For the first time in 34 months, Bitcoin has been trading above $15,950. The only other period this occurred was in December 2017 after Bitcoin rushed by on its way to its ATH near the $20k mark and subsequently in January 2018, on its way down.
BTC/USDT 1 day chart | Source: Tradingview
What’s even more surprising this time is that on-chain fundamentals seemed initially weaker than a few weeks ago. The difficulty was recalculated downwards from its new all-time-high (~ 20.00T) on October 18th to 16.79T on November 3rd. Similarly, the average hashrate is currently around ~117.3 EH/s, down by 15% from the previous peak of mid-October.
However, transaction fees collected by miners have increased sharply over the past few days, with an average fee on Bitcoin above $12 for the first time since January 2018. While transaction costs are paid in BTC, it is natural for on-chain transaction costs to move in line with BTC’s price when denominated in USD. Yet, transaction fees recently went up at a faster rate than the USD price of BTC.
Grayscale Bitcoin Trust’s number of bitcoins held under its custody continues to grow, reaching 490k BTC (November 6th), showing overall investors’ appetite for bitcoin across retail and institutional markets. On the other hand, the weekly premium of GBTC remains in the 20% range, much lower than the environment in the second half of 2017, where the premium consistently remained above 50%. This could be explained by the industry’s maturity and the greater availability of fiat on-ramps for users to purchase BTC from.
Total AUM: $9.1 billion | Source: Grayscale
Bitcoins continue to be massively issued on Ethereum. In total, more than 152k BTC are issued on Ethereum, clearly dominated by two players: WBTC (122,281 BTC) and renBTC (20,432 BTC). Yet, the landscape could change in the coming months with new entrants such as tBTC and BBTC (Binance) joining the race for “BTC pegged dominance on Ethereum”.
Bitcoin’s open interest (composed of both futures and perpetual contracts) stood at more than $5.2 billion, increasing by more than $1 billion in the past two weeks. Without surprise, the futures/perpetual landscape is still far from being dominated by a single market participant regarding the open interest market share, but rather shared between the CME, OKEX, BitMEX, Binance, FTX, and Huobi.
On the other hand, the options market, currently dominated by Deribit (more than 75% of the total OI), reached an aggregated open interest of Bitcoin options of $2.4 billion, a new ATH.
Several recent factors that likely positively influenced the price of BTC were:
PayPal launched custodial crypto services with a potential reach of up to 26 million merchants worldwide.
The DeFi craze went down, as illustrated by large price drawdowns (e.g., YFI, UNI) from their historical peaks. This might have been explained by individuals and institutional investors rebalancing their portfolios toward relatively less risky crypto-assets such as Bitcoin, leading to a snowball effect of people buying bitcoins (i.e., resulting in price momentum).
In addition, Bitcoin’s recent price action may tie to an increase in public recognition of its potential for serving as a global macro hedge asset. The recent price increase from $13.5k may have been triggered by the developing instability in the 2020 US elections outcome. Furthermore, the lack of alternative safe-haven assets could also have played out owing to the recent COVID-19 consequences. For instance, many European countries started to re-implement lockdown measures (e.g., UK, Ireland, France), raising concerns about these currencies’ safe-haven status (GBP, EUR) and their respective equity markets owing to potential economic downturns. Interestingly, while being up by +15.19% over the past 6 months, the gold price didn’t rally together with BTC.
On November 5th, the Justice Department announced the seizure of 69.37k bitcoins (currently valued at over $1 billion) that once belonged to Silk Road founder’s Ross Ulbricht following an investigation launched earlier this year. This was the largest-ever government seizure of Bitcoin to date. The announcement might have contributed to the last day’s price movement as investors recognized the Justice Department’s ownership as effectively locking up supply until a potential auction at a later date following the case’s closure.
Finally, another aspect to consider was the implications of large reputable companies like MicroStrategy and Square investing some of their treasury into BTC. These announcements (and their respective fast-positive returns) could have potentially further legitimized the status of Bitcoin as a stand-alone asset class, with a potential fear-of-missing-out-type reaction from market participants. This would add to a set of positive recent news for Bitcoin, like traditional financial institutions such as DBS offering a digital asset trading platform for clients and JP Morgan rumoring to launch a crypto custody service.
Source: Binance Research
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