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Bitcoin Market ‘Looks Like 2016, Before Historic Bull Run’

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A new report by crypto fund manager Grayscale Investments argues that the current Bitcoin (BTC) market structure “parallels that of early 2016 before it began its historic bull run.”

Grayscale predicts that demand for Bitcoin will significantly grow as inflation accelerates, highlighting the need for a scarce monetary commodity, bolstering the use-case of the cryptocurrency.

The report identifies several on-chain indicators showing growing interest in crypto, noting an increase in long-term holding over short-term speculation, amid historic lows for the number of Bitcoin held on exchanges.

Grayscale also notes that daily active addresses are at their highest level since 2017’s all-time highs.

Quantitative easing bolsters crypto

The report asserts that loosening monetary policy from the United States’ abandonment of the gold standard onwards have created cycles of debt-fuelled asset bubbles followed by aggressive quantitative easing.

Grayscale notes the increasing dependence of the U.S. economy on quantitative easing (money printing) to stay afloat and that history shows it’s an addiction difficult to quit.The S&P dropped 20% over three months in response to the Federal Reserve floating plans to reverse its monetary expansion in 2018.

Despite the US dollar remaining “structurally strong relative to other currencies” the report asserts that investors who are wary of inflation amid the “unprecedented monetary and fiscal stimulus” are searching for ways to protect against the ever-expanding money supply — bolstering the case for Bitcoin as a store of value.

Institutional appetites for Bitcoin grow

Grayscale cites the scoring system used by hedge fund manager Paul Tudor Jones to assess Bitcoin’s attributes against cash, gold, and financial assets and determine the market’s growth potential.

Quoting Jones, the report noted:

“What was surprising to me was […] that Bitcoin scored as high as it did. 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.”

“Something appears wrong here and my guess is it is the price of Bitcoin,” Jones concluded.



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Institutions have no appetite for Bitcoin at this price level: JPMorgan

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As Bitcoin (BTC) price failed to hold its breath above the $35,000 yesterday, JPMorgan expects an overall bearish movement below the critical price level based on the BTC-to-gold volatility ratio. 

In a note sent to investors on Wednesday, JPMorgan detailed its reasoning to see the fair value of Bitcoin between $23,000–$35,000 over the medium term. The banking giant previously pictured a $140,000 roadmap if the biggest cryptocurrency matches gold’s allocation and volatility profile.

But that’s off the table for the foreseeable future, according to JPMorgan’s note, which predicts that “full convergence or equalization of volatilities or allocations [between gold and bitcoin] is unlikely in the foreseeable future.“

JPMorgan also said that China’s crackdown on mining operations would have a positive impact on Bitcoin over the medium term, “as it accelerates a shift away from China’s high share in bitcoin’s hash rate, reducing concentration.”

Not many institutions are joining MicroStrategy’s hunt to buy the dip. “More than a month after the May 19 crypto crash, bitcoin funds continue to bleed, even as inflows into physical gold ETFs stopped,” JPMorgan said, adding:

“This suggests that institutional investors, who tend to invest via regulated vehicles such as publicly listed bitcoin funds or CME bitcoin futures, still exhibit little appetite to buy the bitcoin dip.”

Related: Bitcoin price dips below $34K as day of Grayscale’s BTC unlocking draws near

According to JPMorgan, another major factor preventing a possible bull run is the end of a six-month lock-up period for the Grayscale Bitcoin Trust fund, which saw a nearly $4 billion inflow in December and January. As Cointelegraph reported, July 19 will see the most significant single unlocking day, with 16,000 BTC worth around $627 million released.

Following the April all-time high, Bitcoin is hovering between $30,000–$40,000 for the last couple of weeks. After diving below $29,000 on June 22, BTC price is moving around $34,000, according to Cointelegraph Markets Pro and TradingView data.