After Volatile Week, Bitcoin Sends Bullish Signals Spurred By Institutional Investors

Bitcoin's price performance over the past week has drawn the attention of the wider financial industry as the leading cryptocurrency broke its all-time-high price of $19,783 on Monday, December 1. 

At the time of writing, Bitcoin is trading hands at $19,172 and is up 0.20%. Bitcoin's on-chain metrics are sending bullish signals with the number of active entities approaching 400,000 active per day, only 4% short of its previous all-time-high, data from Glassnode shows. The last time the network saw this many active entities was the bull run in 2017. The rise in active addresses could mean that adoption and use of the network is approaching the same level it was at three years ago. 

Notably, the number of new entities is low compared to the increase of active entities. This suggests Bitcoin's price rally could be driven by institutional investors rather than the retail market. These past months have seen significant developments in the institutional interest in Bitcoin. In September, business intelligence company Microstrategy made Bitcoin its primary reserve currency; in October payments giant Square announced a $50 million investment in Bitcoin; and in November PayPal announced it was launching cryptocurrency services for its 346 million users. 

The price of shares in the Grayscale Bitcoin Trust, which primarily caters to institutional investors, has also trended consistently upwards over the past six months. At the time of writing, GBTC is only $6 away from its all-time-high price of $29.66 reached in December 2017, according to data from Yahoo Finance. 

Adding to the evidence of growing institutional interest in Bitcoin, CEO of investment firm Black Rock, Larry Fink, warned that the growing popularity of Bitcoin and digital currencies could have "real impact" on the U.S. dollar's role in the global economy during a digital symposium hosted by the Council on Foreign Relations. He added that digital currencies like Bitcoin are making fiat money less relevant. 

"I'm not talking about for Americans, I'm talking about for international holders of dollar-based assets," Fink said. "Does [digital currencies] change the need for the dollar as a reserve currency, if there was a true digital currency that was separated from dollar-based assets?"

He tempered his comments by noting the relatively small size of the Bitcoin market compared to other markets. However, commented on the commitment of those invested and excited by cryptocurrencies.

On the bearish side of things, a metric called the entity-adjusted ASOL shows that the average age of coins being transacted is increasing. This means that older coins are being moved more than younger ones, which indicates long-term holders are cashing out. On November 28, the average age of coins transacted was 43.9 days, Glassnode data shows. The last time that metric was this high was in January 2018 when longer-term holders sold off their BTC after it dropped down from 2017 highs.

PC: Bitcoin entity-adjusted ASOL via Glassnode

With all of the volatility and ever-changing updates Bitcoin traders are constantly looking for the best opportunities for a buy-in. Chief Technical Officer at Glassnode, Rafael Schultze-Kraft, noted in a recent tweet that Bitcoin's hash ribbon, a metric used to predict price bottoms so traders can buy at ideal times, is signalling a strong time to buy soon. Hash ribbons assume there is a direct relationship between hash rate and price . 

"When hash rate recovers (30d MA crosses above 60d MA) and $BTC price momentum is positive, Hash Ribbon has given excellent entry points," Schultze-Kraft wrote. 

By Emily Mason

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