Bitcoin
Bitcoin has actually only taken 2% of gold market cap, new data suggests
Bitcoin (BTC) has much further to go to suck away even 10% of gold’s market cap than old data claims, a popular indicator reveals.
Highlighting numbers from Bitcoin’s realized cap on Jan. 12, Ki Young Ju, CEO of on-chain analytics resource CryptoQuant, said that the cryptocurrency had taken far less of gold’s market cap than previously claimed.
Realized cap cools Bitcoin numbers game
As Bitcoin grew in price towards the end of 2020 and hit all-time highs of $42,000 last week, a narrative appeared that investors were swapping gold for BTC, and that Bitcoin had thus taken around 7% of the precious metal’s market cap of $10 trillion.
Using realized cap, which calculates market cap in a different, more precise manner, the real “theft” from gold actually stands at 2%, says Ki.
Unlike market cap, the metric measures the price at which each bitcoin last moved, and excludes coins on centralized custodial exchanges, thus excluding speculative movements. The total is also kept lower by long-lost BTC, which will have last moved at likely far lower prices than today’s.
“People said $BTC took 7% of the Gold market cap. No, it’s not. There are unclaimed, unreachable, and lost Bitcoins. Based on the realized cap, it’s just 2%,” he tweeted alongside a realized cap chart.
“If digital gold replaces 10% of the $XAU market cap then the $BTC price would be $154k.”
Bitcoin’s realized cap stood at $227 billion on Wednesday, while its standard market cap was $645 billion.
BTC performance beats gold fair and square
Despite its arguably slower progress, Bitcoin is still faring extremely well against gold, which failed to recoup its losses in BTC terms even as BTC/USD dropped to near $30,000 on Monday.
Bitcoin bought 18.6 ounces of the precious metal at publishing time, according to data from Buy Bitcoin Worldwide.
Gold posts strong gain on Bitcoin collapse. pic.twitter.com/sqNiWBDJIF
— O₿iWan (@ObiWanKenoBit) January 12, 2021
Bitcoin’s correlation to gold was trending towards zero this week, down markedly from highs seen in October.
Previously, commentators noted that Bitcoin has already transferred all of gold’s $10 trillion market cap in its 12-year history.
As Cointelegraph reported, however, criticism from gold fans remains, with gold bug Peter Schiff casting doubt on both Bitcoin’s status as a safe haven and institutional investors’ interest in it.
“Bitcoin traded near $42K on Friday and near $30K on Monday. An asset that drops 28% over a weekend is not a safe-haven, a store of value, or a viable hedge against #inflation,” he tweeted this week.
“If you want to gamble on #Bitcoin, buy Bitcoin. But if you want to hedge against inflation buy #gold.”
Bitcoin (BTC) hit fresh local lows on Feb. 26 despite what appear to be ongoing largescal institutional buy-ins.
New lows despite bullish signs
Data from Cointelegraph Markets and TradingView showed BTC/USD $44,150 during Friday trading — last seen two weeks ago — after a rebound to $50,000 fizzled overnight.
Bitcoin had seen good news in the form of asset manager Stone Ridge planning to become the first Bitcoin mutual fund, along with major corporate purchases from MicroStrategy and Square. These, however, failed to stem the bearish mood, with 24-hour losses standing at near 10% at the time of writing.
“Everyone wants 42k, so we probably just go up now or drop to 38k on a savage wick. Crowd rarely gets what it wants,” popular trader Scott Melker summarized on Twitter.
Cointelegraph Markets analyst Michaël van de Poppe had prevously forecast ultimate support lying at around $38,000 should Bitcoin not find buying volume at higher levels.
“Bitcoin doesn’t look too great for a bull continuation coming period,” he said on Thursday.
“Still, retest at $54,000-55,000 could happen, but I’m cautious when we get there. If we lose $47,000, then I’m looking at $42,000-44,000 and $37,000-38,500 next. That should be the low.”
