Bitcoin has been rallying hard so far this year, boosted by both the world's biggest tech companies taking an interest in bitcoin and cryptocurrencie
Bitcoin has been rallying hard so far this year, boosted by both the world’s biggest tech companies taking an interest in bitcoin and cryptocurrencies and the vague assumption that institutional demand for bitcoin has arrived and is outpacing retail demand.
The bitcoin price has climbed over 200% so far this year, rising from around $3,500 per bitcoin at the beginning of the year to highs of almost $14,000 as bitcoin and cryptocurrency fever returns after sweeping the world in late 2017.
However, the chief executive of Binance, the world’s largest bitcoin and cryptocurrency exchange by volume, has warned that institutional demand for bitcoin may not be driving the latest rally as much as some had thought—and the already extreme volatility could be about to get even worse.
“We have not seen institutions growing faster,” Binance’s chief executive Changpeng Zhao, who’s often known simply as CZ, told Bloomberg, a financial newswire. “What we’ve seen is a pickup in both places. The number of institutions coming into this industry has not increased that tremendously in 2019 yet.”
According to CZ, retail investors still account for about 60% of trading volume on Binance, about the same percentage as last year, though both have increased.
Margin trading, where traders can borrow against their deposits on an exchange, may also be having an effect on the bitcoin price as investors have a larger pot of funds to speculate with. Earlier this month Malta-based Binance allowed traders to borrow up to three times their deposit, while rival bitcoin exchange Bitfinex is allowing loans of 100 times deposits.
“I would say the majority of people by the end of the year will be using margin in some capacity,” CZ, who has been compared to Facebook founder Mark Zuckerberg, told Bloomberg. “It’s quite safe to use, to be honest. There will be more trading volume and potentially higher volatility.”
Bitcoin’s epic 2017 bull run, which saw the bitcoin price rise from under $1,000 per bitcoin to almost $20,000 in less than 12 months, is largely thought to have been driven by retail investors, with this latest rally believed to be somewhat more mature.
Those who have branded this year’s bull run as different from 2017 have pointed to bitcoin and crypto interest from the likes of social media giant Facebook and iPhone maker Apple, and institutional adoption from the New York Stock Exchange-owner backed bitcoin and cryptocurrency platform Bakkt, and Fidelity Investments, one of the largest asset managers in the world.
Others have suggested the fast-approaching next bitcoin halvening, where the number of bitcoin tokens awarded to miners will be cut by half, could cause a “supply shock” in the market.
Source : Forbes