Are institutions behind the latest BTC rally?

16 Jun, 2019
by David Robb
Are institutions behind the latest BTC rally?

A recent report by a JP Morgan analyst has put forward a possible explanation for the most recent Bitcoin rally. It suggests that it could well be explained by new institutional investment entering the market.

As explained in a ZeroHedge article, JPMorgan's Nikolaos Panigirtzoglou points out that there has been a significant increase in reported trading volumes of Bitcoin and other cryptocurrencies over the past few months, rising to levels comparable to the peak of the last bull market in late 2017/early 2018. Despite these figures, the BTC price isn't still anywhere near the levels it saw back then.

A possible reason for this could be that crypto exchanges are not a good source of data on what's really happening in the market. Panigirtzoglou's report claims that "Bitcoin trading volumes on many cryptocurrency exchanges are significantly overstated by 'fake' trading, e.g. exchanges reporting volume of trades that never took place or via wash trades, and that genuine trading volumes could be around 5% of the reported total". 

However, this seems to swing the pendulum too far in the opposite direction. What could make up the difference is BTC trading that doesn't take place in conventional retail exchanges. Institutions are starting to get involved with BTC in a major way, and the report claims that "the importance of the listed futures market has been significantly understated."

Institutional money tends to be much less fickle than retail investment, and many are claiming that this new rally could be less prone to the volatility that saw Bitcoin plummet from its $20,000 peak last time around. 

Although this assessment may be correct, the community isn't keen to credit anyone at JPMorgan with having expert knowledge of the crypto market. Popular trader Alex Kruger pointed out that he and many others in the community knew that institutional money must be behind the rally. He also took the opportunity to criticize a previous report made by Panigirtzoglou about the relationship between mining cost and BTC price.

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