S&P index, commodities, metals, and just about any asset on global markets dropped sharply in mid-March and gained strength in the months after the so-called “V-shaped” recovery.

A “V-shaped” recovery in the S&P. Image: BTCUSD Chart on TradingView

Grayscale noted that the investors are wary of it. They said that clients viewed the “unprecedented monetary and fiscal stimulus” as a negative and were looking at “alternative assets” like Bitcoin and gold to hedge their properties.

Large corporations share that sentiment as well. At the beginning of this month, enterprise software firm MicroStrategy announced it invested over $250 million in Bitcoin to protect against a grim economic outlook. They also said they considered Bitcoin a “new age form of money.”

In the meantime, Grayscale evaluated Bitcoin’s attributes against cash, gold, and financial possessions to control the market’s potential. It even quoted Paul Tudor Jones — the hedge fund legend that also turned to Bitcoin to hedge investments this year — in its report:

“Bitcoin had an overall score of nearly 60% of that of financial but has a market cap that is 1/1200th of that. It scored 66% of gold as a store of value, but has a market cap that is 1/60th of gold’s outstanding value.”

For a foreigner to cryptocurrency, it seems like Bitcoin’s time as a money substitute has finally ended here. But investors must pay attention against any frenzied investments — just about everything has propelled this year, after all.

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