Binance, the world’s largest cryptocurrency exchange by trading volume has recently released the quarterly report on various aspects of the crypto market. The published report suggested that the recent surge in prices of Bitcoin is mainly due to the immense demand from institutional investors. The report reads,
“During the past three months, we saw new vigor in the cryptocurrency industry. The total market capitalization of cryptocurrencies rose from $130 billion on March 1, 2019, to almost $260 billion as of May 31, 2019, representing 100% growth in just three months. Throughout this period, Binance Research covered a wide array of topics, from stablecoins, cryptocurrency correlations, crypto forks and halvings, crypto prediction markets, crypto asset cycles, and more.”
The analysts behind the report pointed towards the growing volume of Bitcoin trades on the Chicago Merchant Exchange (CME). The exchange registered its all-time high trading volume on May 13th, where the exchange executed $1.3 billion worth of Bitcoin trades. Apart from high trading volumes, the exchange also saw a surge in derivative trading accounts which soared to 2500.
The report further states,
“institutional investors, currently representing (in our conservative assumptions) less than 10% of all long-term investors, are growing their exposure to digital assets and 7 cryptocurrencies, as illustrated by a premium of nearly 40% for Grayscale Bitcoin Trust (GBTC) over BTC spot price at the end of May,” the researches stated. “
The report also talks about privacy and decentralized focus tokens which are being sidelined due to the concerns over their poor fungibility.
While talking about the correlation between the USD price of various cryptocurrencies, analysts behind the report noted that Bitcoin is still the crypto king and the rest of the altcoins follow the suit. However, the analysts noted that irrationality or so-called herd effect plays the dominant role in defining the price fluctuations.
They went onto explain,
“Within this period, the composite altcoin correlation with Bitcoin also hit an all-time high (March 13, 2018). That coincided with Bitcoin’s fall from the $6,000 range to the $3,000 range. This high correlation suggests that market sentiment has already found a local maximum during that period, and a trend reversal may ensue. Such a price movement pattern, to some extent, may reflect both the irrational behavior of market participants and some inherent traits of a young market,”
It is interesting to note that institutional investors are one of the main reason behind the recent surge, and looking at the pace at which the Bitcoin adoption has risen in recent years, the prices of Bitcoin many go even further than what many have predicted.