The Bitcoin price has increased by 57%, from $6,855 to $10,550, so far in 2020. A well-known Bitfinex “whale”—an individual investor that holds a significant amount of Bitcoin—criticized the upsurge, calling it an attempt of manipulation by other whales in the market.
It may have looked that way at the time, but the consistent increase in the volume of spot exchanges, the premium of Grayscale’s Bitcoin Investment Trust (GBTC), and on-chain investor activity suggest the rally was largely organic.
Grayscale’s Bitcoin Investment Trust premium grows
Digital Currency Group’s Grayscale operates a publicly tradable investment vehicle for Bitcoin investors called the Bitcoin Investment Trust (GBTC). With over $3 billion in assets under management, GBTC has been the go-to method of investing into the cryptocurrency market by accredited and institutional investors for several years.
Each share of GBTC accounts for 0.00096698 BTC. Throughout February, GBTC was trading at around $13.48. That values the Bitcoin price at over $13,000, given that nearly one-thousandth of a Bitcoin is priced at $13.48. That leaves with a premium of $3,000 for accredited and institutional investors.
A 30% premium for Bitcoin on Grayscale is substantially high, considering that the premium was hovering at around 7% throughout January.
As of March, the premium has dropped to around 13% — still high considering the significant decline in the Bitcoin price over the past two weeks.
The daily volume of CME Bitcoin futures, which primarily target accredited and institutional investors, also reached a fresh high at $1.1 billion, surpassing $1 billion for the third time in history. Since CME is used by accredited investors in the U.S., it showed a high level of accumulation in the month of February.
Rise in spot volume
Since December 2019, the trading volume on major spot exchanges like Binance, Bitstamp, and Coinbase rose significantly.
The weekly volume of Binance’s most frequently-traded pair (Bitcoin-to-USDT), for instance, surged from 241,000 BTC in the last week of December 2019 to 468,000 BTC in the second week of January 2020. That is a 94% increase in spot volume, in a span of just three weeks.
On margin trading platforms, the prices of cryptocurrencies including Bitcoin, Ethereum, and XRP can be easily swayed because traders are using relatively high leverage to trade.
For that reason, margin trading platforms are easier to manipulate than spot exchanges. This helps explain why a major Bitcoin whale said that the initial upsurge of bitcoin from the $6,000s to $9,000s was manipulated.
However, the noticeable increase in spot volume throughout January and February demonstrated that real retail interest toward cryptocurrencies rose and there was organic demand for the asset class.
On-chain investor activity increased
According to Adaptive Fund’s Willy Woo, on-chain activity of Bitcoin increased as the Bitcoin price surpassed $10,000.
The analyst said that fundamental investor activity backed the Bitcoin upsurge, noting that the rally itself did have organic demand backing it.
The number of unique addresses used on the bitcoin blockchain network also increased from early January to February, from around 350,000 to 500,000, showing user activity increased during the two months.
The rise in spot volume, increase in on-chain investor activity, high volume of CME futures, and the premium of GBTC all indicate that both retail investors and institutions accumulated Bitcoin throughout the digital currency’s upside movement from $8,000 to $10,500, suggesting that the rally was not completely manipulated.