• The S&P 500 is now down 11%.
• The JSE All Share is now down around 13%.
• And gold is up 8%.
That’s incredible gains given cryptos are deemed “high risk assets”.
So, what’s driving this 2020 crypto rally?
#1: The return of “Crypto Whales”
“Whales” in the crypto market are often large crypto investors. And because they own tons of Bitcoin, “Whales” can move crypto markets by selling or buying.
Recently, they’ve been buying.
The seven-day moving average of the number of addresses holding 10,000 bitcoins or more, rose to 111, last week Wednesday. That’s the highest level since August 2019, according to blockchain intelligence firm Glassnode.
And since early March 2020, that number has risen by more than 11%.
One reason for this increased interest from long-term holders and large investors could be associated with the bullish narrative of the upcoming Bitcoin halving
Wayne Chen, CEO of Interlapse Technologies and founder of Coincurve, a cryptocurrency purchasing and spending platform recently said,
“The increase in the number of BTC addresses with more than 10,000 BTC is likely the result of long-term holders coming back online to expand their holdings.
Some of these addresses may belong to high-net-worth individuals or groups, who are diversifying into bitcoin amid the ongoing coronavirus pandemic and ahead of the mining reward halving, due in the next two weeks”.
What’s more, many advocates tout bitcoin as a safe haven asset and an inflation-hedge like gold. They claim the economic destruction caused by the coronavirus pandemic and the unprecedented money printing exercises undertaken by the global central banks and governments will bode well for bitcoin’s (alt coins) price.
Simon Peters, analyst and crypto asset expert at global investment platform eToro recently noted,
“Amid the deteriorating economic outlook for the US economy and the likelihood of an ever-increasing monetary supply, which weakens the US dollar and stokes inflation fears, we believe bitcoin could easily test previous highs above $19,000 as investors look for safe havens away from traditional assets."
#2: US bitcoin start-ups experience an uptick in business
Thanks in part to the uncertainty of the coronavirus crisis and rising bitcoin prices, bitcoin wallet start-ups have seen a sudden uptick in activity.
For example, over the past two months, an Austin, Texas-based bitcoin startup Unchained Capital, with over $50 million in assets under management and $150 million worth of bitcoin transactions processed, garnered several dozen new institutional clients, representing hundreds of individuals.
The company’s chief product officer, Will Cole said its custody product “Vault” saw 340% growth in Q1 2020 as compared to the previous quarter.
Backing this up, is crypto hardware wallet specialists, Ledger, who’s been scaling up to meet increased demand for hardware wallets.
And Casa, a subscription-based bitcoin start-up, also recently revealed an “influx of new clients” since the beginning of March – with a “50% increase in total” bitcoin usage.
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#3: US investors are starting to pile in
Swan Bitcoin, a bitcoin investment service based in Los Angeles recently revealed a huge uptick in Americans buying bitcoin. These customers have been saving “over $300 per month” in bitcoin on average, with some “measuring well into the thousands.”
Backing this up is River Financial, a bitcoin brokerage based in San Francisco.
The company has also experienced significant growth in customers buying “hundreds to a couple thousand dollars’ worth of bitcoin”.
Alexander Leishman, its founder and CEO said,
“The number of orders on our platform doubled in mid-March, and it has since sustained a significantly elevated rate. And many of our clients have directly told me that they are buying bitcoin because the government is printing so much money. A lot of these people are buying bitcoin for the first time”.
The last line is extremely note-worthy, because it shows that bitcoin (and cryptos) are becoming more mainstream.
This is good for crypto acceptance and growth in the future.
See you next week.
Managing Editor, The South African Investor
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