First and foremost, I want to assure you that this post isn’t about tribalism. The premise of this article is to research whether Bitcoin and cryptocurrencies as the whole are dead or not.
The reason this research is based mostly on Bitcoin is because it’s still no. 1 coin in terms of the market cap, and because of its popularity, it tends to be the entry point for anyone who hasn’t come across cryptocurrencies before.
I will be taking a look at several factors to determine Bitcoin’s and overall crypto market sentiment:
- Google trends
- What people say vs what people do
- Involvement of institutional investors
- 80% Bitcoin price retracement from the all-time high
I have spent a good amount of time with Google trends trying out different keywords and time frames. I found that the most relevant data could be found for the past 3 months which is based on the United States search queries typed into Google.
The reason being I’ve gone ahead with the 3-month sample is basic — there was not much movement on the Google trends chart for the whole year and the trends were projected in an extremely linear fashion that didn’t tell much.
Only after narrowing the research down to 90 days was it worth taking the findings into consideration.
Now, as you’re reading this, I’d like you to take the conclusions drawn from it with a pinch of salt and use them as a guidance only and not the be all end all of the market sentiment.
Nonetheless, they should contribute to finding the answer.
I’ve used 3 different keywords that are reflected in the above diagram:
- buy bitcoin (average of 70.8-118k monthly searches in the US)
- sell bitcoin (average of 4.3-6.5k monthly searches in the US)
- is bitcoin dead (average of 1.7-2.9k monthly searches in the US)
I’ve checked other keywords related to the market sentiment such as “buy btc”, “sell btc”, “should i sell bitcoin”, “buy crypto”, “sell crypto” etc., and the search volume levels weren’t satisfactory to be used in this article.
From the above, we can learn that Bitcoin is still being searched way more in the context of buying rather than selling. The third keyword and the premise of this research, is Bitcoin dead, is behind the two.
However, the spike in the yellow line that was generated on the November 25th is related to the $6,000 support level breach:
The reason for the spike of such a drastic search query could be related to what was widely believed in the crypto space that the $6,000 support level is the absolute bottom of the market.
However, when we zoom out and analyze the search trends going back to March this year, we can clearly see a rapid surge to buy Bitcoin.
This tells us that there are plenty of new people who want to capitalize on the recent price decline and they might be gearing up to buy.
The key phrase here is “new people” — new because if you were involved in cryptos before, you already know where and how to buy some coins — I bet you don’t search the internet for “buy bitcoin” any more, do you?
That’s a good sign because despite the fact that the media are constantly bombarding people with bad news on Bitcoin, there are still plenty of them that are willing to get in whilst the price has now become affordable.
Going by the same logic, however, you don’t necessarily search the internet for “sell bitcoin” when you already own some. But then in certain cases, you do, actually.
For example, my dad who doesn’t know much about cryptos, holds some coins on an exchange. I know for a fact he doesn’t know how to convert them into fiat because he hasn’t linked his bank/debit card to his exchange account.
I’m sure there’s plenty of people like my dad who might be searching for it and that could explain the red line movement.
What can we learn from the trends?
Even though the price seems to be falling, the Google trends findings say something else.
The search queries for buying bitcoin shot up to the April’s levels which indicates a decent interest among the retail investors.
There’s an obvious gap between people looking to buy and those who want to sell and that could mean that we are approaching the selling exhaustion.
To verify these conclusions, let’s take a look at what people are saying versus what people are doing.
What people say vs what people do
This is rather tricky to determine, that’s why I’m going to use a few data charts. They should be rather self-explanatory.
The chart above shows the number of Bitcoin wallets that were created going from December 2017 until today.
There’s virtually no decline here and more wallets are being created on a daily basis. But is it a valid indicator to determine the market sentiment?
At first glance, it’s not.
That’s because a new wallet address is created automatically nearly every time you transact within the network and it also depends on the exchange you’re using. Some of them won’t let you use the same address twice, and some of them will.
Nonetheless, that would explain the exponential growth of them.
But then we have to answer the premise question of this article — is Bitcoin dead?
If Bitcoin was truly dead, it would mean that less and less people are using it and less and less wallets are created.
Wouldn’t the line from the chart above looked slightly different and more horizontal? (if not declining at all)
Whilst the wallet user count doesn’t give off any specifics on the market sentiment, it hints that Bitcoin is just fine.
The total number of transactions hasn’t weaken one bit despite the price drop. This indicates that the rate of growth at which more people are transacting withing the network is sound.
The Bitcoin market cap is probably the best indicator to talk about the sentiment.
As you can see, it has been declining since the all-time high with some minor pullbacks. The market had stabilized around August till the middle of November, where we saw a 40% drop that wiped out $45 billion.
