From Speculation to Allocation: Crypto Markets Seeing a Paradigm Shift
There's a paradigm shift from pure speculation to tactical allocation in the crypto market as investors are locked in an accumulation phase and are holding their positions with a medium- to long-term view, according to digital asset investing firm CoinShares.
"This trend is also highlighted by the amount of coins left on exchanges, a metric which is experiencing an accelerating downtrend," Jean-Marie Mognetti, CEO of the company, said in the company’s annual report for 2020.
He argued that the trend is observable not only in the global media, but also on the blockchain itself, "where its immutability comes in very handy,” as unspent transaction output (UTXO) analysis enables the mapping of the maturation of the global coin supply.
Moreover, this year, the "investor landscape is very different with a blend of financial services companies to catch up with the growth of the digital asset ecosystem and other corporates exploring digital asset exposure in response to monetary inflation," the CEO said, noting that the previous bull market cycle, in 2017, was led first and foremost by retail investors.
Per Mognetti, the market is sending "some interesting indications" that digital assets are in the early phases of a 12-24 month bull market cycle, itself part of a bigger, longer, multi-decade supercycle.
For 2020, the company’s CEO forecasts two major trends:
- the "grand awakening" from global investors and corporate treasurers to the role of digital assets in a portfolio;
- a "more avant-garde" trend which will see high alpha generator bets at the edge of innovation (decentralized finance (DeFi), non-fungible tokens (NFTs), Web3.0, identity and prediction markets).
CoinShares also said that their total comprehensive income doubled last year, reaching GBP 18.4m (USD 26m), while total assets held by the company hit GBP 1.96bn, showing an increase of approximately 290% over the year.
Meanwhile, Mognetti’s claims seem to be backed by the latest available data released by on-chain market intelligence provider Glassnode. The analysis offers some observations related to the recent bitcoin (BTC) price dip, and explores the average spent output lifespan (ASOL) metric which provides insight into the average age of all UTXOs spent on a given day.
What it found is that during this latest selloff, ASOL "fell dramatically" and back to levels below the BTC accumulation range seen between USD 50,000 and USD 60,000. "This indicates [that long-term holders] did not panic sell and capitulate and instead primarily HODLed through the dip," according to the analysts.
"As seen in ASOL, the total amount of lifespan that is being spent has actually fallen at or below 2020 pre-bull market levels. This confirms that old coins are holding onto their stack, and the majority of spending is by holders of relatively young coins. What these three metrics indicate is that older hands are not rushing for the exit," they said.
A similar conclusion was reached last week by Phillip Gradwell, Chief Economist at on-chain analytics and intelligence firm Chainalysis, who said that at least USD 3.2bn worth of bitcoin was sold during the selloff, constituting the largest one-week USD loss of all time. Almost all of this loss was incurred by bitcoin held between 4 and 13 weeks prior to being sent, meaning that most of the sellers were recent investors.
At 14:17 UTC, BTC trades at USD 37,077 and is up by almost 2% in a day, trimming its weekly losses to less than 4%. The price is down by less than 36% in a month and is still up by 293% in a year.