Why does Bitcoin remain relatively stable after thunderstorms such as FTX?A recent report by Morgan Stanley's analyst SheenaShah team analyzed the reasons behind this.She believes that the main reason is that Bitcoin prices have plummeted this year, trading activity is surprisingly low, and currently 78% of Bitcoin has not been traded in six months, setting a record high in history
Why does Bitcoin remain relatively stable after thunderstorms such as FTX?
A recent report by Morgan Stanley's analyst SheenaShah team analyzed the reasons behind this.
She believes that the main reason is that Bitcoin prices have plummeted this year, trading activity is surprisingly low, and currently 78% of Bitcoin has not been traded in six months, setting a record high in history. According to Morgan Stanley, this means that these bitcoins have not been sold in a bear market, possibly due to the average breakeven purchase price of approximately $45000 for anyone who purchased/received bitcoins 1-1.5 years ago.
The team believes that:
This also means that the "marginal" price of Bitcoin is determined by decreasing trading volume, which significantly reduces market liquidity and increases volatility.
Since the beginning of this year, Bitcoin has accumulated a decline of over 65%
On the other hand, retail investors may only be more patient than institutions, and they see that cryptocurrencies can soar every time the Federal Reserve relaxes monetary policy, while holders are just waiting for the next inevitable quantitative easing policy from the Federal Reserve and the accompanying market panic.
Due to the peak of the number of retail investors in the fourth quarter of 2021, their trading has basically exited the market. Compared to 2017-2018, Morgan Stanley observed that institutions are now the main traders, while retail investors played a more important role at that time.
This means that cryptocurrency has become an extreme leverage bet for central bank policies in institutional trading: buying when loose, selling when tight (and short). In fact, as Morgan Stanley pointed out:
Bitcoin has experienced multiple bull and bear markets before. Since 2013, the rise in the price of Bitcoin has been following the growth of the legal tender supply, and its correlation with the US stock market is also increasing.
In addition, some observers believe that although there are many factors that encourage investors to stay away from risky assets, including high inflation, the energy crisis in Europe, the continued bottleneck of the global supply chain, and even the difficulty in mining Bitcoin, the long-term holders of Bitcoin seem more confident than ever in the long-term value proposition of Bitcoin.
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