Bitcoin is up 12% this month — even though barely anybody is trading it

Bitcoin
has
rallied
sharply
this
month
—
but
not
for
reasons
you
might
think.

The
world’s
largest
digital
currency
has
risen
more
than
12%
since
the
beginning
of
June.
On
Wednesday,
its
price

topped
$30,000
to
hit
its
highest
level
since
April
14,
according
to
Coin
Metrics
data.

Market
players
have
attributed
the
jump
to
the
news
that
U.S.
asset
management
giant
BlackRock
had

filed
for
a
spot
bitcoin
exchange-traded
fund
tracking
the
market
price
of
the
underlying
asset.

While
that
may
be
part
of
the
reason,
the
outsized
moved
can
be
put
down
to
another
factor
beyond
the
news
flow
surrounding
large
institutions
taking
steps
to
embrace
bitcoin
or
other
digital
assets.

Crypto
“market
depth”
has
been
sitting
at
very
low
levels
this
year.
Market
depth
refers
to
a
market’s
ability
to
absorb
relatively
large
buy
and
sell
orders.
When
market
depth
is
low
and
big
players
put
in
orders
to
buy
or
sell
digital
coins,
prices
can
move
in
a
big
way
up
or
down,
even
if
the
orders
are
not
that
huge.

Market
depth
is
a
measure
of
liquidity
in
a
market.

According
to
data
firm

Kaiko,
bitcoin’s
market
depth
has
fallen
20%
since
the
start
of
this
year.
Bitcoin
has
been
one
of
the
hardest-hit
cryptocurrencies
in
terms
of
market
depth,
Kaiko
said.

“Bitcoin’s
recent
surge
in
value
has
largely
been
driven
by
large
trades
within
a
less
liquid
market,”
Jamie
Sly,
head
of
research
at
CCData,
told
CNBC
via
email.

“Our
analysis
of
market
orders
over
5
BTC
reveals
an
aggressive
surge
in
market
buying,
suggesting
large
players
are
seeking
to
gain
exposure
to
digital
assets.”

“When
combining
large
orders
with
thin
books,
the
market
is
subject
to
more
volatile
movements,”
Sly
added.

That
lack
of
liquidity
has
in
part
been
driven
by
the
regulatory
scrutiny
of
the
crypto
industry
from
U.S.
authorities.
The
Securities
and
Exchange
Commission
has

sued
major
exchanges
such
as
Coinbase
and
Binance.

Low
liquidity,
which
has
been
a
feature
of
the
crypto
market
all
year,
is
also
partly
behind
bitcoin’s
80%
year-to-date
rally.

Another
notable
feature
of
the
current
crypto
market
is
the
low
volumes
being
traded
on
exchanges.

Daily
trading
volume
in
the
cryptocurrency
currently
sits
at
around
$24
billion,
according
to
crypto
data
website
CoinGecko.

That’s
down
markedly
from
the
more
than
$100
billion
of
overall
trading
volume
in
bitcoin
during
the
peak
of
the
2021
crypto
rally,
when
bitcoin
rose
close
to
an
all-time
high
of
nearly
$69,000.

Large
crypto
investors
usually
hope
that
an
early
surge
in
prices
will
be
enough
to
tempt
retail
investors
back
into
participating
in
the
rally
which
ultimately
boosts
prices
for
bitcoin
and
other
digital
coins.
But
that
hasn’t
happened.

“What
is
notable
about
this
rally
is
that
trade
volumes
overall
are
at
multi-year
lows,
and
we
are
only
seeing
a
slight
increase,
which
even
then
is
far
lower
than
levels
we
saw
from
January
to
March,”
Clara
Medalie,
director
of
research
at
Kaiko,
told
CNBC.

“I
think
trading
volumes
and
price
volatility
are
two
of
the
most
telling
indicators
of
crypto
market
activity.
Both
volatility
and
volumes
are
at
multi-year
lows,
and
even
a
rapid
increase
in
price
is
not
enough
to
draw
traders
in.”

