Bitcoin has finally made a comeback, breaking the $ 50,000 barrier to trade at around $ 57,000 at time of publication. The signal became a much-needed relief to the bulls after the cryptocurrency market was completely down for two weeks after the sudden crash on February 22nd, now known as Bloody Monday.
The market downturn appears to be continuing despite the increased demand and confidence in the cryptocurrency markets from individuals and institutional investors. A blog posted by Robinhood, a trading platform that Generation Z has used for millennia called “Crypto Goes Mainstream”, stated that the platform saw more than 6 million new cryptocurrency users in the first two months of 2021. Given that monthly subscriptions in 2021 are 15 times the average. In 2020, this is very indicative of a shift in retail investor perception towards cryptocurrencies.
Market depth saw Bitcoin (BTC) reach as low as $ 43,700 on February 28, 25% below its all-time high of $ 58,352 on February 21. To all the new cryptocurrency investors who have been driving the wave during the rally in early 2021 and late 2020.
Smart investors are often aware – and they are concerned about the fact that such price adjustments are occurring in the financial markets, and even the stock market. A similar phenomenon was recorded recently in the case of Tesla stock, which underwent a massive 11.4% price adjustment.
The price fell sharply despite higher demand
These price adjustments are often normal for financial assets that have a long bullish period and increase in value over a period of several months, as is evident in the case of Bitcoin. Institutional investors, who often believe in their long positions due to the supply of value their investment may get in the future, are waiting for these price adjustments to attract more bitcoin. However, due to the bureaucratic nature of large organizations, there are often many obstacles that they have to overcome in order to ultimately invest.
Jay Howe, CEO of cryptocurrency exchange OKEx, told Cointelegraph that withdrawals can be expected given the early stage of the bullish race. Most government agencies need to justify their purchase of bitcoin to investors as well as board members. So doing the due diligence and justification for the ratio of distribution in their portfolios would be fine.
Since depositing a cryptocurrency into a balance can be a time-consuming and obstacle-filled process, Hao believes that some institutions may be disappointed: “Many still believe that a market value of less than $ 1 trillion is not large enough. The asset class to invest in. And others contradict its fluctuations. ”
This theory is supported by corporate investment by companies led by powerful business leaders such as Jack Dorsey and Michael Sailor. Square was the first major institution to buy deep, adding 3318 Bitcoin to its wallet on February 23, which was about $ 170 million at the time. Given that more than 80% of Square’s revenue in the third quarter of 2020 came from Bitcoin, the move seems obvious.
MicroStrategy Sailor CEO also announced on February 24 that the company had acquired an additional 19,452 bitcoins, worth about $ 1 billion at the time. The following week, March 1, he revealed that the company had bought a small amount of 328 Bitcoin, worth $ 15 million at the time. According to Bitcoin Bonds, MicroStrategy now has a total of 91,164 BTC, which is approximately $ 4.6 billion. In fact, this represents 74% of the company’s market value. Howe also argued that obtaining such an award may not have been that easy for other institutions:
“We see BNY Mellon developing several institutional storage solutions, but they will emerge later this year. It takes time. For most organizations, the decision to buy Bitcoin is not as easy as Michael Sailor. Most people have to go through complex processes first, and I think that’s in part.” The reason for this gap.
Given that the most notable correction in Bitcoin prices occurred on March 12, 2020, also known as Black Thursday, this recent drop in prices may reflect the cyclical nature of the asset. “The historical impact of the price season does not favor Bitcoin in March. Once they know this, traders will be more careful when they land a long trade,” Shen Ie, in charge of product research and development of cryptocurrency derivatives at Bybit, a cryptocurrency derivative exchange, told Cointelegraph. ”