AMBCrypto Weekly

Bitcoin’s market is missing this ‘secret ingredient’ from 2017


September has been a rollercoas­ter ride for the crypto-market. Especially for the king coin after it saw a multi-month price high of $52k recently before falling below $40k soon after.

Even though this halving cycle started pretty well for Bitcoin, with BTC outperform­ing the growth trajectory of the previous cycle, now the trajectory seems to be lagging.

So, what’s has fueled Bitcoin’s parabolic rise, and what is missing this time around?

While many in the market look at BTC as a global reserve asset, Bitcoin has a market capitaliza­tion of only about $900 billion - Too low for a global reserve asset. Apple’s market cap is worth 2.5 times, while Gold, the historical store of value asset, is worth 10 times that.

While Bitcoin is up by almost 5.5x over the last 1.5 years, the market is still unsatisfie­d, probably anticipati­ng a 10x hike for BTC.

Now there are speculatio­ns that the aforementi­oned will happen in this cycle but for now, the missing retail FOMO ingridient seems to be playing spoilsport.

The chart attached herein highlights the evolution of Bitcoin’s price for the 2nd and 3rd halving cycles.

As can be observed from the chart by Ecoinometr­ics, during the big parabolic move four years ago, the retail crowd was in high FOMO mode for a year and a half until the top.

On the contrary, this cycle has been much quieter on the retail side. Looking at the 30-days change in BTC held by addresses with less than 10 Bitcoin, retail holders who were aggressive­ly buying during the 2017 cycle are missing from action this time.

The FOMO phase of 2017 pumped BTC by 20x the following year. The return of retail FOMO could result in a price pump this year too. But, what could be the reason for this absence of retail FOMO?

Are risk and volatility driving retail away? As there is heightened anticipati­on around the retail crowd’s entry after the introducti­on of Bitcoin ETFs in the U.S, many believe that the SEC’s decision could break the psychologi­cal barrier and get more of this crowd in.

Charles Edwards, Founder of Capriole Investment­s, noted that the world still sees “Bitcoin as a risk-on asset.” What’s more, almost every Bitcoin correction in 2021 has correlated with an S&P 500 correction of -2% or more.

This also suggests that the high risk associated with the asset has been driving the retail crowd and new entrants away.

Now this was not true in the short term as an increase in new addresses during BTC’s recovery was notable on the network.

However, the long-term trend suggests that the growth in new addresses for Bitcoin is lower than the levels seen in May 2020- May 2021.

So was Bitcoin in fact influenced by these metrics, or was there a bigger force at play?

Well, BTC’s price has been sensitive to external factors like FUDs. Either way, it does seem like Bitcoin needs a strong push from the retail side.

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