In
the
last
bitcoin
cycle,
market
momentum
was
largely
driven
by
big,
institutional
names
as
investment
banks
from


Morgan
Stanley
to


Goldman
Sachs
set
up
trading
desks
to
give
their
clients
exposure
to
the
digital
currency.

However,
the
market
really
started
to
break
out
only
when
retail
traders
started
to
take
notice
—
in
early
2021,
people

became
tempted
by
the
phenomenon
that
was
NFTs,
or
nonfungible
tokens,
and
other
more
speculative
bets.

Later
that
year,
the
cryptocurrency
market
experienced
a
seismic
rally,
with
the
price
of
bitcoin

zooming
to
unprecedented
levels.
That
was
in
tandem
with
surging
trading
volume,
which
climbed
from
$21.2
billion
at
the
start
of
2020
to
$105.4
billion
on
Nov.
9,
2021,
when
bitcoin
hits
its
all-time
high,
according
to
CoinGecko.

Today,
trading
volume
is
nowhere
near
where
it
was
at
the
height
of
the
2021
crypto
boom.

“Any
bit
of
news,
if
it’s
good,
then
the
professional
traders
trade
—
otherwise,
they’re
not
trading,”
Carol
Alexander,
a
professor
of
finance
at
the
University
of
Sussex,
told
CNBC.

“If
a
bit
of
good
news
like
the
bitcoin
ETF
comes,
they
fire
the
cannons
upwards.”

BlackRock’s
ETF
filing
was
followed
by
similar
move
from
Invesco
and
WisdomTree,
which
also
filed
for
their
own
respective
bitcoin-related
products.

“Bitcoin
and
ether
are
both
being
manipulated
in
this
way
by
the
professional
traders.
They
don’t
trade
most
of
the
time,
they
wait
until
there’s
a
bit
of
good
news,”
Alexander
said.

“Then
they’ll
sell
the
top
and
you’ve
got
a
sideways
market.”

Indeed,
bitcoin
has
traded
within
a
range
this
year,
and
attempts
to
burst
significantly
higher
have
been
thwarted.

Alexander
thinks
bitcoin
is
likely
to
trade
within
a
range
of
between
$25,000
and
$30,000
for
the
remainder
of
the
summer.

She
expects,
however,
that
toward
the
end
of
the
year,
the
cryptocurrency
will
climb
toward
$50,000,
citing
attempts
from
larger
market
players
to
prop
up
the
market,
with
big
purchases
making
outsized
moves.

“It’s
not
a
market
for
ordinary
clients.
It’s
really
is
not,”
she
warned.

Vijay
Ayyar,
vice
president
of
international
markets
at
the
Indian
crypto
exchange
CoinDCX,
told
CNBC
he
suspects
the
latest
run-up
in
bitcoin’s
price
is
being
driven
more
by
“long
term
institutional
buyers.”

Big
funds
and
crypto-focused
hedge
funds
are
among
the
market
participants
driving
the
action,
Ayyar
added.

“I
don’t
think
this
is
as
much
of
a
retail
push,
since
retail
was
quite
flushed
out
during
the
recent
pullback,”
he
said.

Several
crypto
industry
insiders
have
expressed
hopes
that
the
market
is
nearing
a
“bottoming”
period
where
it
can
start
to
rise
again.

The
recent
price
action
echoes
activity
in
2018,
when
both
bitcoin’s
price
and
volumes
were
subdued
for
several
months
before
beginning
to
rise
again
the
following
year.

However,
CCData’s
Sly
said
it
is
“still
too
early
to
say
whether
the
worst
is
over
for
bitcoin.”

“The
recent
wave
of
interest
from
traditional
financial
institutions,
like
Blackrock,
Citadel,
and
Fidelity
instils
a
renewed
optimism
in
the
market,”
he
said.

“Provided
the
wider
macro
environment
and
equity
markets
continue
to
be
favorable,
it
is
possible
that
bitcoin
could
maintain
its
current
positive
price
trajectory.”

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