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Bitcoin’s Scarcity Feature Makes the Crypto an Aspirational Store of Value for Investors, says Fidelity Digital Assets

Fidelity Digital Assets, the crypto arm of investment firm Fidelity Investments found in its new report that many investors consider Bitcoin to be an “aspirational store of value”. The firm believes that the largest cryptocurrency has the properties of a store of value but has yet to be widely adopted.

Fidelity Digital Assets was launched in 2018 and has since set up Bitcoin custody and trading services for institutional clients.

In Fidelity’s most recent report, scarcity was mentioned as one of the key characteristics in reference to a good store of value for protecting against the depreciation of value in the longer term. With Bitcoin’s finite supply, it makes the cryptocurrency an aspirational store of value.

Low interest rates and global monetary and fiscal stimulus may have fueled the rate of awareness and adoption of cryptocurrencies. The United States recently offered its second stimulus check for COVID-19 economic relief. Treasury Secretary Steven Mnuchin has announced that the second stimulus payment is set to be administered in August.

With the excess money printing due to stimulus checks being paid out by US government, Gemini CEO Tyler Winklevoss advocated in a recent public tweet that Bitcoin is the way to go, and should definitely be invested in. He explained that with the US Federal Reserve’s plan of mass printing money, the “stage for Bitcoin’s next bull run is set.”

Fidelity argued that Bitcoin’s most novel innovations its unforgeable digital scarcity:

“Investors believe this property is foundational in understanding and appreciating Bitcoin. Before Bitcoin, multiple investors made important contributions in the quest to achieve digital scarcity, but were unsuccessful in enforcing it.”

60% of institutional investors said they could invest in crypto

Fidelity Digital Assets surveyed 774 institutional investors across the United States and Europe, and 80 percent of those who were surveyed found something appealing about digital assets.

The research was conducted from November 2019 to early March 2020 and is the second consecutive year that Fidelity Digital Assets has conducted this survey for US institutional investors and the first for European investors.

60 percent of the institutional investors surveyed believe that digital assets have a place in their investment portfolio.

Over a quarter of institutional investors surveyed by Fidelity Digital Assets are holding Bitcoin, while 11 percent have exposure to Ethereum.

36 percent of respondents, including 27 percent from the US and 45 percent from Europe say that they are currently investing in digital assets.

Why is the Bitcoin Price Correlation with the Stock Market Currently High?

It is important to understand Bitcoin’s correlations with the US dollar and traditional assets, then find a rule in the relationship, so we can predict the Bitcoin market by observing the performance of other markets, like stocks and gold.

Recent Stock and Crypto Market Bull Run Driven by Unlimited QE

There is no doubt that Bitcoin (BTC) and the overall crypto market has some correlation with the stock market, with market experts remarking that Bitcoin has been surging in tandem with traditional markets for awhile. Extensive research has already been conducted by market experts to study the seeming correlation of both markets.

In the article, we use a simple holistic method to observe the Bitcoin and crypto market correlation with the stock market movements of this year.

Nasdaq fell to 6,686.36 – its one-year low on March 18; The Dow Jones Industrial Average fell to 19,094.27, its one-year low on March 20; S&P 500 fell to 2,191.86, its one-year low at March 23. During this period of the COVID-19 market crash, Bitcoin also crashed to $3,800m its lowest point for the year on March 13 with Ethereum falling to its own yearly low of $86 on the same day.

On March 23, the day S&P 500 plunged to its low, was the day the most influential thing which occurred for the market. The Federal Reserve announced unlimited QE and set up several new lending programs, which meant enough money would be provided to sustain the market without boundaries or limits. The new money supply and its expectations have become the most important factor for both the stock and crypto markets which tend to rise when liquidity is made freely available.

Since then, both the stock market and the crypto market started a bull run. On Sept 2, the S&P 500 and Nasdaq reached a record high and on Sept 3, the Dow reached a record high. Ethereum reached a 2-year high on Sept 1. Bitcoin however was a bit different which reached a 1-year high on Aug 17, but this was influenced heavily by the announcement of MicroStrategy choosing Bitcoin as its primary reserve currency and investing $250 Million into the cryptocurrency.

