This week in Bitcoin price: Nov 22-28
After six straight weeks of growth, Bitcoin flirted with its all-time high before stumbling back below $17,000 over the holiday weekend. Is it still on track to break records? Get the intel you need to make informed trades with our weekly dispatch from Coinbase researchers.
Published on November 28, 2020
The big picture
For nearly seven straight weeks, Bitcoin had been climbing towards record highs. In the first half of last week – for the first time since Bitcoin’s legendary bull run of late 2017 – it broke $19,000 and seemed poised to crack the all-time record. But as the Thanksgiving holiday approached, Bitcoin stumbled – seeing an 11 percent drop to $17,100. Prices began to chug upward again last night, but the decline left a lot of investors wondering two things: what caused it? And was it just a temporary blip?
There are reasons to be optimistic. At the time this report was published on Saturday, the market cap of all digital assets had rebounded to $525 billion, down just 1% on the week. And over the course of 2020, the dominant Bitcoin narrative has been around unprecedented institutional interest – more big money from Wall Street, tech, and elsewhere than ever before. Hedge-fund giants like Paul Tudor Jones and Stanley Druckenmiller have added Bitcoin to their portfolios. And public companies including Square, and Microstrategy use it as a reserve asset on their corporate balance sheet.
As a result, we weren’t surprised to see lower liquidity – money flowing into and out of crypto – from U.S. corporations over a holiday weekend. And we’re very curious to see what happens on Monday when everyone returns to their desks. Will people see the dip as an opportunity to buy?
In any case, the big-money investors that are helping drive Bitcoin prices up show no sign of losing steam. On the contrary, every week brings further reports of mega crypto deals and investments. Here at Coinbase, we saw continued strong volume from institutional clients right up until Thanksgiving, with four consecutive days (November 23rd to 26th) of volume greater than $2.4 billion a day – all four of which earned slots on our Top Ten biggest-volume days ever.
Thanksgiving itself was a surprisingly busy day for our over-the-counter (or OTC) desk – which handles major transactions with institutional clients. We noted several taking advantage of the holiday dip to increase their position and also saw crypto-native firms cycling out of smaller alt-coins and into Bitcoin and Ethereum.
Meanwhile, New York investment services giant Guggenheim Partners disclosed plans to invest as much as $530 million in the Grayscale Bitcoin Trust – a vast fund that exclusively invests in Bitcoin and is managing assets worth more than $10 billion (see graph below; “AUM” stands for “assets under management”) as of November 25.
Besides the predictable reduction in institutional investment over the holiday, one other factor that might have contributed to the dip was the reopening of OKEx, a troubled Chinese exchange that had halted withdrawals more than a month ago. On Thursday, withdrawals were reinstated for the first time in five weeks and a flood of frustrated customers cashed out, rapidly boosting Bitcoin’s supply right as the holiday and it’s decreasing liquidity arrived – a one-two punch that we believe to be at least one cause of the stumble.
But back to our main topic – why have institutional investors taken such an interest in Bitcoin? One aspect has to do with inflation. As central banks and governments have created unprecedented trillions of new dollars, yen, and euro, Bitcoin as a store of value to rival gold is proving to be a powerful narrative.
As Bitcoin is pushing toward new highs, gold is hovering at a multi-month low of $1,787 per ounce as of November 27th. Typically, gold and Bitcoin have moved more or less in sync. So one question we’ll continue to explore in future weeks is why gold isn’t experiencing a similar boom – and is Bitcoin potentially stealing some of its luster?
This week Bloomberg reported that, “Bitcoin has shot to a record high just as billions of institutional dollars have fled gold… the debate is now heating up on whether the world’s largest digital currency can one day rival bullion as an inflation hedge and portfolio diversifier.”
Hedge-fund billionaires aren’t the only people who are looking to Bitcoin instead of (or in addition to) gold. Worldwide Google search volume for “buy bitcoin” and “buy gold” were almost identical this week.
That said, search interest remains significantly lower than it was during the late 2017 boom. This might indicate that Bitcoin’s recent run has yet to bubble up to the mainstream. If prices continue to rise, it will be interesting to see at what point they capture mainstream attention (and what effect that attention might have on prices).
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