With Bitcoin flying the past few weeks, a lot of people have argued that it has finally found its bottom. The popular Binance exchange has released a comprehensive report on the state of the crypto market. They have found that the worst for the space is most likely over which indicates that from here on out it’s going to be all green with prices flying high. Of course, this is news for investors and traders who are eager to see blockchain technology reach mainstream appeal.
The Binance report states:
“Having emerged from a period of the highest internal correlations in crypto history, the data may support the notion that the cryptomarket has already bottomed out.”
On top of this, Binance published another report which goes on to explain the internal correlations.
On the other hand, not everyone in the crypto space ecosystem has such a bullish outlook. The popular derivatives trader Tone Vays has a rather pessimistic belief (but perhaps realistic outlook, when looking at the year-long bear market) that a new bottom could still be formed.
There is NO magic price that turns a bear trend to a bull trend, it's about how $BTCUSD gets to a price. I can see a scenario where I say:— Tone Vays [#UnderstandBit] (@ToneVays) 9 April 2019
"I was wrong, #Bitcoin did bottom at $3k, now that we are at $8k"
But I can also say:
"I know $BTC is $10k, but I don't think we bottomed" https://t.co/wQ26ypfV2C
With the price of Bitcoin reaches the $5,000 mark recently, it seems more and more likely that Binance is right and there will not be any lower lows.
Although it does seem that retail investors still dominate trading in the crypto market.
“The cryptomarket’s frequent periods of extreme correlation are inseparable from the market’s highly retail-driven participation.”
The Binance report compares the dynamics in crypto to that of the Chinese stock market, suggesting that both markets are mainly packed full of retail investors.
Two years ago, “retail investors accounted for more than 99.8% of the Chinese stock market by number of accounts, more than 40% by market value, and more than 80% by trading volume.”
Both cryptocurrency and the Chinese stock market also suffer from high turnover rates.
The cryptocurrency market is comprised of around 700 crypto funds that combined show “a total of just under $10 billion in assets as of January 2019.”
In such a example in which their portfolios are wholly comprised of Bitcoin, “this would account for an upper bound of only 14% of the total market value of bitcoin.” Getting altcoins involved with this scenario would change the results so that the “institutional proportion overall could be less than 7% for the cryptoasset market.” This is just a small fraction of the dynamic in the stock market.
“Meanwhile, crypto’s estimated 7% institutional participation rate represents only one-thirteenth of that for the U.S. stock market.”
On a positive spin though, institutional investment is more than likely to rise as new Bitcoin trading platforms launch such as the regulated Bakkt.
The mind of the investor
The report later went onto discuss the trading that takes place in crypto:
“Generally speaking, non-professional investors are prone to becoming overconfident or overly pessimistic in reacting to market trends, leading to higher potential transaction volume, more volatile prices, as reported in numerous studies.”
On the flip side, a lot of crypto investors are more likely to hold their assets during a market decline.
“In the face of market downtrends, unlike many momentum-driven institutional investors, most investors in the crypto asset market may prefer to ‘HODL’ through a prolonged decline in prices.”
Meanwhile, Craig Wright of Bitcoin SV is looking at a lot of hate from some of the bigger names in the following his move to sue Holdanaut and Peter McCormack, two popular crypto enthusiasts.
Yesterday, Binance announced a capital decision to delist Bitcoin SV after they received a lot of ill feelings from the cryptocurrency community in regards to the nChain scientist and founder of BSV who has claimed that he is Satoshi Nakamoto.
The popular crypto enthusiast, John McAfee has had his words on Wright saying,
“Enough is enough! There at least a dozen crypto adherents who know the true identity of Satoshi. I can assure you, 100%, it is NOT Craig Wright. This absurd claim of Craig's is incomprehensible. Mr wright: Have you no shame? Seriously sir! Have you no shame?”