It seems that the crypto market has now become even more sensitive to monetary policy, maybe due to the whole crypto market is much smaller than that of the stock market. Although crypto market performance can hard have an influence on the stock market, stock traders need to be aware of the more sensitivity of the crypto market. This can be an affiliated factor to observe.

Bitcoin and Cryptos as assets

Well, to understand the logic of Bitcoin and Cryptos as assets, we need to have an understanding of how our financial world currently operates.

The US dollar is the de facto world currency, thus the value benchmark for everything else, including assets and other fiat currencies. Lots of financial activities are based on US dollars like loans and settlements, which no doubt increase requirements and adoptions of US dollars (In a negative word, US dollar colonization). When the world lacks a supply of US dollars, everything else will fall in price in reference to US dollars. If the US dollar is stable, then the crypto prices may have become influenced by the monetary policies of other currencies. For example, there is very high inflation in Argentina, so the general public would like to exchange their Argentine pesos for Bitcoin, to reduce the risk of inflations.

Although Bitcoin and other cryptocurrencies can function like currencies, like payment and store of value, the market cap of cryptocurrencies is quite small compared to traditional finance, and most financial activities are based on fiat money. After all, you can’t borrow Euro, then pay back Ethers. Typically you need to pay back Euro. In other words, the financial inclusion of cryptocurrencies is not enough. If bitcoin and other cryptocurrencies replace more traditional financial functions, which may reduce the role of the US dollar and other fiat money, the relationships between Bitcoin and other fiat money will be different.

Daily price analysis of recent days

In recent days, the Bitcoin and crypto market correlation with the stock market is apparent.

On Sept 23, the S&P 500, Dow and Nasdaq each had their worst day in two weeks, S&P 500 closed at the lowest level since July. On Sept 23 Tesla stock dropped 10.34%, the Bitcoin price dropped around 2.4% while Ethereum price dropped around 7%.

On Sept 23, The S&P 500 rose 0.3%, the Dow rose 0.2% and Nasdaq rosed 0.37%. While Tesla stock rosed 1.95%, Bitcoin rosed around 5% and Ethereum rosed around 9%.

Mati Greenspan Shocked by Ripple’s XRP Token’s Circulating Supply Up by 26% this Year

Mati Greenspan, the founder of analytics firm Quantum Economics expressed his disbelief that the circulating supply of Ripple’s XRP token has increased by 26% this year, which makes Ripple’s recent bull run to $0.70 seem less conceivable.

The data and explanation by Greenspan caused a stir in his thread, as the data indicates that Ripple’s XRP should have had greater difficulty surging to around $0.70 on most exchanges in recent weeks with so much of the XRP supply available to the public.

Ripple’s XRP token has also seen a price surge of around 160% this year, with most of its price gains coming over the course of the last month—posting similar gains to Bitcoin. However, Quantum Economics founder Mati Greenspan appears shocked due to Ripple XRP’s circulation supply.

Greenspan posted the above chart from Messari on Twitter, writing:

“WTF XRP? Is this accurate? What gives? Circulating supply of XRP is up 26% this year according to @MessariCrypto.”

The huge increase in XRP’s circulating supply this year led the Twitter-sphere to question how Ripple’s token was able to surge to $0.70 with such a huge amount of XRP available to the public in in circulation as well as raised some of the same old questions about Ripple’s operating model.

Ripple has faced criticism for the perceived lack of decentralization in its XRP network, with some Twitter followers arguing that Ripple can release the XRP tokens at will.

These comments and Greenspan’s own explanation of the XRP supply drew the ire of one seemingly knowledgeable Ripple supporter called ‘Cricket’ who argued:

“NOT even close to how it works! The supply is fixed with the exception being 1 billion tokens per month that unlocks from escrow. Ripple has put 90% to 100% of those back into a 5-year escrow. The amount of XRP hasn’t even increased more than 4 billion in the last 3 years.”

According to Ripple’s own explanation, the company has locked 55 billion XRP (55% of the total possible supply) into a series of escrows. These escrows are on the ledger itself and the ledger mechanics, enforced by consensus, control the release of the XRP.

Per Ripple’s website:

“The escrow consists of independent on ledger escrows that release a total of one billion XRP each month over the next 55 months. This provides an upper limit on the amount of new XRP that can be brought into circulation. The amount of XRP actually released into circulation will likely be much less than this. Any additional XRP leftover each month will be placed into a new escrow to release in the first month in which no escrow currently releases.”

