Grayscale: Bitcoin Market â€˜Looks Like 2016, Before Historic Bull Runâ€™
Grayscale notes that long term holders are increasingly dominating the Bitcoin markets over short-term speculators, driving demand relative to supply.
A new report by crypto fund manager Grayscale Investments argues that the current Bitcoin (BTC) market structure â€œparallels that of early 2016 before it began its historic bull run.â€�
Grayscale predicts that demand for Bitcoin will significantly grow as inflation accelerates, highlighting the need for a scarce monetary commodity, bolstering the use-case of the cryptocurrency.
The report identifies several on-chain indicators showing growing interest in crypto, noting an increase in long-term holding over short-term speculation, amid historic lows for the number of Bitcoin held on exchanges.
Grayscale also notes that daily active addresses are at their highest level since 2017â€™s all-time highs.
Quantitative easing bolsters crypto
The report asserts that loosening monetary policy from the United Statesâ€™ abandonment of the gold standard onwards have created cycles of debt-fuelled asset bubbles followed by aggressive quantitative easing.
Grayscale notes the increasing dependence of the U.S. economy on quantitative easing (money printing) to stay afloat and that history shows itâ€™s an addiction difficult to quit.The S&P dropped 20% over three months in response to the Federal Reserve floating plans to reverse its monetary expansion in 2018.
Despite the US dollar remaining â€œstructurally strong relative to other currenciesâ€� the report asserts that investors who are wary of inflation amid the â€œunprecedented monetary and fiscal stimulusâ€� are searching for ways to protect against the ever-expanding money supply â€” bolstering the case for Bitcoin as a store of value.
Institutional appetites for Bitcoin grow
Grayscale cites the scoring system used by hedge fund manager Paul Tudor Jones to assess Bitcoinâ€™s attributes against cash, gold, and financial assets and determine the marketâ€™s growth potential.
Quoting Jones, the report noted:
â€œWhat was surprising to me was […] that Bitcoin scored as high as it did. Bitcoin had an overall score of nearly 60% of that of financial but has a market cap that is 1/1200th of that. It scored 66% of gold as a store of value, but has a market cap that is 1/60th of goldâ€™s outstanding value.â€�
â€œSomething appears wrong here and my guess is it is the price of Bitcoin,â€� Jones concluded.
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