That’s the biggest decline in 7 years on the month over month basis where the price had dropped 37% in one month. The previous time Bitcoin lost more than 35% within one month occurred in August, September and October back in 2011.
If you’re wondering whether the price might go up in December, here’s a quick comparison on how Bitcoin had performed in November vs December going back since 2013:
Historically speaking, December has been Bitcoin’s month for the past three years.
The total crypto market cap had lost 83% since January 2018 resulting in a loss of $690 billion. This is an important retracement number and I will be closing this article with a few remarks on it.
The graph above shows the number of blockchain patents that were granted since January 2018.
As this doesn’t tell us whether Bitcoin is dead or not, it surely propels the blockchain technology and indicates strong growth of the concept.
But then, because Bitcoin was the precursor of blockchain, it could indirectly influence the public in favor of Bitcoin. Blockchain as the word is strongly associated with Bitcoin among people that are only starting out in cryptos, and that’s a positive sign for BTC.
Now, I don’t necessarily want to get into the so-called cryptocurrency tribalism. I’m using this reddit to show the pace at which the Bitcoin community has been growing since the start of 2018.
Back in January, the user count subscribed to /r/Bitcoin was just above 500,000 and despite the bear market and declining prices, it had managed to nearly double the amount of users at the beginning of December.
That shows us that there is a natural growth of interest among people not yet involved with cryptocurrencies or Bitcoin itself.
Involvement of Institutional Investors
- JP Morgan buys cryptos in mid September, 2017.
- George Soros and his $26 billion family office grants approval to buy cryptos in April 2018.
- Goldman Sachs set up a cryptocurrency trading desk in April 2018 and allocate $400 million to it.
- Steven Cohen, a hedge fund manager worth $14 billion gets into cryptos in July 2018.
- Marc Lasry, a hedge fund manager worth $1.8 bullion gets into cryptos and advocates for Bitcoin to hit $40,000
- Adreessen Horowitz had launched a $300 million crypto fund in June 2018.
- Wellington Management, a $1 trillion money manager had allocated crypto portfolios in March 2018.
- Susquehanna, a global trading platform had opened a crypto trading desk for its clients through futures
- BlackRock manages $6.3 trillion in assets and they’re considering getting into cryptos
- Fidelity has $2.1 trillion in assets under their management and they are soon expected to launch a crypto trading desk to their clients for five to seven top coins by market cap
That’s a lot of money that is soon to hit cryptocurrencies and increase the total market cap.
Just taking the two major players from the list above, BlackRock and Fidelity who jointly manage $8.4 trillion in assets, in case that only 2% of that sum ($168 billion) was to enter the crypto market, it would have been larger than today’s total market cap of $122 billion.
Bitcoin isn’t dead. And so aren’t the good alts.
80% Bitcoin Price Retracement
Last time Bitcoin retraced more than 80% was between November 2014 and January 2015.
What happened next was an 8-month consolidation period that was followed by the biggest bull run that Bitcoin and cryptocurrencies had ever experienced.
Is the history going to repeat? It’s hard to tell, but it certainly looks quite similar.
If that was the case, then the consolidation period this time should take at least a year or two before we see a rapid surge in price.
That would be an excellent opportunity to start accumulating because it most definitely doesn’t look like Bitcoin or cryptos are dead at all.
We’re going through a massive bear market at the moment and the price might bottom out at around $3,000 as that’s where the next major support resides at or it already has floored. It’s up to you to take that risk.
In case you’re wondering about Bitcoin’s historical retracements, here’s a good graph for it:
Is Bitcoin dead? — No.
Are cryptos dead? — Far from it.
From an investing standpoint, we’re probably at the best time to get into the market for the long haul.
And speaking from an observer’s perspective, it very much looks like the cryptocurrencies as the whole are yet to boom.
What happened in January 2018 was a hype-driven escalation, similar to that from the dotcom days. Then, the market took time to pull together before it was ready for another run up. It might be the exact same case here in the crypto world.
When does it happen? Nobody knows because nobody can time the market. But at least one thing is certain — we’re not dead.
BTC – 3DsiPb26ugH4N7urkq6P3T9meSp2NMNqan
BCHABC – qrr63e483sl5c0rzqjf8pnds26pegex0h52gc6tndx
ETH – 0x2F678cF4A0bc4B2D6F4e22A3A1bfC4BA746BDDBe
LTC – MU4iw9ydysAu9egDsp6gmiQ45DX6ujYBqQ
Disclaimer: You should do your own due diligence, research and analysis before you invest any money in cryptocurrencies. Cryptocurrencies are highly volatile and classed as high-risk investments. You should never invest any money unless you’re prepared to lose your capital. The author of this article holds the said assets and might be biased towards them.