Reasons For XRP Bull Run and Drop

As reported by Blockchain.News, the Spark (FLR) Airdrop Program, which greatly benefits XRP holders could be a reason for the massive circulating supply, as FLR tokens could be received freely on a 1:1 ratio with XRP, officially launched on December 12.

The Spark (FLR) Airdrop Program, which greatly benefits XRP holders could be a reason for the massive circulating supply, as FLR tokens could be received freely on a 1:1 ratio with XRP, officially launched on December 12.

Due to this factor, on-chain data indicates that the XRP bull run leading up to the snapshot was caused by crypto investors increasing its stake to receive more spark tokens.

Although market traders were expecting Ripple’s XRP token price to soar to unfathomable heights following Ripple-funded Flare Networks’ airdrop, the cryptocurrency did the opposite – XRP’s price crashed instead.

The price plunge of XRP was attributed to one major explanation – following the airdrop, many traders dumped their XRP funds, sending the token price down by around 8% to $0.50.

As Bitcoin booms into new realms of price discovery past $23,000 pulling the rest of the crypto market with it, XRP price has also found momentum rising 8.5% this week, with 6.5% of the token price increasing over the last 24 hours to the current price of $0.60 where it is consolidating.

The XRP token price increase may be further buoyed by recent news from Ripple’s CTO David Schwartz, who shared encouraging statistics of the new XRP Ledger software build.

After merging the performance proposals of various software engineers to optimize the XRP ledger—Schwartz reports that the optimization of the XRP Ledger (XRPL) reduces memory consumption by about 50% and improves the synchronization speed.

While this is positive news for XRP holders, the XRPL upgrade must be audited and approved prior to implementation.

Bitcoin’s Liquidity is Vanishing From Exchanges and Supply Crisis is Near, Bullish for BTC Price

Bitcoin has seen multiple incredible rallies this year, recording new all-time highs. Bitcoin’s price has reached its all-time high of over $24,100 earlier last week, and has since consolidated. Bitcoin’s price plunged over 4.4% in the past 24 hours, slumping to $22,802, however, it has stayed well above its strong support level of $20,000.

Although Bitcoin’s price has retraced, MicroStrategy also recently announced that it has purchased more Bitcoin, this time—$650 million in BTC. MicroStrategy now owns more Bitcoin than the United States government, making it the fifth-largest holder of BTC.

As MicroStrategy has hoarded more Bitcoin, the CTO of Glassnode, Rafael Schultze-Kraft noted that Bitcoin is in a supply and liquidity crisis. According to the CTO, this makes it very bullish for the world’s largest cryptocurrency. The CTO explained:

“#Bitcoin is in a supply and liquidity crisis. This is extremely bullish! And highly underrated. I believe we will see this significantly reflected in Bitcoin’s price in the upcoming months.”

According to Schultze-Kraft, Bitcoin hodler-s are hoarding 14.5% of the circulating supply of the cryptocurrency. The amount of Bitcoin held in accumulation addresses is 2.7 million BTC, which are the addresses that have only received Bitcoins, and never spent the funds.

21 million may not be the actual total supply of BTC

Although Bitcoin ultimately has a total supply of 21 million coins, some of which have not been mined yet; considering lost coins, the CTO argues that the supply is way less than the grand total. He explained:

“21 milltion bitcoins? You wish. That’s just the hard cap – considering lost coins, the real number is much less. No one knows for sure how many, but estimations point to at least 3M. That’s 16% less circulating BTC available.”

Institutional demand on the rise

Institutional demand from Grayscale, MicroStrategy, Square, Ruffer Investments and MassMutual are slowly but efficiently buying up the Bitcoin supply. The CTO of Glassnode expects that many more institutions are on the move, “gradually, then suddenly.”

Grayscale Bitcoin Trust has added around 210,000 BTC in the past six months, while the total amount of Bitcoin mined in the past 6 months is of a lower number, around 185,000. This would cause a supply crisis, as Grayscale has bought up more Bitcoin than the amount issued.

