VYSYN Ventures Weekly Insights #44
There has been a return to bullish exuberance across the cryptocurrency market with a series of positive news catalysts. Bellwether Bitcoin briefly returned above the $60k price, following some transactions from large Bitcoin holders and an announcement from PayPal.
Altcoins have also been on an upward trajectory, with Ethereum recently recording an all-time high. Ethereum has also received it’s share of positive news, with payment processor Visa integrating an Ethereum-based payment option.
In the latest VYSYN release, we analyze some of the key tailwind behind the rising prices. We detail adoption by payment processors in both Bitcoin and Ethereum, long-term BTC holding activity, and Bitcoin Whale movements.
PayPal Integrates Cryptocurrency Support as Traders Eye $80k
On March 30th, PayPal announced the integration of cryptocurrencies on its platform. PayPal users will now be able to spend with the 29 million merchants that are on the PayPal platform.
With over 377 million accounts active on PayPal, this is an extremely bullish development for mainstream cryptocurrency and real-world usage. The announcement coincided with a 2% daily jump which was followed by Bitcoin price testing the $60k level over the following days.
Other factors are also propelling the current bullish trend. Data from the derivatives exchange Derebit reveals that a significant pool of capital from derivatives traders is anticipating that Bitcoin could reach $80K in April.
Bitcoin Demand-Supply Dynamics Improve as Exchange Outflows Continue
Long term holding is another key dynamic that fosters bullish market conditions. When less Bitcoin is available on the market, prospective buyers must secure the asset from a more limited supply. Assuming that demand stays constant, price must rise to facilitate the more constricted supply.
The balance of Bitcoin held on exchanges suggests that a significant portion of speculators have been moving their BTC to long-term storage. The cumulative BTC held on exchanges has been declining since March 2020, resulting in demand-supply dynamics improving for the asset.
(Source: Glassnode Studio)
Exchange-Listed Funds Manage over 800k Bitcoin
(Source: Arcane Research)
While Bitcoin is flowing out of exchanges, BTC is flowing into exchange-listed investment vehicles. Over 800,000 BTC is currently managed by companies that are providing vehicles for investing in Bitcoin to institutions and accredited investors.
The BTC controlled by these companies currently represents over 4.3% of the total Bitcoin supply. Grayscale is the largest player offering such a vehicle, with their GBTC product managing roughly $35 billion worth of BTC.
The long-term investment mandates of such funds also foster more bullish market conditions for Bitcoin. These funds refrain from short-term trading and accumulate significant Bitcoin positions for the long-term, also improving demand-supply dynamics.
Bitcoin Whales Move $2 Billion Worth of BTC
Bitcoin Whales have also been active, and may have had a key role to play in the recent bullish price movements. Bitcoin Whales moved over $2 billion worth of BTC within 24 hours from the 26th of March to the 27th of March.
The activity of whales in the Bitcoin market almost certainly had a disproportionate impact on the BTC price movements. Over the seven days following the 26th of March, Bitcoin price appreciated by ~15%.
Visa Adopts Ethereum
Ethereum, the biggest altcoin by market capitalization has also been recording significant price appreciation. On the 2nd of April, Ethereum appreciated by over 8% to record an all-time high of $2,144.
The Ethereum price has since retraced to ~$2k, which will likely be a significant trading level, with liquidity expected from both the buy-side and sell-side at this level. Ethereum has also had bullish news developments playing a role in propelling the asset’s price movements.
Visa has recently announced that it will adopt the Ethereum blockchain for settling payments. The firm announced that it was integrating the option of the Ethereum-based stablecoin USDC as an option to settle payments.
More Bullish Movements to Come?
Cryptocurrencies can often record extremely volatile movements with no apparent event supporting the fluctuations. However the recent bullish movements across the cryptocurrency market can be linked to improving fundamentals.
Payment processor adoption, an increased propensity towards long-term holding, and whale activity are all events which played a role in the recent price jumps. Both Bitcoin and Ethereum have recorded an exemplary price performance thus far in 2021 with both trading at multiples of their opening price.
With both assets trading near record highs, we may still be in the middle of the current bullish movements. The recent bullish catalysts such as the Bitcoin whale transactions and the greater levels of long-term accumulation would certainly suggest so.