The recent surge in the bitcoin value has gained the attention of retail investors in the market of cryptocurrency. Several Cryptocurrency exchanges are witnessing a rapid increase in crypto market activities recently, as the crypto market is increasingly attracting a greater number of investors. Michael Bucella, a partner at one of the leading cryptocurrency investment firms, Block Tower Capital, believes that the market data indicates a recent increase of retail investors in the crypto market. To know more about this you can visit Crypto Engine website.
According to the Bitcoin bulls, the current rally of the cryptocurrencies is dissimilar to the one that occurred towards the end of 2017. During that time, bitcoin’s value rose dramatically to $20,000 before it shrunk to a low of $3,122 during the next year. The distinguishing factor of this rally, however, is the fact that this price rally is backed by institutional investors.
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We have examples of well-renowned investors such as Stanley Druckebmiller and Paul Tudor, who invested roughly $11.5 billion in bitcoins during last year. Also, Ruffer, a famous asset management firm based in the United Kingdom, added $747 million worth of bitcoins to its investment portfolio.
However, despite these positive indications associated with the bitcoins, some critics remain skeptical of the bitcoins. For example, a number of stockbrokers and economists such as Nouriel Rubini believe that bitcoins have no intrinsic value and find the cryptocurrency market unpredictable.
In spite of this skepticism, there are some investors, who want to invest in bitcoins and make gains during this rally.
Expected Volatility In Cryptocurrency Values
Data on Google Trends data illustrates that searches on bitcoin increased rapidly during the beginning of this month, similar to the increasing search trends on bitcoins during 2007.
For the first time, an aggregate market value of cryptocurrencies exceeded the $1 trillion mark last Thursday, courtesy bitcoins, which reached an all-time high of $40,000 per bitcoin and other cryptocurrencies.
In the interim, there has been an increase in traffic (increased signups and trading activity on online investment platforms). One such example can be taken from a platform, ‘EToro’, which saw a 61% increase in unique bitcoin holders up till the last week, as compared to a year before. There was also a 49% increase in another cryptocurrency, known as ether.
“There will be volatility, which is natural after the gains we have seen, but the long-term trend is clear,” Simon Peters, Cryptocurrency market analysts believe that the fluctuations are inevitable following the enormous gains. Simon Peters, a market analyst from eToro while talking to CNBC claimed that an increasing number of investors are adding crypto into their portfolios and that it is becoming more mainstream.
Revolut, a British financial tech company has gained 300,000 new cryptocurrency customers during the preceding month. The cryptocurrency with the greatest demand on Revolut was the bitcoins in the last 10 days, followed by other digital currencies ether and XRP.
There has also been a dramatic surge in the values of altcoins during the last week. These altcoins are usually believed to have a similar positive trend alongside bitcoins. This can be demonstrated by the performance of ether, which surpassed the $1,000 mark on January 4 this year.
According to Crypto-Compare, trading bulks of cryptocurrencies increased to a top daily value of $68.3 billion last Sunday.
Conclusion – Are We Moving Towards Mainstream Crypto Adoption?
A popular belief among cryptocurrency investors is that bitcoin is similar to the commodity, gold, hence they proclaim bitcoin as “digital gold,” which provides the investors with the opportunity to have a safe asset which also protects their investments from inflation. Policymakers at JPMorgan, the largest investment bank in the U.S. have set the bitcoin’s value target of $146,000 over the longer run, giving a lofty long-term price target of $146,000 for bitcoin, believing that the bitcoins will soon begin to contend gold as an “alternative” currency.
They do, however, agree that for this target to be reached, the volatility trend of the bitcoin’s value must drop significantly. They furthered that some signs showed an increase in retail investors’ interest directing towards growing amounts on platforms like PayPal etcetera.
PayPal, for example, introduced a feature in the United States in 2020, which allows its users to directly invest in cryptocurrencies. PayPal also aims to offer crypto-shopping across its huge network of retailers this year. This step by PayPal can be seen as an effort to encourage crypto activity and mainstream it across markets.
Data shows that bitcoin and other cryptocurrencies are becoming increasingly popular among retail investors in developing markets, such as Brazil, Spain and Argentina. Economists believe that although investors of all scales, both small as well as high, have been eyeing to invest in cryptocurrencies, price volatility may continue to be a threat for investors.
In the future, two factors are the greatest determinants of the cryptocurrency market – the approval of a bitcoin exchange-traded fund (ETF) and an IPO from Coinbase, says Charles Hayter, CEO at Crypto-Compare.
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