4 min read
Bitcoin is once again approaching $55,000 in a renewed bull run, as the cryptocurrency’s total market cap retakes $1 trillion.
After Bitcoin's price hit an all-time high of $57,000 on February 20, it underwent a sharp correction, falling to $43,000 just eight days later. Since then it has recovered, gradually inching back up its current price of over $54,000. Bitcoin's recovery has seen the cryptocurrency’s total market cap once again surpass $1 trillion, a level it hasn’t reached since February 22.
The news follows a succession of announcements from companies that have added Bitcoin to their treasuries, including Norwegian multinational Aker ASA and Chinese app maker Meitu. Combined with widespread retail adoption, the institutional investments “are creating ideal conditions for the next leg up to $55,000, and beyond,” Jason Deane, Bitcoin analyst at Quantum Economics, told Decrypt.
Bitcoin’s total market capitalization has seen positive growth since February 28, when it fell to $815 billion, its lowest point since first reaching the $1 trillion mark on February 20.
According to AssetDash, Bitcoin is now the sixth-largest asset by market capitalization, trailing the likes of Amazon, Apple, and Microsoft in the top five. It might only be a matter of time until Bitcoin breaks into that category, argued Deane. As more Bitcoin is mined, Bitcoin’s market capitalization grows. “Over time, therefore, Bitcoin is less and less likely to drop below the psychologically important $1 trillion market cap,” he said.
Bitcoin sustaining its $1 trillion market capitalization could prompt further institutional investment, according to Curtis Ting, managing director of Europe at crypto exchange Kraken. “The trillion-dollar mark confers a sense of legitimacy and staying power,” he said. “It can almost be a prerequisite for allocation for some institutional heavy hitters.”.
Amidst the current mini bull run, large quantities of Bitcoin have been flowing out of exchanges. This has been happening since the start of 2021, but in recent weeks, the decline has been steeper than usual.
According to data from Glassnode, the sharp decline in Bitcoin on exchanges began on February 23.
Bitcoin on exchanges. Image: Glassnode
Between February 23 and today’s date, the total amount of Bitcoin on exchanges has fallen from about 2,490,000 to approximately 2,441,000. This represents a 2% decrease in a little over two weeks.
Whenever Bitcoin sharply falls off of exchanges, it offers clues about the current sentiment of Bitcoin investors; it tends to imply that investors are saving their Bitcoin for the long term, instead of looking to trade for short-term gains. This, in turn, might imply that Bitcoin holders expect the cryptocurrency’s price to keep rising.
Not only are companies like MicroStrategy expanding their already massive Bitcoin holdings, but large trades of Bitcoin continue on exchanges, implying that the cryptocurrency’s biggest investors are still active. Earlier today, 1,900 BTC (approximately $102 million) was transferred, according to Whale Alert, a website that tracks large cryptocurrency transactions.
But where do all of these bullish signals for Bitcoin leave the Grayscale Bitcoin Trust, which holds the vast majority of Bitcoin held by publicly traded companies?
Despite the bullish signs for Bitcoin, the Grayscale Bitcoin Trust (GBTC) Premium—which is the percentage above the spot price of Bitcoin that GBTC trades at—remains negative. According to Skew, a data analytics website for cryptocurrencies, GTBC’s Premium has not been positive since late February.
There are competing explanations for this; one suggestion is that it could be down to the launch of Bitcoin ETFs in North America. Notably, the North American Bitcoin Exchange Traded Fund brought in over $400 million worth of investment in its first two days.
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