Retail investors are not involved, as the price of Bitcoin reaches $ 40,000

Retail investors are not involved, as the price of Bitcoin reaches $ 40,000

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Many investors feel validated in the cryptocurrency market now that the Bitcoin price has set a new historical record of $ 34,778.

The last time Bitcoin (BTC) was traded near this level was during the 2017 bullish run, when it peaked at around $ 19,783. Even the mainstream media realized, including the New York Times, that observed that the current rally had “a very different feeling from the last time”.

Many in the cryptocurrency community would agree. Therefore, it is essential to take a deeper look at the factors that are driving the current rally.

The “average Joe” is no longer running the show

In 2017, Bitcoin’s rise was widely considered to have been fueled by retail investors who were placing speculative bets on a nascent market for BTC and other less-capitalized cryptocurrencies from the initial coin offering craze.

At that time, there were millions of retail investors in South Korea, Japan and China who became a force in the market. At that time, he was the “average Joe” driving the gain of more than 1,300% of Bitcoin that year, as pointed out in the Wall Street Journal by IG Group’s chief market strategist, Chris Weston.

Participation in Bitcoin trading based on the currency involved. Source: Wall Street Newspaper

US dollar trading increases with the arrival of Wall Street

Advance to 2020 and the investor landscape has changed dramatically. Institutional investors, who largely remained on the sidelines in the first bullish run, were the face of the bullishness this time around.

These investors are expected to take long-term maintenance positions, with no intention of selling anytime soon. They are also migrating to Bitcoin futures markets, where the number of open contracts on the Chicago Mercantile Exchange has recently exceeded $ 1 billion, and are strengthening their balance sheets with BTC, rather than letting it stay in cash.

While it is not uncommon for institutional investors to be ahead of the curve, it is worth repeating that they were not the first to come out of the gate in cryptography. In fact, many of the leaders in corporate America who are now entering Bitcoin for the first time are now the same people who rejected Bitcoin at that time.

For example, in October, PayPal announced that it would support cryptocurrency transactions for 26 million merchants on its platform. Users can also buy, hold or sell cryptocurrencies on the PayPal platform, including Bitcoin, Ether (ETH), Litecoin (LTC) and Bitcoin Cash (BCH).

The irony is that Bill Harris, the former PayPal CEO, warned in 2018 that Bitcoin was worthless and was heading towards zero – he even labeled it a scam. PayPal is rivaled only by Jack Dorsey’s Square at the pace that large companies are buying Bitcoin.

Wall Street companies previously avoided Bitcoin because of its volatility, classifying it as a risky asset at best and “rat poison squared” at worst, according to Warren Buffett of Berkshire Hathaway. While Buffett has yet to discover cryptography, other big investors are getting involved.

Billionaire traders from Paul Tudor Jones to Stanley Druckenmiller have become optimistic about Bitcoin, both of which have praised the leading cryptocurrency at the expense of physical gold.

In 2017, JPMorgan CEO Jamie Dimon threatened to fire employees who traded Bitcoin, but now the company is publishing optimistic analyst reports on the digital asset. Larry Fink, CEO of BlackRock – the world’s largest asset manager – also appears to be looking forward to Bitcoin, suggesting that it is not out of the question that Bitcoin will “evolve into a global market”. He stated:

“Bitcoin has caught the attention and imagination of many people. Not yet tested, very small market in relation to other markets. ”

Meanwhile, MicroStrategy CEO Michael Saylor was the first to move in corporate America into the Bitcoin space, but he was not always a fan. In 2013, Saylor said that the days of Bitcoin were numbered and that the market was destined to suffer a fate similar to that of online gambling.

Then, in an unexpected turn of events, Saylor decided to make Bitcoin the main reserve asset of the company’s treasury, taking $ 425 million in BTC for the balance sheet. That investment is worth $ 1.56 billion in the last check. On December 4, Saylor raised the stakes by buying even more BTC.

That was then, this is now

Another important difference is that the price of Bitcoin started the year in 2017, trading at around $ 1,000. In 2020, the price of BTC started trading at $ 7,200. Therefore, it is much more expensive today, and not all retail investors may realize that they do not need to buy an entire Bitcoin to gain exposure to the asset.

The fly in the ointment in 2020, however, was COVID-19. For individual investors, the economic downturn may have affected any investment plan. Unemployment in the US, for example, is hovering at 6.7%, meaning that the economy still has a steep hill to climb if small investors want to get out of the pandemic pit.

High unemployment translates to low disposable income, and Uncle Sam has not been very helpful. While BTC can be designed to be a major democratizing force, that control cannot be controlled by people who are struggling with the economic realities of 2020.

In addition, unlike 2017, East Asian investors have been unloading their Bitcoin this year at an unprecedented pace.

Bitcoin ATMs are ahead

Although the cryptocurrency market may remain in its early shifts, it is more mature than in 2017. Much of the foam has been eliminated and is no longer considered the Wild West in many ways.

Despite any hesitation by the retail investor, entry channels are growing rapidly, with new exchanges becoming increasingly online, including those that are decentralized in nature. Meanwhile, Bitcoin ATMs, which are becoming a competitive and convenient portal for retail investors, are expanding their presence worldwide.

Unlike institutional investors like Jack Dorsey, whose approach to buying Bitcoin is so complex that he published an investment white paper on it, retail investors can turn to something familiar with Bitcoin ATMs, or BTMs.

As the BTM market begins to mature and the list of genuine operators expands, retail crypto investors can finally have an easy gateway. For example, CoinFlip, one of the largest BTM operators, has launched thousands of BTMs in the United States, focusing on places where people are without bank accounts or Internet access.

This cash-to-Bitcoin approach offers retail investors a simple and convenient method to enter the Bitcoin market and, according to Ben Weiss, CoinFlip’s chief operating officer, is designed to empower those who are excluded from the traditional banking system.

However, not all Bitcoin ATMs are the same, and there are some dubious operators that are charging fees in the 20% range – a practice that goes against the democratizing principles on which Bitcoin was founded. Fortunately, an increasing number of companies are tending to cut rates, with CoinFlip and CoinSource taking 6.99% and 11%, respectively.

As moderate companies lower their rates and predatory Bitcoin ATM operators weaken, retail investors can once again enjoy easy access to a digital asset whose popularity is only growing.

Joshua Harrison is a London based crypto entrepreneur and investor. He is the co-founder of Harrison & Keen Trade – a cryptocurrency forecasting and trading company. Harrison also works in the area of ​​digital payments, where he advises entrepreneurs in their market implementation and compliance strategies.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you must conduct your own research when making a decision.