Bitcoin Price Corrects Lower After Impressive Run Fueled by Strong Institutional Interest

By Mariliana Fotopoulou Monday, January 4, 2021

Bitcoin (BTC) price moved to $34,800 on Sunday to quickly add a further 20% to its December close amid a surge in institutional demand. BTC price has corrected lower to around $31,500 on Monday on profit-taking, but the overall uptrend is still intact.

Strong Demand From Institutional Investors Fueling Rally

One of the factors behind Bitcoin’s record-breaking frenzy lately was the entry of large institutional investors into the market, according to Henri Arslanian, a global crypto leader at PwC.

Bitcoin broke above over $30,000 for the first time on January 2. Even though BTC has been here for more than ten years, its popularity among mainstream institutional investors started to surge last year. Furthermore, Bitcoin, like gold, is viewed as a hedge against inflation.

“When you look at this bitcoin rally that we have been seeing in the last couple of weeks and months, really, there’s two big elements driving it. One is the continuous entry of institutional players,” Arslanian said.

In 2020, legendary Wall Street investors, including Paul Tudor Jones and Stanley Druckenmiller have voiced their support for Bitcoin, prompting mainstream institutional investors to put faith in the cryptocurrency. Jones and Druckenmiller are both invested in Bitcoin and have highlighted its appeal as a hedge against inflation.

PayPal and Fidelity have also announced their support for Bitcoin in 2020, while Square and MicroStrategy purchased the cryptocurrency using their own balance sheet.

The trend is expected to continue in the coming month, and there are multiple instruments now that enable institutional investors to get exposed to BTC, Arslanian said.

“But also there’s a lot of regulated players as well. This was not the case a couple of years ago.”

Arslanian also said increased adoption of Bitcoin among retail investors is another factor that fueled its recent rally. He pointed out that the number of accounts of crypto exchanges is much higher nowadays as it’s significantly easier to purchase cryptocurrencies today.

“With these two big elements driving it, there’s a lot of momentum going on in the space. There’s a lot of optimism in the crypto markets as well,” Arslanian said.

Arslanian also compared the recent rally in Bitcoin price with the one from 2017, saying the main difference now is there’s much more clarity in regulations. He pointed out that today, a high number of regulators across the world have people working on crypto internally.

Summary

PwC global crypto leader Henri Arslanian said Bitcoin’s latest red-hot rally was driven by increased adoption among large institutional investors. Bitcoin price broke above $30,000 for the first time on Saturday to print a fresh record high of $34,800 a day later, before correcting modestly lower on Monday.

About the Author


Headshot for author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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