The start of February has brought yet another batch of evidence supporting the notion that the ongoing surge of crypto prices has deep institutional roots. Ignited by market whisperer Elon Musk and his Tesla’s announcement of a $1.5-billion Bitcoin position, the bullish cycle was reinforced by further news coming from the likes of Mastercard, Amazon and BNY Mellon.
The level of interest around the industry is certainly rising, as Bitcoin’s (BTC) price is rapidly becoming a widely discussed topic on most finance-oriented TV stations. With large corporate players at the helm of the rally, is the public firmly in the back seat, or does it have a say in how long the party will last?
The power of community
The power of corporate players to move crypto markets comes from two interrelated sources: their own capital invested in digital assets and the capacity to lead public sentiment, often by their own example.
Some companies wield greater social clout than others due to factors such as founders’ personal charisma or the brand’s public visibility. In Tesla’s case, these two have come together, resulting in the explosive effect we observed last week.
According to Nisa Amoils, partner at tech-focused rolling fund A100x, the fact that Tesla’s move was so consequential for the digital asset markets is no coincidence. Amoils told Cryptox that “Tesla and Bitcoin have more in common than meets the eye, and it’s not only volatility,” adding further:
“They both have communities — almost religion — behind them, and this is an important trend to watch that we also see in certain protocols and DeFi. Elon speaks to both retail and institutional this time, and he timed it right after the GameStop retail push.”
Amoils anticipated more corporate copycats emerging in the short term, along with continued price movement. In the long term, in her opinion, the recent parade of institutional validation will contribute to solidifying Bitcoin’s status not as just an investment tool but as a medium of exchange as well: “A unique asset with multiple functions.”
Speaking to both “retail and institutional” appears to be central here. Tesla’s move has been so impactful because of the automaker’s unique position as both a high-cap tech firm and a popular brand with a significant social following. This is a reminder that institutional forces can elicit the largest effects in today’s financial markets when they sweep the crowd along.
Sentiment is king
Main street investors are not just a bunch of movie extras silently watching as financial institutions and big corporations inflate asset prices as they will. For one, potential retail investors in the United States alone are sitting on a pot of money roughly equal to the entire crypto market’s capitalization, and that money is waiting to be deployed.
Pat LaVecchia, CEO and co-chairman of digital securities marketplace Oasis Pro Markets, commented to Cryptox that the combination of disposable savings and the fear of missing out on the price move could instigate more people to enter the industry:
“U.S. households have accumulated around $1.6 trillion in excess savings over the last year, per Oxford Economics data. With people at home looking at new asset classes, since interest rates are so low, it could fuel more interest [in cryptocurrencies]. As institutional sentiment grows and the general public sees major institutions jumping in and legitimizing Bitcoin, then we may see FOMO kick-in for those who are still on the sidelines.”
Taking this line of reasoning even further, a direct consequence of the current institutionally driven rally, or the next one, could be the influx of new individual investors on a large scale. Sooner or later, many iterations of this process should result in digital assets reaching the holy grail of mass adoption.
Following public sentiment around crypto is, therefore, no less integral than tracking institutions’ moves. So far, things have been looking good on this front. Joshua Frank, co-founder and CEO of crypto data provider The Tie, told Cryptox that Twitter activity on Bitcoin has surged to an all-time high in the wake of the Tesla news.
Furthermore, Bitcoin’s daily sentiment score, which measures how positive or negative conversations on a subject have been over the last 24 hours compared to a rolling 20-day average, reached a yearly high. These metrics show that in the short term, Twitter users’ mood has been extremely bullish.
Metrics of long-term sentiment looked promising as well. Frank went on to add that Bitcoin’s long-term sentiment score, which measures how positive investors have been on the asset over the last 50 days compared to the past 200, jumped markedly, reaching the value of 75 out of 100. Frank explained to Cryptox:
“A consistently positive long-term sentiment score means that investors continue to become more positive about Bitcoin, and this increasing sentiment was furthered by the TSLA news.”
If Tesla’s example will indeed inspire a stampede of big corporate followers, the future of money might come even sooner than expected. On the other hand, the crypto market may still be too volatile and unpredictable for some of the legacy firms to enter. As such, it could be the case of a gradual entrance rather than a one-day revolution.
