Bitcoin keeps setting new record highs. Are retail investors back in the game?

By Frances Yue

Welcome back. This is Frances Yue, MarketWatch cryptocurrency and markets reporter.

Bitcoin has been regularly setting new all-time highs lately and was trading at $73,678 on Wednesday. Market participants have debated how much of the rally is being driven by institutions and whether retail investors have returned to the market.

I sat down with Anthony Scaramucci, founder and managing partner of alternative asset management firm SkyBridge, and Austin Federa, head of strategy at the Solana Foundation, to discuss this.

Find me on X at @FrancesYue_ to share any cryptocurrency or newsletter ideas.

Are retail investors back?

While some retail interest has returned to the cryptocurrency market, it remains relatively subdued compared to 2021, when bitcoin hit a record high in its last cycle, according to Scaramucci. This shows that the current bull market is still in an early stage, he noted.

"Retail investors are here, but if you look at Twitter [the social-media platform now known as X], or if you look at digital asset searches on Google, they're not that prolific right now. They were much higher in November 2021 than today," Scaramucci said in a telephone interview.

Although the price of bitcoin continues to reach its all-time high, some retail investors have been afraid to return to the market, in part due to the bankruptcies of several major crypto companies in 2022, which caused the price of bitcoin to fall to below $16,000 in November 2022., Scaramucci noted.

Still, Federa de Solana noted that retail activity in terms of cryptocurrency usage has increased recently. He said he is seeing projects on the Solana blockchain reaching all-time highs for daily active users in almost all categories, including social media, non-fungible tokens, and crypto gaming protocols. Activities in these areas are typically driven by retail users.

"These [crypto] Networks are only useful when people actually use them, build applications on them, and use the applications built on top of them. And we've seen great interest from the Solana user base," Federa said by phone.

"There are more users in the [Solana] network than ever before. So if we use it as an indicator of retail interest, I think it will definitely come back," Federa added. The number of active addresses on the Solana network stood at about 1 million as of Tuesday, a record, according to Block data.

Federa said he's also seen more interest from users in Asia and Eastern Europe than in the U.S. "These areas usually get excited before Western markets get excited about things again," he said.

Isn't this about rate cuts?

While macroeconomic factors used to have a significant impact on cryptocurrency prices, bitcoin's latest rally is not driven by anticipation of interest rate cuts, according to Greg Magadini, head of derivatives at Amberdata.

“The futures basis in bitcoin right now is 25% annualized for a leveraged long,” Magadini wrote in emailed comments, referring to the difference between the cash price of bitcoin and the futures price of the cryptocurrency. "This indicates that investors are willing to pay a substantial premium for leveraged long positions, so traders who are craving bitcoin right now don't really care if the risk-free interest rate is 5% versus 5. 25%".

Crypto in an instant

Bitcoin (BTCUSD) has gained 11.1% over the past seven days, while ether (ETHUSD) is up 8.8% over the same period, according to data from CoinDesk.

Required readings

Grayscale unveils plans for bitcoin 'mini' fund, two months after GBTC conversion to ETF (MarketWatch) Coinbase plans $1 billion convertible debt deal after stock surge (MarketWatch) Coinbase's bear camp Drops Further as Analyst Says Stock Rally Could Continue (MarketWatch)El Salvador Says It Has $84 Million Profit After Bitcoin's Record Run (MarketWatch) MicroStrategy Leads Crypto Stock Rally to As You Increase Your Bitcoin Holdings (MarketWatch) Bitcoin Targets $100,000 Before Halving. This is what is driving this cryptocurrency rally. (MarketWatch) Bitcoin's fair value is $35,000, but who's counting? (MarketWatch) Did the bitcoin ETF frenzy send cryptocurrencies to a record high? How the experts see it. (Market clock)

-French Yue

This content was created by MarketWatch, operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and The Wall Street Journal.

 

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03-13-24 1636ET

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