In the past couple of weeks, the Bitcoin (BTC) price has resurged after months of apparent monetary stagnation. Since July 23, the value of a single Bitcoin has risen by around 20%. Not only that, after trading sideways since its supply squeeze in early May, the premier currency broke through its all-important $10,000 psychological threshold, thus leading many casual investors to once again jump back on the crypto hype train.
Bitcoin’s recent price hike has also resulted in a retail boom, with a whole host of trading platforms across the world reporting sky-high Bitcoin trading volumes. As a result of this bullish market activity, Joe DiPasquale, prominent crypto pundit and CEO of BitBull Capital, recently stated that this latest surge is once again building up an element of FOMO, or fear of missing out, among casual investors who believe they might be late to the crypto party.
Echoing a somewhat similar sentiment, Joshua Frank, co-founder and CEO of The Tie — a provider of data aggregation tools — commented to Cointelegraph that historically speaking, volatility has driven significant new waves of interest and investors into Bitcoin, particularly with the most recent run from $9,000 to $12,000. Frank outlined that the 30-day average number of Twitter users discussing Bitcoin has spiked from 24,000 to 30,000 over the last two weeks, adding:
“Bitcoin hit its highest daily tweet volume level since June 26th 2019 in the wake of the Twitter scam on July 16th. While it isn’t clear that the run-up had any correlation to the scam, we have seen in the past that, all else equal, the more users talking about Bitcoin the better the asset performs.”
Denis Vinokourov, head of research at BeQuant, a crypto exchange and institutional brokerage service, told Cointelegraph that since volatility picked up, his firm has observed trade volumes jumping by about 40% from where daily summer averages were prior to this recent rally.
Top cryptocurrencies are mobilizing fast
Cointelegraph also discussed the recent market action with Adam Vettese, market analyst at cryptocurrency trading and investment platform eToro. He pointed out that since crypto prices began rallying at the end of July, the number of crypto positions being opened increased by 115% versus the previous fortnight. Over the same time period, trading volume in crypto instruments also increased by 162%. The number of Bitcoin positions opened increased by 222% with a 421% rise for Ether (ETH) and 170% for XRP.
Christophe Michot, sales director at digital asset trading platform CrossTower also claimed that over the course of the past couple of weeks, his firm has observed a 219% increase in daily trading volume as well as a 66% rise in the number of daily average signups over the same time period.
Michot also highlighted that since the pullback in mid-March, the market as a whole has experienced a strong bullish reversal. For example, Bitcoin has regained over 210% and Ethereum bounced by 364% since the “Black Thursday” crash of March 11, 2020.
The crypto market rally has come on the heels of positive news such as the U.S. OCC’s recent clarification permitting the custody of Bitcoin by banks as well as the announcement of another stimulus package to be issued by the Fed in the near future, which some experts believe will continue to devalue the U.S. dollar.
People’s sentiment regarding crypto is soaring
On July 12, Bitcoin’s long-term sentiment score — a comparison of investor sentiment over the last 50 days vs. the prior 200 — hit a new all-time high leading up to Bitcoin’s run at the end of the month. Similarly, the daily sentiment score represents a measure of how positive or negative conversations on Twitter have been about a particular coin over the last 24 hours vs. the previous 20 days.
The daily sentiment score of investors has remained positive (above 50) every day from July 20 to Aug. 1. Even after Bitcoin failed to surpass the $12,000 mark and retraced by $1,400, investor sentiment fell below 50 for only about 28 hours, alluding to the fact that investors have remained extremely positive on Bitcoin.
Frank told Cointelegraph that approximately 68% of all tweets discussing the long-term financial future of Bitcoin over the past month have been positive. Similarly, Michot added that according to CrossTower’s media data, the market is in the early stages of a new bull run, adding: “Another positive sentiment is coming from family offices and other traditional advisory firms. These firms are seeing increased demands by clients seeking exposure to the cryptocurrency markets.”
Since the start of the recent crypto surge, there has been a spike in the use of stablecoins along with a clear increase in demand for other DeFi-related tokens. John Todaro, director of institutional research at TradeBlock, a trading platform for institutional investors, told Cointelegraph:
“Stablecoin circulating supplies have increased substantially over the past 6 months, with Tether seeing around $10bn in deposits and USDC seeing over $1bn. This may seem small, but those deposits make Circle and Tether, to an extent, defacto banks with sizable customer deposits. $5–10 bn in customer deposits is equivalent to a small to midsize U.S. commercial bank.”
Todaro added that while merchant adoption still remains limited for stablecoins, there is real demand for these assets in developing economies as well as those with political instability, such as in Latin America, parts of the Middle East, and to an extent, Hong Kong. He also noted that derivatives volumes have spiked recently (at Deribit, CME and others), but a large portion of that is tied to price action, as increased volatility almost always tends to drive increased trade volumes.
Vinokourov believes that the recent spell of low volatility and thin trading volumes has evolved into one of the busiest periods for digital assets in recent memory: “Volumes on spot and derivatives venues spiked higher as Bitcoin traded over $11,000, and other large cap assets followed in lockstep.” Vinokourov further opined:
“Particular attention ought to be paid to the evolution of Ethereum volatility profile which, despite coming off recent highs, remains elevated relative to Bitcoin. This suggests more potential volatility for the second largest cryptocurrency.”
BTC Fear and Greed Index’s correlation with its price
Another aspect worth exploring is the relationship that may or may not exist between Bitcoin’s Fear and Greed Index and its price, and if the metric can suggest a possible price direction. Expounding his views on the matter, Todaro opined that the index is calculated based on a few variables that are, to an extent, affected by price, forcing the index to follow certain niche inputs such as the velocity of price gains, all-time high prices and price momentum, among other parameters.
For instance, if there is a large crash in the market, volatility will increase, and the index will conclude that the market has high fear. In doing so, the index ultimately follows the price. Additionally, the index captures Google trends, with high interest in positive crypto-related terms meaning high greed. Therefore, Todaro believes that the index can be used to make current and future investment decisions:
“While the price of Bitcoin isn’t back to all-time highs, this was the fastest price gain over a 10-day period in its history, which would read extremely greedy, and so maybe it is time to sell and wait for a pullback to re-enter.”
Another correlation worth exploring is the one between Bitcoin and the S&P 500. According to Quantum Economics founder Mati Greenspan, the previously high correlation between crypto-assets and the S&P 500 has now decreased:
“We can clearly see earlier this year, where the correlation spiked up to 0.6 due to the multi-asset early-pandemic sell-off. By now, however, we’re once again below 0.2, which basically means that there is no correlation on a day-to-day basis anymore.”
Furthermore, Greenspan noted that even a peak of 0.6 only represents a very loose correlation, adding, “Many stocks have a very high correlation with each other, usually above 0.8 even if they’re in completely different industries, and many altcoins are similar.”