Bitcoin price officially reached a new all-time high above $19,892 on Dec. 1 after nearly three years, according to data from Coinbase and Tradingview.
Despite the Thanksgiving crash last week, Bitcoin (BTC) price managed to rebound throughout the weekend. BTC then easily passed the $19,000 mark on Monday to reach its all-time high, albeit on a couple of exchanges.
There are three key trends that fueled BTC's rise from sub-$3,600 in March to over $19,892. These include the rise in institutional demand, lower selling pressure and the resilience of BTC throughout 2020.
Data suggests institutional demand propelled the rally
Most on-chain data points show that the demand for Bitcoin from institutions has been rapidly increasing.
In November, Grayscale recorded all-time high net inflows, and the CME Bitcoin futures market saw its open interest climb near $1 billion.
Grayscale, in particular, said that more institutions invested in cryptocurrencies during the third quarter of 2020 than ever before.
The figures Grayscale sees are important to gauge the institutional interest in Bitcoin because the Grayscale Bitcoin Trust is typically the first point of entry for most institutions to gain exposure to BTC.
In the United States, there is no exchange-traded fund (ETF) for Bitcoin and other major cryptocurrencies. Hence, the Grayscale Bitcoin Trust is the closest investment vehicle to an ETF in the U.S. market. The Grayscale report reads:
“More institutions invested in 3Q20 than ever before and have increased their average allocation from $2.2 million in 3Q19 to $2.9 million in 3Q20. Institutions that are comfortable with multiple products within the Grayscale suite of products, have averaged nearly double the commitments of single-product investors during 3Q20.”
As Cointelegraph reported in August, MicroStrategy purchased $450 million worth of BTC, adopting Bitcoin as its primary treasury asset. This was likely the spark that triggered the current wave of institutional demand for the digital store of value.
This was accompanied throughout the summer by high-profile allocations to Bitcoin from the likes of Square, Paul Tudor Jones, and later, Stanley Druckenmiller, which only further fueled the positive market sentiment.
I call this chart "The Traditional Onslaught".— Travis Kling (@Travis_Kling) November 30, 2020
We've been talking about "The Herd" for 3+ years. The Herd requires career risk cover. This is that.
They are by definition not early adopters, but their pockets are deep & their capital is sticky. #Bitcoin is just getting started. pic.twitter.com/jC7uVBXxxW
In November, Druckenmiller explained that Bitcoin is likely here to stay, as it has significantly outperformed gold in 2020, saying:
"It’s been around for 13 years and with each passing day it picks up more of its stabilization as a brand."
Low whale inflows
Six months after the halving, November also saw low selling pressure from whales, according to on-chain data. In other words, the amount of Bitcoin being sent to exchanges from high-net-worth investors consistently decreased throughout the month.
CryptoQuant CEO Ki Young Ju pinpointed the Exchange Whale Ratio as an indicator of long-term bullish market sentiment. He said:
“Dear $BTC shorters, You can call me a moon boy, but unfortunately, there won't be a mass-dumping like March this year. Exchange Whale Ratio(90-day MA) is still very low. Long-term bullish is inevitable.”
The low selling pressure on BTC helped sustain its rally throughout the month, eventually allowing the dominant cryptocurrency to reach a record high.
Bitcoin's resilience has been a big factor
On June 13, JPMorgan Chase said in a note that Bitcoin’s recovery from the March crash showed it had staying power. The recognition of Bitcoin’s resilience by the largest investment bank in the U.S. likely acted as a major confidence boost, especially for institutional investors.
Ultimately, the impressive performance over the past decade and Bitcoin's strong momentum since dropping below $3,600 across major exchanges in March demonstrated BTC’s resilience and long-term potential as a digital store of value.