The crypto markets have seen a turn in fortunes compared to the biting conditions of most of last year. The markets have already seen a 200% rise this year with satoshis going from $3,500 at the start of the year to highs of almost $14,000. This off course has sent players in the space wild with commentators and speculators sharpening their pens, and giving their theories as to why this rally is occurring. Interest from the biggest tech companies has been offered up as a key driver to this price rally, but the CEO of Binance, which is the largest crypto exchange in the word; has recently thrown a spanner in the works
Binance CEO Changpeng Zhao otherwise known as “CZ” warned that institutional demand may not be the driver of the Bitcoin rally as many had thought and that the extreme volatility being seen now may even worsen. He told finance publication Bloomberg;
“We have not seen institutions growing faster. What we’ve seen is a pickup in both places. The number of institutions coming into this industry has not increased that tremendously in 2019 yet.” According to him retail investors still account for 60% of his firm’s trading volumes, which is about the same percentage as last year, though there have been marginal increases in both.
Margin trading has not been prominently offered up as a major driver of the soaring prices, but yet could just be. Margin trading is where traders can borrow against their deposits on an exchange giving them a larger pool of funds to speculate with. This could very well be one of the main reasons why the markets have been getting animated, considering that Binance allowed traders to borrow up to three times their deposit earlier this month. Bitfinex, a rival of Binance’s allowed loans of up to a 100 times the deposit.
Zhao went on to predict that margin trading would be very popular by the end of the year. “I would say the majority of people by the end of the year will be using margin in some capacity. It’s quite safe to use, to be honest. There will be more trading volume and potentially higher volatility.” The BTC rally of 2017 which saw prices skyrocket from $1,000 to $20,000 within a space of 12 months was largely thought to have been driven by retail investors, and a hint of irrational exuberance. The current rally is however thought to be more mature because a lot of institutional investors are currently on the train.
As Zhao predicted more volatility for crypto, others have pointed to Facebook’s Libra as one of the reasons why crypto is headed further north. Others have also predicted a market supply shock with the fast approaching next Bitcoin halving where the tokens available to miners will be cut by half.
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