Bitcoinโs price has experienced a significant increase, surging from under $20,000 to over $50,000 since June 2023. This surge was mainly driven by the anticipation and subsequent approval of nearly a dozen spot Bitcoin ETFs in the United States. However, despite this price surge, retail traders have not yet entered the market. This raises the question of whether their arrival could potentially trigger another price surge for Bitcoin in the coming months.
How Did We Get Here?
Retail investors typically exhibit a behavior known as FOMO (fear of missing out), where they tend to search for investment options that are currently popular. This behavior is evident in the cryptocurrency market, which tends to become overheated when demand from retail investors skyrockets. This leads to a rapid increase in prices followed by a correction and a cooling off period.
The last such cycle occurred in 2021 when Bitcoin prices were booming, and the retail crowd was actively participating. There were predictions on Twitter of Bitcoin reaching $100,000 per BTC in a few months. However, these predictions did not materialize, and Bitcoinโs value declined, causing retail investors to retreat from the market.
Bitcoin began its recovery in June 2023 when BlackRock filed to launch its own spot BTC ETF. This caught the attention of institutions due to BlackRockโs success rate with ETFs. The sentiment around Bitcoin shifted from skepticism about the SEC allowing a spot BTC ETF to an expectation that it was only a matter of time before approval was granted.
This change in sentiment led to growing hype and rising prices. From June 2023 to early January, Bitcoin surged from under $20,000 to over $40,000. Subsequently, 11 spot BTC ETFs were approved, resulting in a sell-the-news moment. However, Bitcoin continued its upward trend and surpassed $50,000 for the first time in more than two years due to the actual demand for these financial products.
Where Is the Retail?
Despite the involvement of large investors and institutions in Bitcoin, reports suggest that smaller holders have been selling their BTC stash. Google Trends data also indicates that worldwide searches for Bitcoin are not as high as during the 2017 boom, the 2021 bull run, or even the 2022 industry crashes. Apart from a brief spike around the ETF approvals in mid-January, the search volume has barely exceeded levels seen during the 2019 bear market and the 2020 Covid-induced correction.
This lack of retail participation is surprising considering Bitcoinโs price has more than doubled since June 2023. However, there is potential for this to change with the upcoming halving event. Historically, Bitcoinโs price has performed well after each halving, which could attract retail investors to enter the market.
The Impact of Retail Investors
The arrival of retail investors could have a significant impact on Bitcoinโs price and potentially drive it to new all-time highs. Here are a few potential scenarios:
1. Increased Demand: Retail investors entering the market would increase demand for Bitcoin, which could lead to further price appreciation.
2. Market Volatility: Retail investors tend to exhibit herd behavior, causing rapid price movements. This increased volatility could provide opportunities for traders and investors.
3. Mainstream Adoption: The entry of retail investors could contribute to mainstream adoption of Bitcoin and other cryptocurrencies, increasing their overall acceptance and legitimacy.
Hot Take
While Bitcoinโs price has experienced a significant surge driven by institutional interest and approval of spot BTC ETFs, retail investors have yet to participate fully in the market. The upcoming halving event could potentially change this dynamic and result in another price surge for Bitcoin in the next few months. It would be interesting to see if retail investors can trigger a new all-time high for Bitcoin and contribute to its continued growth as a mainstream asset class.
Owen Patter is a distinguished crypto analyst, accomplished researcher, and skilled editor, leaving a notable imprint on the cryptocurrency landscape. As a proficient crypto analyst and researcher, Owen delves into the intricate realms of digital assets, offering insights that resonate with a diverse audience. His analytical acuity is harmoniously paired with adept editorial skills, allowing him to transform complex crypto information into easily comprehensible content.