Liquidity is vanishing from exchanges

Bitcoin’s supply on exchanges have been decreasing by 20% since January this year. Bitcoin has been moved from exchanges to long-term storage, including custodian wallets. Schultze-Kraft explained:

“Liquidity is vanishing from exchanges. We’re seeing the longest depletion of exchange funds. 14.4M BTC is held by illiquid entities – that is 78% (!) of the current supply. Illiquid entities spend less than 25% of the BTC they receive, acting as supply sinks in the network. Yes, only 12% of the BTC supply is liquid, according to this metric.”

Bitcoin Dominance to top out this month then drop

Cryptocurrency trader Michael van de Poppe expects Bitcoin’s dominance to top out this month. However, he believes that altcoins will take over, and Bitcoin’s dominance would start to drop afterward. He explained, while pointing to the below chart:

“I’m still expecting the Dominance chart of #Bitcoin to top out this month. After which, #Bitcoin calms down and the dominance will start to drop.”

One more ATH for Bitcoin?

The cryptocurrency trader said that Bitcoin could still make a new all-time high if Bitcoin remains stable above its support levels. He added:

“The crucial area for me on lower timeframes is the $23,400-23,600 area. If that breaks for #Bitcoin, we’ll be having new all-time highs before 2021. If not, I think the correction is due.”

78% of the Circulating Bitcoin Supply is Illiquid, a Clear Bullish Indicator as BTC is Being Hoarded

Bitcoin’s price has reached a new all-time high just a few days ago, and the world’s largest cryptocurrency has managed to stay trading in the $27,000 level. Bitcoin’s price is up by 3.3% in the past 24 hours, and 16.3% in the past week. In the past year, BTC is up by over 274%.

In the past week, Bitcoin has managed to record multiple all-time highs, starting on Dec. 25. On Christmas Day, BTC recorded a new high at $24,600 before reaching over $28,300 on Dec. 27. As Bitcoin’s price is climbing higher, its liquidity is slowly vanishing from exchanges, as investors are hoarding the cryptocurrency.

According to crypto on-chain analytics firm Glassnode, 78% of the circulating Bitcoin supply is illiquid, which means it is not quite accessible for buying. The analytics firm noted that this is an indicator of bullish investor sentiment, as many investors are hodling the cryptocurrency, reducing selling pressure. Glassnode stated:

“78% of the circulating #Bitcoin supply is illiquid and therefore hardly accessible for buying. This points to a bullish investor sentiment as large amounts of $BTC are being hoarded – which reduces sell pressure.”

Glassnode further pointed out that there is only 4.2 million Bitcoin in constant circulation, which are available for buying and selling. The analytics firm added that 14.5 million BTC are classified as illiquid, and Bitcoin liquidity is defined as the average ratio of received and spent Bitcoin across entities.

According to Glassnode, the recent Bitcoin bull run was partly due to the emerging Bitcoin liquidity crisis, as 1 million additional Bitcoins have become illiquid as investors are hodling in 2020. Glassnode added:

“The amount of liquid/illiquid #Bitcoin supply has a clear relationship with the $BTC market. Since 2017 the illiquid BTC supply has grown more than the newly mined supply – a pattern we have observed in the bull run of 2017 as well. Bullish, as long as this remains the case.”

Although this indicator follows the ones observed in the bull run of 2017, senior strategist at Bloomberg, Mike McGlone stated that there are more reluctant Bitcoin sellers this time. According to McGlone, Bitcoin would be less prone to steep corrections in 2021 than in 2017.

eToro Sees More Bitcoin Demands Than Supply, Set To Ration Bitcoin Sales

Popular social trading platform and cryptocurrency marketplace, eToro has noted that it has more demand for Bitcoin (BTC) than its current supply can support. The move has driven industry experts to believe that the cryptocurrency marketplace will begin to ration its Bitcoin sales, following an update sent by the platform to its users.

“The unprecedented demand for crypto, coupled with limited liquidity, presents challenges to our ability to support BUY orders over the weekend,” the Israeli-British company said in an email to customers. “In light of this, it may be necessary for us to place limitations on crypto BUY orders over the weekend.”

