Besides the cryptocurrency’s swift ascent over the back half of 2020 and early 2021, an unusual phenomenon has opened; heightened profit-taking and exchange to fiat currencies. Data collected from a fiat-crypto gateway underscores this seemingly inconsistent development.
Sharing exclusive data, Simplex co-founder and chief analytics officer Netanel Kabala say:
“While the international press coverage of Bitcoin’s rally has caused a swathe of new users to flock to the industry and buy-in, outflows have been equally significant. Of the total amount of cryptocurrency sold in the last six months, 43% of crypto was off ramped in December alone.”
A quick look at Google Trends for the term ‘Bitcoin’ (BTC) echoes these developments, especially now that new equity instruments like Grayscale Bitcoin Trust and big-name funds like Blackrock add exposure and raising crypto awareness.
However, given the heightened ability to quickly convert crypto and withdraw in fiat currencies, the uptick in funds leaving the ecosystem is astonishing.
This can be associated with the growing fungibility of cryptocurrency, primarily helped by the support of players like Simplex, which empowers users to buy, sell, and spend crypto through Visa partnerships.
Even though some of the latest rally’s onlookers have decried the rapid rise in crypto valuations as proof that a bubble is forming in this nascent asset class, others within the industry see the development as a harbinger of times to come. One of the areas this is most apparent is altcoins.
Data compiled by Simplex demonstrates that as Bitcoin prices have leveled off above $30,000, daily purchases of altcoins have risen by approximately 65%. More interestingly, the data emphasize that newer users account for nearly 20% of this volume, indicating a sharp increase in the number of novice retail investors expanding and diversifying their exposure within the ecosystem.
Poloniex, one of the top 20 global cryptocurrency exchanges, which has adopted Simplex’s platform, has encountered these results firsthand.
Karen McHenry, Poloniex’s Director of Product, attributes this development to greater access within the ecosystem, especially with Simplex’s buy option, which promotes instant account funding alongside the heightened ability to cash out quickly.
She also doesn’t see the capacity to convert from crypto to fiat as harming interest more quickly despite the eyepopping amounts taken off exchanges.
It may sound remarkable, but adding the ‘sell’ option positively impacts the number of crypto transactions.
Though this simple off-ramp and rising volume of sell orders might seem negative for prices, it can also be viewed as a healthy reflection of the ecosystem’s growing use cases. Besides making it easier to exit and enter, growing areas like decentralized finance (defi) and greater fungibility contribute to a cryptocurrency’s value proposition.
As companies begin lining up to add exposure as retail accumulation climbs, Bitcoin drive may stimulate. By extension, lift the altcoins sought after by the newcomers seeking opportunities outside the seminal crypto coin.
McHenry continues:
If the bull market can maintain its momentum, some of these BTC profits will flow into altcoins, particularly among retail investors. This creates a positive feedback loop, with traders who turn a profit prone to telling their friends about crypto, bringing more investment into space.
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