So far, Bitcoin has been growing quite strongly in 2019. Ever since the crypto winter retreated, the coin has been seeing one rally after another, growing more than 200% in a span of only a few months. It started the year with a low price of only $3,200 and then managed to surge all the way up to $14,000, all within the first six months.
There are quite a few reasons for this, such as the rising interest in the world’s largest tech firms. Even if some of them were not interested in Bitcoin itself, their interest in altcoins and the decision to launch their own coins helped considerably. Companies like Facebook, Telegram, and even J.P. Morgan have either announced or launched their coins already, and countless new investors have started joining the space.
However, the situation might not be as positive as initially believed, at least as far as the CEO of the world’s largest crypto exchange, Binance, is concerned. Changpeng Zhao, also known as CZ, recently issued a warning on Bitcoin, stating that the institutional demand is not rising as much as many had thought it would. This might turn the series of recent rallies into a series of large corrections. Indeed, Bitcoin’s current behavior seems to already be proof enough of CZ’s words.
Bitcoin’s volatility might increase, claims Zhao
Zhao openly stated that the institutions are not growing faster, despite the fact that many have expected they would. According to him, the number of institutions coming into the industry is increasing, only not at a rapid pace, which might reflect negatively on Bitcoin, and increase its volatility.
Retail investors still account for more than half of Binance’s trading volume, approximately 60%. CZ points out that this was the same percentage as observed last year, although the number of investors has increased in both areas.
Bitcoin price might also be affected by margin trading, as it allows investors to use a larger portion of funds to make their estimates regarding the coins’ future prices. Binance itself recognized its impact and popularity earlier this month when it launched another platform, this one specially dedicated to margin trading. While using it, traders can borrow as much as three times their deposit. Other exchanges allow even more, such as Bitfinex, which lets traders take loans of 100 times their deposits.
CZ believes that margin trading is going to take off even more before the year ends. He believes that it is a safe practice, which will likely increase trading volume, but also volatility.
The market is maturing
The current situation in the crypto sector has numerous similarities with the largest rally in crypto history, that came in 2017, but also some significant differences. Back then, the Bitcoin price surged from below $1,000 to $20,000 in a single year. The surge has been fueled by retail investors back then. This time, however, experts believe that the market and the rally itself might be more mature.
Others have found more differences between the two, such as increased interest by the world’s largest companies, including Facebook, Apple, and even the New York Stock Exchange. Bakkt and Fidelity are also expected to come and contribute to the sector, likely driving the adoption and the prices further up. Others are already awaiting Bitcoin’s next block reward halvening, believing that it is more than likely to cause a supply shock in the entire market.