With Bitcoin trading above $ 23,000 emerging to become the new normal, Bitcoin organizations and whales are driving price discovery into territories not previously charted on the price charts. However, this is no shock to maxis and chain analysts, with Willy Woo recently quoted saying,
“$ 100,000, I would rate as very conservative, probably too conservative. I would rate $ 200,000 up as a sweet spot. $ 300,000 is not out of the question, and I am not ridiculing $ 1,000,000. “
According to Willy Woo, there is the potential for supply shocks with more and more institutional buyers entering the market. It is vital for retail traders to identify when and where in the Bitcoin market cycle, organizations took over the price of Bitcoin and more importantly, supply spot exchanges.
Looking at the Bitcoin price chart, back in 2018 or 2019, neither technical analysts nor traders could have seen through it, unless they had studied institutionalization and its implications on price discovery. Ideally, they would not know the difference between a bull market and a bear, before riding through it, as the chart has been fine for most of 2020.
In fact, in 2019, there was a cliff on the Bitcoin price chart, one where the price dropped from $ 6000 to $ 3000, a development that marked the beginning of the year. Around this bottom, Bitcoin changed hands several times, or as crypto-Twitter likes to put it – “weak hands were shaken out.”
Based on data from CoinMarketCap and the price chart attached here, there was a notable discrepancy between investor expectations and the daily price on simultaneous exchanges for most of 2018 and 2019.
In 2019, when the price climbed up from $ 4000 to $ 14000, it could be directly attributed to the investment flow by institutions, according to Willy Woo. If retail traders kept an eye out for the change in hands and the rapid acquisition of Bitcoin by organizations like Grayscale, the 2020 bull run would have been better received. The current sale walls on exchanges like Binance and Huobi signify an old 5Y-7Y supply that is now operational.
Instead of supporting further price discovery and high demand, more retail traders are leaving the network. This can be a momentary or strategic move, however, this is bound to have an impact on the distribution of Bitcoin supply. Institutions may acquire the rest of the 2.5 million Bitcoins directly as the price is discovered beyond $ 23,500.
If supply is controlled by institutions, sales would have a direct impact on random exchange prices, and a supply shock could potentially shake further weak hands.
The institutionalization that has led to the 2020 phase, and has blown upwards, has changed the direction of investment flows, especially as crypto has fewer than 100 million people and far fewer institutions. However, the growth is neither natural nor proportional when looking at the chart since a lot of buying happened around the flood of Ponzi schemes back in 2017.
While Ponzi schemes may have done more harm than good to Bitcoin’s reputation and mainstream adoption, it is interesting to note how failed Ponzi schemes and ICOs have been crucial to the institutional price rally and institutionalization.