vokatile explained!21 Jan 2021 19:39
Janet Yellen, the nominee for Treasury Secretary in the Biden administration, did mention the risks of crime and fraud that Bitcoin poses in a hearing, but the selling pressure didn’t really coincide with her comments.
The stock market can also move in confounding ways, falling on seemingly good news and vice versa. But this kind of wild unexplained swing is much more common in Bitcoin, which still trades largely on lightly regulated exchanges or on fast-moving overseas futures markets.
In recent weeks, Bitcoin has generally been weaker when it’s daytime in Asia, and stronger when it’s daytime in the United States. That reflects a divide in enthusiasm in those two parts of the world—both critical to Bitcoin prices.
Bitcoin may be an international asset, but it trades differently and faces different regulations depending on the jurisdiction, so changes in local sentiment can affect prices even if the broader market is optimistic.
“There’s been big net inflows into North America from Eastern Asia,” said Philip Gradwell, the chief economist at Chainalysis, a firm that has mapped the Bitcoin ecosystem around the world and can track movements of cryptocurrencies in real time.
To understand Bitcoin, it’s necessary to grasp the differences in local sentiment, which can mean that American Bitcoin-holders wake up 10% poorer than they were when they went to sleep.
“The North American ecosystem around cryptocurrencies has matured enormously compared to 2017, and also cryptocurrencies got a bit harder to use in East Asia,” Gradwell said. “There’s still a lot of cryptocurrency that is held by Chinese nationals, but there’s a bit more pressure on the exchanges that tend to serve them. Technically, they’re still not allowed to operate on the mainland. They do, but there’s sort of been a bit more of a clampdown. Also, you’ve had less interest from Japan and South Korea than you did back in 2017. People who bought Bitcoin then have been willing to sell it.”
So even if Asian investors are bullish on Bitcoin, they have incentives to sell if they’re nervous about their ability to cash out in the face of more stringent government rules.
Gradwell says that Bitcoin’s 600% rise in 2020 had a lot to do with supply and demand. Large investors bought an enormous amount of Bitcoin between March and June, with a record numbers of buys worth at least $1 million—84% more than was bought during the bull run in 2017. Some of those investors say they bought Bitcoin because they’re growing more nervous about inflation in the U.S., given that the government has been spending so much on stimulus efforts.
The supply of Bitcoin is limited, with only 6.25 new Bitcoin—or about $200,000 worth at current prices—created about every 10 minutes. So when large investors enter the market they need to find willing sellers, and may have to pay up for the privilege of buying it.
Theoretically, steadily rising demand would simply keep pushing the price higher given th
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