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Bitcoin has once again reclaimed the USD 19,000 mark, climbing to a high of USD 19,349.0 yesterday and is presently trading at USD 19,169.00, marking the first rally over the last three years to see the crypto asset above the USD 19,000 mark.
The market talks allude to the current rally in Bitcoin as primarily being supported by whale accumulation, decreasing exchange supply, and large participation leading to an explosive volume trend.
Whale Accumulation
Every level that has been reclaimed by Bitcoin during the present rally has been well-supported by the formation of whale clusters, suggesting that the recovery in the asset and the current support zones in Bitcoin are well-supported by accumulation from large investors.
Image Source: © Kalkine Group 2020
Whale clusters are generally formed around the price level, where whales buy the cryptocurrency and keep Bitcoin in their wallet, which further acts as an accumulation signal.
Narrowing Supply
Apart from large institutional buying, another factor that seems to be encouraging the recent price rally is the drying supply of the digital currency. A large accumulation or a large bubble of unspent Bitcoin mainly reflects that large institutions are filling up their wallets.
In addition to the supply crunch created by whales, the continuous supply crunch in the blockchain over reduced reward on mining per block since the last halving day, is also adding to the supply squeeze, propelling the asset in action.
Interesting read: What is it about Bitcoin that is luring millennials?
The Volume Upsurge
Most importantly, the current rally is taking comfort from large participation.
Image Source: © Kalkine Group 2020
At present, market speculations around cryptocurrencies and uncertainty across risk assets in face of emerging wave of COVID-19 across the globe, seem to be lifting the sentiment around Bitcoin that was originally created for safeguarding one’s money during a turmoil.
Apart from that, the emerging opportunities in the cryptospace for generating additional alpha in the face of emerging decentralised finance application such as yield farming, are also attracting investors. This is leading to a surge in volume, which in turn is further attracting public participation.
A Word of Caution
While both the price and the volume trend are justifying the recent Bitcoin rally against the pair of global currencies at present, the accumulation volumes around the recent top are drying up with smaller whale clusters and lower accumulation volumes.
Apart from the decline in the accumulation volume at the top over the deposition of unspent coins by whales, the underlying volatility in Bitcoin is also surging with the BitMEX .BVOL index soaring to an annualised volatility level of 52.96 per cent.
(Data Source: BitMEX)
The surging annualised volatility and increasing unspent or accumulated coins around the upper level is further increasing the risk of whiplash, and large fluctuations in Bitcoin can not be ruled out.
