Bitcoin’s market capitalization has exploded higher by approximately $100,000,000,000— or $100 billion — over the past 30 days alone.
The rally has caught many on the sidelines unaware: just two months ago, BTC was at $9,800, poised to collapse further, some analysts say, as the coin struggled at key support levels. Bitcoin was also facing some risk due to election uncertainty, they said.
But as of this article’s writing, Bitcoin trades well above $16,000 as the largest rally since 2017 has taken place.
Lucas Nuzzi, an analyst at Coin Metrics, recently broke down why he thinks the coin is rallying so far and so fast.
What has driven Bitcoin from $11,000 to $17,000?
Nuzzi first disputed the rumors that Bitcoin is being pushed up as a result of crackdowns on Chinese investors:
“Multiple outlets have reported that Chinese miners haven’t been able to sell their BTC in Nov. because of a regulatory crackdown. As I’ve covered previously, there is no on-chain evidence of that. In fact, the opposite seems to be taking place: BTC held by Miners is down in Nov.”
That’s roughly how much has been added to #Bitcoin‘s market cap over the past month.
There are 2 hypothesis of what’s driving this rally:
1) A huge supply chain disruption in China has led to a #bitcoinshortage
2) Institutions are FOMOing in
More data ?
— Lucas Nuzzi (@LucasNuzzi) November 24, 2020
The idea was that because China had seemingly targeted over-the-counter desks, platforms like OKEx, and many other ways to sell Bitcoin for fiat, miners were stuck holding their coins.
Nuzzi says this is most likely wrong.
Instead, he says that Bitcoin is being driven higher by institutional players, as made evident by the fact that there hasn’t been an increase in the amount of BTC on exchanges. Institutional players normally use over-the-counter desks or through algorithms, which may buy coins across exchanges, then aggregate them in one long-term address.
“The absence of an increase in BTC on exchanges is evidence that this rally is likely being driven by institutions. Institutional use of OTC onramps still results in positive price action, but with a limited on-chain footprint, which is what we might be witnessing.”
Ari Paul, CIO of BlockTower Capital, has shared a similar sentiment.
Commenting on what is driving the rally in a recent thread, Paul said:
“For most of this rally, we’ve seen a clear pattern of algorithmic style buying during US hours and flat activity during Asia hours. Those are largely HNWs (high net worth individuals) buying large amounts facilitated by algos (or via an OTC desk that uses algos).”
He said that anecdotally, he has been talking with these billionaires, and they purportedly say they are buying Bitcoin because they see it as a hedge against inflation and the depreciation of the traditional financial system.
Who are the billionaires?
While Paul and Nuzzi could not disclose who the billionaires who are buying bitcoin are, there are some that have publicly announced their exposure to this space.
For instance, a Mexican billionaire worth $13 billion recently put 10 percent of his investment portfolio into Bitcoin.
Stanley Druckenmiller, Paul Tudor Jones, and Bill Miller are also Wall Street investors that have put capital into Bitcoin over recent weeks.