Institutions are still buying: data
Data from the professional trading arm of U.S. exchange Coinbase meanwhile showed another major tranch of BTC leaving its books for a private or custody wallet — something which traditionally suggests institutional buying.
The latest spike of 12,100 BTC is the second this week, such large volumes themselves being a rarity, a fresh chart from on-chain monitoring resource CryptoQuant confirms.
The so-called “Coinbase premium,” the difference in price between Coinbase and Binance, flipped to negative for several brief moments as Bitcoin dropped to nearly $44,200.
As Cointelegraph reported citing CryptoQuant, whales appear to favor buying at current price levels, with the result that a dip much below $44,000 would be “unlikely,” according to CEO Ki Young Ju.
On Thursday, Ki described the last Coinbase Pro spike, which occurred at $48,000, as “the strongest bullish signal” he had yet seen in Bitcoin.
A relief bounce in the Bitcoin market Thursday did little in offsetting its prevailing correction bias as its price slipped inside a critical support area.
The BTC/USD exchange rate touched an intraday low of $45,000 during the early Asian trading session Friday, down by up to 22.90 percent from its record high established earlier this week. Traders held on to $45,000 and the levels around it as support, given the range’s historically-verified capability of capping downside corrections.
Bitcoin Support Confluence
Nonetheless, the latest downside move appeared much stronger, raising possibilities that bitcoin would extend its decline further lower.
“[I’m] keeping an eye on the $44ks — tested once, but a break below there likely sends price back down to $40k,” alarmed Josh Rager, the co-founder of BlockRoots.com. “And if price makes way to $40k — you know it’s going to wick in the mid to upper $30ks. [It] could bounce here — but going to take it level by level/day by day.”
Bitcoin is down over 22 percent from its record high. Source: BTCUSD on TradingView.com
Mr. Rager’s downside target at $40,000 converged well with the blue wave in the chart above.
It represents the 50-period simple moving average (50-SMA) on Bitcoin’s daily chart. The wave has underpinned the cryptocurrency’s uptrend throughout 2020. Many instances showed the price breaking below the 50-SMA but only to reclaim the wave later to confirm the market’s bullish bias.
Analyst Willy Woo’s floor model—which has zero evidence of turning false—also alerts about hard price support near $39,000. Mr. Rager agreed that Bitcoin could fall to $40,000 in the coming sessions while forming a wick towards $38,000-39,000. The cryptocurrency may resume its uptrend at a later stage.
Psychological Price Floors
Bitcoin rallied by almost 100 percent in 2021 to hit an all-time high above $58,000. Its gains appeared on growing institutional adoption, led by Tesla’s $1.5 billion investment into the cryptocurrency and its intentions to use the decentralized token as a form of payment for its services and products.
This week, mobile payment app Square announced that it had also upped its Bitcoin reserves by investing another $170 million into the cryptocurrency. The Jack Dorsey-headed firm had added $50 million worth of bitcoins to its balance sheet late last year.
Nasdaq-listed business intelligence firm MicroStrategy also took a similar but heightened call to increase its bitcoin exposure. It put $1.06 billion to purchase another stash of the digital assets, pushing its total reserves from around 71,000 BTC to above $90,500 BTC.
Square has 5% of their balance sheet in bitcoin.
Tesla has 8% of their balance sheet in bitcoin.
Microstrategy has 95%+ of their balance sheet in bitcoin.
Who is next?
— Pomp 🌪 (@APompliano) February 24, 2021
All the firms revealed the average rates at which they purchased Bitcoin. For Tesla, it was between $35,000-$40,000. MicroStrategy’s latest investment into the Bitcoin market arrived when it was trading above $52,000. Meanwhile, Square stated that it purchased the cryptocurrency at a mean price of a little over $51,000.
That also increased Bitcoin’s ability to reclaim levels above $50,000 in the coming sessions, given the corporates’ high-profile exposure in the cryptocurrency above the said levels.
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