Bitcoin’s recent spike above $9000 has been the talk of the town, with several analysts and proponents of the cryptocurrency vouching for its revival. In a series of tweets, Alex Kruger, a popular economist, spoke about the entry of institutions into the Bitcoin ecosystem and how the switch from retail investors was beneficial to the cryptocurrency market.
Kruger’s tweet read,
“JP Morgan analyst acknowledges what has been relatively obvious for about two months already: it is mostly institutions behind the bitcoin bull-run, rather than retail investors, as it was during the 2017 mania.”
This comment was made in relation to a recent article that spoke about how BTC’s surge was thanks to the dominance of institutional investors. The analyst in question, Nikolas Panigirtzoglou, had previously claimed that over the past few months, Bitcoin trading volumes had risen to $445 billion in April from a 1Q19 average of $220 billion per month. This was followed by an increase in May, clocking at a massive $725 billion in terms of trading volumes on cryptocurrency exchanges.
Kruger pointed out that Panigirtzoglou was wrong because of the analyst’s earlier claims that Bitcoin’s intrinsic value was determined by its correlated mining cost, an incorrect fact. Kruger inquired,
“This same analyst a month ago wrote about how bitcoins’ intrinsic value is determined by its mining cost (which is incorrect) and how bitcoin was at the time trading above intrinsic value (overpriced). How much do these bankers get paid to be late or wrong?”
Kruger added that Bitcoin’s cost of production follows the market price and “not the other way around.” When the price of BTC goes up, the cryptocurrency becomes more profitable to mine. Therefore, more miners start digging for blocks which increases the block rate. To keep all parameters in equilibrium, mining difficulty adjusts itself and increases the cost of production.
The cryptocurrency market has been on a price ramp since BTC’s rise on Sunday, with the cryptoverse abuzz since then. At press time, Bitcoin was trading at $9146, with a total market cap of $162.48 billion. The 24-hour trading volume was a healthy $21.42 billion, with the ‘king coin’s’ resurgence contributing to the rest of the market moving to greener pastures.
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