The shortage of Bitcoin to sell on the eToro platform comes following a month-long bullish run in the price of Bitcoin. As expected, the bullish run in the price of Bitcoin is a response to a massive accumulation of the premier cryptocurrency by investors around the world. While there have been intermittent dumps by many who seem to be taking profits as the coin traded above $42,000, many more bulls are accumulating the coin at a fast pace with expectations for even bigger surges in the near future.

The Role of Institutional Investors in Creating the Scarcity

The current dip in eToro’sBitcoin reserve may have been spurred by the continuous accumulation of the cryptocurrency by institutional investors who are beginning to embrace it as their reserve currency.

Amongst the most renowned of these big corporate investors is online payment giants PayPal and Square’s Cash App while business intelligence firm, MicroStrategy Incorporated also made a series of headlines with its bullish Bitcoin purchases. The latter firm has accumulated as much as 70,470 BTC at an average price of $15,964 according to an earlier report by Blockchain.News.

Other top institutions whose Bitcoin accumulation must have contributed to the BTC shortage include hedge funds Grayscale Capital and Tudor Investment Corp, backed by Billionaire investor Paul Tudor Jones.

Cryptocurrencies’ Fixed Supply Will Hinder Their Functionality as Actual Currencies, says UBS Economist

Cryptocurrencies have emerged as the new kid on the block in the financial scene, leading to divergent opinions. Paul Donovan, the chief economist at UBS Global Wealth Management, believes that cryptocurrencies hold a fundamental flaw as their supply cannot be slashed whenever demand flops in most cases.

Cryptocurrencies cannot be manipulated

Donovan argued that a “proper currency” should allow central banks to manipulate its supply so that an equilibrium can be restored whenever demand slumps. He noted:

“A proper currency can be a stable store of value, providing certainty that it will be able to buy the same basket of goods tomorrow as it buys today. That confidence is derived from central banks’ ability to reduce supply when demand is falling.”

Donovan alluded to the fact that cryptocurrencies cannot be influenced by switching off their supply. Notably, one of the factors that attract pundits and investors to the crypto sector is the autonomy created by cryptocurrencies as they shun governmental control.

Spending power

The chief economist also delved into the issue of cryptocurrencies’ spending power whenever their value plummeted. He explained:

“People are unlikely to want to use something as a currency if they’ve got absolutely no certainty about what they can buy with that tomorrow.”

The crypto market has nosedived in the last 24 hours after BitMex Research started a Bitcoin (BTC) double spend rumor of around $21. This false information sent Bitcoin price to a low of $28,953, and Grayscale investment saw this as the opportunity to buy the dip and added BTC worth $1.2 billion to its portfolio.

Bitcoin has, however, surged past the $30,000 mark and is trading at $30,581 at the time of writing. Ethereum has also been down by 14.02% in the last 24 hours and hovering around the $1,129 price at press time, according to CoinMarketCap.

6 Million Bitcoin Moved in the Last Six Months as 46 Million Americans Own BTC

After testing the $40K waters, Bitcoin (BTC) retraced to the $37K level as the top cryptocurrency shed some steam. BTC was down by 2.23% in the last 24 hours to hit $37.755 during intraday trading, according to CoinMarketCap.

On the other hand, Rafael Schultze-Kraft, Glassnode’s co-founder and CTO, disclosed that 6 million or 33% of Bitcoin supply moved in the last six months, whereas 12.5 million BTC were hodled during the same time frame.

Holding or hodling seems to be a favoured strategy in the Bitcoin market because coins are kept in cold storage or digital wallets for future purposes other than speculation.

Long-term holders have been setting the accumulation ball rolling because they bought more Bitcoin in the recent dip, which saw lows of $29,500 hit. Furthermore, BTC moved to strong hands because its supply shock was at levels witnessed at the $50-$60K range.

At the current level, on-chain data shows that a pattern of accumulation is still in play in the Bitcoin market.

46 million Americans own Bitcoin

Americans are among the global citizens setting a precedent in Bitcoin ownership. Reportedly, 46 million Americans own BTC, making the leading cryptocurrency one of the most held financial assets in the nation.

The United States is also emerging as the biggest beneficiary of the intensified Bitcoin mining crackdown by Chinese authorities because its share of hashrate recently skyrocketed to 16.8% from just over 4%.

Bitcoin whales keep on ramping up their positions

Bitcoin whales seem not to be relenting on their quest of purchasing more coins, given that they continue ramping up their positions.

