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FOMO Begins: Bitcoin Adoption Explodes To Highest Level Since Previous Parabolic Peak

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2020 was undeniably the year of Bitcoin. No financial assets have acted as a better safe haven, insurance policy, protection against inflation, and more – all while being the top-performing mainstream investment asset in terms of ROI.

FOMO has started in a major way, and will only increase from here. The sudden surge in interest surrounding crypto is reflected in the asset setting the highest number of new BTC address created since 2018 when the bear market began. With the ever-important adoption metric revisiting crypto bubble peak figures, is this the final sign that there’s no turning back and the bull market is on?

Newly Created BTC Addresses Captures Rate Not Seen Since Crypto Bubble Peak

Bitcoin is an unusual asset compared to stocks, gold, and traditional markets. Technical analysts typically chart them in linear scale, but because Bitcoin grows by network effect, and its price has increased so sizably over its lifetime as price discovery takes place.

This network grows when more and more users participate in it, either through mining and keeping the network secure, contributing hash power, or when more people buy and use the budding financial technology.

RELATED READING | BITCOIN OVERTAKES PAYPAL MARKET CAP, SETS SIGHTS ON VISA, MASTERCARD, AND BIG BANKS NEXT

When a user buys Bitcoin a wallet is created for them. Existing users can also create additional wallets as they wish. These addresses and the rate at which they are created can be a helpful tool in understanding consumer adoption and investor interest.

If BTC addresses are climbing, and they have been, it is a sign that new users are coming in at a rapidly growing rate. According to blockchain data analytics firm glassnode, the rate at which new BTC addresses are created recently matched a figure that hasn’t been seen since January 2018.

 

glassnode data shows that BTC addresses just reached a level back when the last bull run ended | Source: BTCUSD on TradingView.com

Bitcoin FOMO To Return To Retail, New Wave Of Speculators And Investors Incoming

The reason this is notable is due to the fact that the metric has reached a level that is on par with peak crypto bubble hype and speculation.

When Bitcoin had broken $10,000 in 2017, within weeks it traded at $20,000 capturing a world of retail interest and investors who were essentially buying the top. As a result, newly created addresses skyrocketed.

Where the crypto market is currently, however, has nowhere near the same level of interest as 2017 when Bitcoin capture the imagination of the media and mainstream public.

RELATED READING | BITCOIN BULL MARKET CORRECTIONS EXAMINED: WHAT TO EXPECT WHEN CRYPTO CORRECTS

This time around, however, Google searches reflect that average Joes who bought the top last time around, are mostly unaware that Bitcoin is nearly back to all-time highs. When the record is broken, another flood of FOMO could come in.

If retail isn’t buying crypto, then where is this surge of new users coming from? It is an entirely different class of people buying crypto this time around, and they aren’t making the mistake of buying altcoins that didn’t live up to promises.

Institutions are buying BTC, as are massive corporations, and there has even been a slew of celebrities coming on board. Billion-dollar hedge funds and business, along with millionaire celebrities buying now, will leave very little of the scarce Bitcoin supply left for retail investors when they do decide to get in.

Featured image from Deposit Photos, Charts from TradingView.com





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Bitcoin

Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K

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Bitcoin price is still in a rut, trading near $33,000 and trapped in a downtrend that just seems to get worse with the passing of each day. As the price slumps, analysts have consulted with several technical and on-chain metrics to explain the price collapse, but none of these have picked up on the exact reason. 

One area of interest has been the sharp rise in short positions at Bitfinex in the past week. Traders are placing exaggerated importance on these Bitcoin (BTC) margin shorts as if they are predictors of the current market crash. Still, as Cointelegraph previously reported, analysts forget that Bitcoin margin longs are usually much larger.

On June 18, longs outnumbered Bitfinex shorts by at least 22,800 BTC, but 87% of the short positions were closed before June 22. Currently, margin longs are 43,850 BTC higher than the amount shorted.

While those shorts are usually savvy traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in activities involving crypto trading or mining.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million in Bitcoin after a successful senior secured note private offer. To make things worse, Michael Saylor’s business intelligence firm announced the intention to raise another $1 billion by selling stocks to buy Bitcoin.

Let’s take a look at how these courageous shorts fared.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, shorts increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 shorts were added when Bitcoin was trading at $37,050. Lastly, between June 14 and 15, shorts increased 6,000 to a 25,000 peak while Bitcoin averaged $40,100.

By looking at the Bitcoin prices when those short position increases took place, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders search for bearish signals after Bitcoin futures enter backwardation

Traders closed positions before BTC crashed bel$32,000

These short positions were steadily closed over the past three days when Bitcoin was already trading below $37,000. However, 17,000 short contracts had already been closed by the time the price plunged below $33,500. Therefore, it is implausible that the average price was below $34,500.

No one would complain about gaining 8%, shorting the market to generate a $73 million profit. However, it is essential to note that on June 16, when Bitcoin reached $40,400, these shorts were underwater by $65 million.

This analysis shows how even highly professional traders can go deep underwater. There’s no way to know if this trade would have been profitable had the crackdown on China not aggravated Bitcoin price or if MicroStrategy managed to raise the $1 billion before the price drop.

If anyone still believes in market manipulation, at least there’s comfort in knowing that pro traders can face drastic losses as well. However, unlike us mortals, whales have deep pockets and patience to withhold even the most rigorous thunderstorms.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.