As the crypto markets make a slight recovery following their plummet earlier in the week, all eyes turn to the continued price gains of Bitcoin. Since the start of the year, BItcoin has posted more than 50 percent in gains, with the $6000 price mark becoming the next significant hurdle for the currency. Average investors may consider the psychological value of BTC at $6000, but institutional investors and their behavior will be the true indicators of market direction moving forward in 2019.
Tom Lee, Fundstrat cryptocurrency analyst and regular Bitcoin commentator, has pegged current market sentiment for BTC at its highest point in his Bitcoin Misery Index (BMI), a value not yet seen under bearish conditions. While Lee give some hope that having an elevated BMI in the midst of a bear market may give indication that the bulls are in for a turn, he also cautions that a rising BMI has historically correlated with a sudden downturn in pricing.
His prediction may have come true last week, as the price of Bitcoin crashed from $5400 to $5000, with the majority of the crytpo markets experiencing an acute retraction in price. However, most of the sudden price movement was brought about by the actions of the New York Attorney General’s office, who issued a court filing accusing Bitfinex and Tether of market manipulation. In the report, the New York AG’s office claimed that Bitfinex was in danger of insolvency, and used $850 million worth of Tether funds to cover the losses–funds that are supposed to be backing the value of USDT 1:1 with U.S. dollars.
The market uncertainty generated by the report, in addition to confusion surrounding Bitfinex user funds, led to a flash crash in the Bitcoin and altcoin markets. While BTC has steadily recovered to $5300 throughout the weekend, investors are still unsure which was the market will move entering the fifth month of the year. More than any other metric, the $6000 mark for BTC could prove a severe litmus test for the commitment of institutional investors.
Previous reports by analytics firm Adamant Capital report that the majority of retail investors, at long-last, fled the bear market of cryptocurrency in November 2018 following the collapse of BTC pricing. Since that time, the valuation of Bitcoin has seen a drop in price volatility, owing to the decreased actions of retail traders.
At the beginning of April a series of coordinated Bitcoin buys across multiple exchanges, totaling over 20,000 BTC, kicked off the present price rally which has taken Bitcoin to highest valuation in six months. While no single trader has come forth to claim responsibility for the transactions, analysts are owing the behavior to institutional investors–rather than crypto whales. The coordinated actions of a well-capitalized trader(s), who sunk nearly $100 million in BTC, means that the market is currently operating at the behest of institutional investors. And some analysts have pointed out, these large-capital investors could be riding short-term sentiment.
Considering the bullish turn in crypto market prices ignited from a series of transactions, it could be that these traders are waiting for the $6000 mark to take action again. For one, Tom Lee’s BMI measures market sentiment for Bitcoin, with that value reaching its highest point since 2017. Retail investors are looking at Bitcoin prices favorably, for now, but that could change with the looming hurdle of BTC at $6000. BItcoin was hovering around $6000 before its crash in November 2018, meaning a number of investors could be looking to recoup on losses at that threshold.
If this proves to be the case, the institutional investors which catalyzed the most recent bullish run for BTC could look to make a killing in the short-term, playing off the change in market sentiment that could accompany steep BTC resistance at $6000.