According to on-chain metrics provider Santiment:

“Bitcoin large addresses continue to show interesting patterns in how supply distributions are changing over time, and the amount of addresses fluctuating in each tier. 10-1,000 BTC addresses (144.97K addresses) are at their highest point since April.”

With the holding culture in play in the Bitcoin market, whether this will prompt an upward momentum remains to be seen.

Bitcoin Stands at Crucial Level of Support at the $45K Region

Bitcoin (BTC) recently experienced an uptick, which made the leading cryptocurrency breach the psychological price of $40K. This upward momentum saw BTC scale above the $46,000 level.

Nevertheless, Bitcoin was down by 1.83% in the last 24 hours to hit $45,339 during intraday trading, according to CoinMarketCap. Market analyst Michael van de Poppe believes that Bitcoin has retraced to a crucial level of support at the $45K area.

Another analyst tweeting under the pseudonym CryptoHamster added:

“Bitcoin broke the 200D MA. The price is facing the resistance of the previously built sideways area with a large volume. One could anticipate the rejection from here initially, but if BTC keeps testing it, we might see the further evolution of the bullish scenario.”

Therefore, if Bitcoin holds this area, a bullish setup will be formed.

Strong hands hold 76.8% of BTC supply

On-chain analyst Will Clemente disclosed that 76.8% of Bitcoin’s supply is held by strong hands or investors who hold BTC for long-term purposes other than speculation.

Long-term holders have emerged to be significant players in the Bitcoin ecosystem. For instance, they set the accumulation ball rolling by purchasing more BTC, evidenced by their heavy buying during the recent dip of $29.5K.

The dominance of large Bitcoin transactions surge by over 65%

According to crypto analytic firm Glassnode:

“The dominance of large Bitcoin transactions (> $1M) has risen from 30% in 2020, to over 65% in 2021. This reflects a growing share of institutional interest, and capital being transferred across the Bitcoin network.”

Institutional investment played a pivotal role in making Bitcoin attain an all-time high (ATH) price of $64.8K in mid-April. Therefore, an uptick in institutional interest in the Bitcoin network is bullish.

Meanwhile, Bitcoin’s supply ratio on exchanges recently hit a 26-month low indicating that holders are still confident in the leading cryptocurrency.

Ethereum Whales’ Accumulation Mode Continues as Price Tops $3,200

Days after the London Hardfork went live, Ethereum (ETH) has been experiencing an uptick in prices as the second-largest cryptocurrency is set to become deflationary based on this upgrade.

ETH was up by 16.52% in the last seven days to hit $3,228 during intraday trading, according to CoinMarketCap.

Ethereum whales are not relenting in their accumulation quest because addresses with more than 100k coins now hold 43.7% of ETH supply, as acknowledged by Santiment. The on-chain metrics provider explained:

“Ethereum whale addresses aren’t stopping their accumulation as prices hover above $3,100. Three years ago to the day, addresses with 100k+ ETH owned 35.8%. Today, they own 7.9% more of the second market cap asset’s total supply. There are 1,338 of such addresses.”

These statistics show that Ethereum whales’ accumulation has been on an upward trajectory because they owned 35.8% of ETH supply three years ago compared to the current 43.7%.

Is Ethereum eyeing the $4,000 level?

According to market analyst Ali Martinez:

“The IOMAP shows that Ethereum could run to $4,000 if ETH manages to close above $3,235. A rejection from this supply barrier could lead to a spike in selling pressure that pushes ETH to $2,700.”

Martinez believes that a run to the $4,000 level is relatively open because Ethereum currently stands at the zone, which it has to break for more upward momentum to be attained.

On the other hand, Ethereum options open interest recently surged to a two-month high.

ETH was recently boosted after the London Hardfork or EIP 1559 was implemented because a base fee for every transaction carried out will be set. As a result, giving all a fair opportunity.

Furthermore, users who may wish to conduct their transactions faster than the standard provisions of the network can add a tip to validators to fast-track their transactions. Part of this tip is burnt, helping to improve the monetary policy of the Ethereum network as a whole and making it deflationary.

With ETH options open interest topping $4 billion, whether this will boost Ethereum’s journey to the $4,000 level remains evident.