When Will Retail Investors Participate in the Ongoing Bitcoin Rally?
Cryptocurrencies are making headlines with a market cap surpassing $1.59 trillion on December 6th. Bitcoin and Ether are leading the charge, but despite this, everyday traders seem hesitant to join in. Let’s explore the reasons behind this cautious approach.
Cryptocurrency Market Overview:
On December 6th, the total market cap hit a 19-month high at $1.59 trillion. Bitcoin’s weekly gains were impressive at 14.5%, making it the world’s ninth-largest tradable asset. However, everyday traders are not rushing in, and this has sparked discussions about the possible reasons for their hesitation.
Some think it’s because of inflation and less interest in borrowing money, as interest rates are still high at over 5.25%. Rajat Soni’s post may have made things sound more dramatic, but the main idea was still true at its core.
Economic Indicators and Investor Caution:
Various U.S. economic indicators, like wages, salaries, and household net worth, are at record highs. However, analyst Ed Yardeni suggests the “Santa Claus rally” might have happened earlier this year, with the S&P 500 gaining 8.9% in November. Despite positive economic signs, investors are playing it safe, holding around $6 trillion in “dry powder” in money market funds.
Did Everyday Traders Miss Out?
Determining if everyday traders missed recent gains in Bitcoin and Ether requires looking beyond Google Trends and app download rankings. Indicators like the Tether premium in China, Google search trends, and derivatives markets offer insights into everyday trader participation.
Tracking Everyday Demand:
The Tether premium in China is a valuable gauge of everyday demand. On December 5th, the USDT premium relative to the yuan reached 1%, a modest improvement. However, it remains within the neutral range, suggesting no significant surge in everyday activity.
Google Trends and Everyday Interest:
Google search trends for “buy Bitcoin” and “buy crypto” show a stable pattern over the past three weeks, with a 90-day index around 50%. This data contrasts with significant surges in Bitcoin and S&P 500 prices, indicating that everyday interest is considerably lower than in 2021.
Derivatives Markets and Everyday Participation:
Looking into derivatives markets, particularly perpetual futures, provides more insights. Positive funding rates, indicating greater demand for leverage by buyers, currently fluctuate between 0.2% and 0.4% per week. However, during bullish periods, this metric can surpass 4.3%, which is not the case for the top seven coins in terms of futures open interest.
Elusive Everyday Participation:
The influx of everyday participants in the current cryptocurrency cycle remains elusive, with new entrants not displaying excessive optimism. Analysts point to trends in the Coinbase app, but it’s crucial to consider the regulatory scrutiny faced by Binance. Existing everyday traders may have shifted from offshore exchanges to Coinbase rather than indicating a new wave of crypto enthusiasts.
What’s Next for Bitcoin?
The recent surge in Bitcoin’s value is attributed to factors like decreasing interest rates and growing anticipation for the potential launch of a Bitcoin ETF in the United States. This positive momentum reflects a shift in market sentiment, drawing renewed interest in the cryptocurrency.
As Bitcoin continues its ascent, influential Bitcoin advocate Max Keiser predicts the occurrence of a ‘God Candle,’ foreseeing a remarkable $100,000 increase in Bitcoin’s price.
The term ‘God Candle’ refers to a candlestick pattern signaling an unexpected and significant price surge, often occurring rapidly.
Keiser asserts that the God Candle is currently in play, poised to have a groundbreaking impact on Bitcoin’s price, creating excitement and speculative anticipation in the market. His confidence in this prediction is rooted in insights into the potential approval of a spot Bitcoin ETF and the upcoming Bitcoin Halving event projected for the second quarter of 2024. The approval of a Bitcoin ETF in the U.S. is eagerly awaited, as it could make Bitcoin more accessible to mainstream investors. The combination of this anticipation and the approaching Bitcoin Halving event contributes to a sense of optimism within the crypto community, suggesting that Bitcoin’s ongoing rally may signify the start of a sustained bull market.
Despite soaring cryptocurrency prices, everyday traders appear cautious. Understanding these dynamics requires a holistic analysis of economic indicators, search trends, and derivatives markets. Monitoring these factors will be crucial in gauging the true extent of everyday involvement in this dynamic market as it continues to evolve.
