Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry.
This week we analyze the influence MicroStrategy and other institutional investors have had on Bitcoin as it reaches the psychological level of $50,000. Moreover, we dive into crypto’s alt season and how it was affected by Bitcoin’s recent milestone.
Bitcoin $50K Propelled by Institutional Activity
4,427 days after its genesis block, Bitcoin has managed to reach a price of $50,000 for the first time. Throughout this time, Bitcoin has taken a life of its own, progressing from Satoshi Nakamoto’s original peer-to-peer cash vision to anonymous darknet money to digital gold.
While these narratives have evolved throughout Bitcoin’s cycles, in one shape or another they have propelled the cryptocurrency all the way to the $50k milestone.
In terms of the current leading narrative, at IntoTheBlock we have extensively covered Bitcoin’s institutional adoption and Bitcoin as digital gold as two intertwined forces behind the current rally. This time, MicroStrategy is being pointed to as the responsible entity behind the spike to $50,000.
The business intelligence firm has announced plans to issue $600 million worth of convertible notes with the proceeds used to buy Bitcoin. By doing so, MicroStrategy is effectively issuing debt to add to its Bitcoin holdings, leveraging up their position.
This would be the second time Michael Saylor’s company has done this, which explains why the company’s stock (MSTR) has been trading almost as an unofficial leveraged Bitcoin ETF.
The correlation between Bitcoin’s and MicroStrategy’s stock prices has been remarkably strong with a 30-day correlation coefficient of 0.93 at the time of writing.
Beyond MicroStrategy, an increasing number of institutions are looking into Bitcoin. Within the past year institutional heavy weights such as BlackRock, JP Morgan, BNY Mellon and Morgan Stanley have made major steps towards providing Bitcoin investing with their own and their clients’ funds.
While they haven’t announced any buying activity yet, these and other corporations are likely already investing in Bitcoin. This is noticeable in Bitcoin’s transparent blockchain data. Moreover, several companies may choose to follow Tesla’s approach, buying Bitcoin privately and enjoying high returns after disclosing their purchase.
IntoTheBlock’s large transactions volume indicator aggregates the total volume sent in transfers worth over $100,000. Given the magnitude of this amount, large transactions volume act as a proxy to the level of institutional activity taking place on-chain.
The growth in large transaction volume has been astounding, increasing tenfold from a daily average of $8 billion in 2017 to $80 billion so far in 2021. Bitcoin also recently recorded its first week with daily large transaction volume of over $100 billion.
Alt Season Takes a Break
Although Bitcoin has taken most of the headlines in crypto, other crypto-assets often referred to as altcoins have been leading the way in terms of price performance in 2021. This has been reflected in Bitcoin’s declining market dominance as well as in the price performance of top 10 cryptoassets by market capitalization.
While several cryptoassets have more than doubled in 2021, we are observing DeFi and smart contract protocol tokens outperform in particular. This trend, though, slowed down for the most part on Feb. 16 as Bitcoin reached the $50K mark.
Put in aggregate, the total market cap of altcoins is currently at all-time highs, surpassing its previous high a few days ago.
With nearly $600 billion worth of value in altcoins, it is fair to say that there is much more to crypto than just Bitcoin. While the recent milestone of $50K halted the trend in altcoins outperforming, it is yet to be seen if alt season is stepping back or if it is just getting started.
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