Bitcoin’s (BTC) price keeps going up in December. It seems the bullish season is here with us. But, retail investors are yet to pile in. What is holding them back?
The total market capitalization of the crypto market increased to exceed $1.55 trillion on December 5, 2023, supported by impressive weekly gains of 14.5% for Bitcoin (BTC) and 11% for Ether (ETH). Interestingly, the milestone, marking the highest level in 19 months, pushed Bitcoin to become the world’s ninth-biggest tradable asset, exceeding Meta’s $814 billion capitalization.
Despite the strong bullish momentum, analysts have noted that retail demand is still relatively stagnant. Some believe the stagnation is caused by an inflationary environment and decreased interest in credit, given that interest rates keep hovering above 5.25%. While the analyst Rajat Soni’s post seems to have dramatized this situation, the underlying, essentially, remains true.
Retail investors aren't paying attention to #bitcoin.
They are more worried about whether or not they will be able to pay rent or put food on the table.
They will likely start paying attention near the next top (IMO sometime in 2025) and they will FOMO into a position before…
— Rajat Soni, CFA (@rajatsonifnance) December 2, 2023
Multiple United States economic indicators have exploded to record highs, including salaries, wages, and household net worth. Nonetheless, analyst Ed Yardeni suggested the “Santa Claus rally” might have happened already earlier this year, with the S&P 500 gaining 8.9% in November.
This increase highlighted dropping inflationary pressures and massive employment data. Yet, the investors in the retail category remain cautious, with nearly $6 trillion in ‘dry powder’ parked in money market funds, just waiting on the sidelines.
Related:Bitcoin Set For The Best November Since 2020
Did Retail Investors Miss Ether’s And Bitcoin’s Recent Gains?
Without any dependable indicator to track the level of retail participation in cryptos, an extensive data set is needed for making conclusions, beyond only analyzing Google Trends And crypto-related app download rankings. To determine whether retail traders have missed out on the rally, these indicators must align across different sources.
The premium of Tether (USDT) in China is considered an important gauge of retail demand within the crypto sector. This premium quantifies the difference between peer-to-peer USDT trades based on yuans and the value of the United States dollar. Excessive buying activity normally exerts upside pressure on the premium, while bearish markets mostly see an influx of USDT into the market, resulting in a 3% or greater discount.
On December 5, the USDT premium relative to the yuan reached 1%, a small improvement from the past weeks. Nonetheless, it remains within a neutral range and has not breached the 2% threshold for more than six months. Whether retail flow moves towards Bitcoin or altcoins, Chinese-based investors mainly have to change cash into digital assets.
Google Trends And Other Analyses
Shifting the attention to Google Trends, searches for “buy Bitcoin” and “buy crypto” highlight a stable pattern over the last three weeks. While there is no definitive answer to what catches the attention of new retail traders, the queries normally revolve around how and where to buy digital assets and cryptos.
Interestingly, the current 90-day index stands at nearly 50% and shows no signs of recent improvement. That data appears counterintuitive, considering that Bitcoin has gained 53% in the last 50 days, while the S&P 500 has surged by 4.5% during the same time. Essentially, when viewed over a longer time frame, the current search levels remain a strange 90% lower than their all-time highs in 2021.
Related:U.S. Interest in Bitcoin Plummets According to Google Trends
Ultimately, it is important to review the derivatives markets, particularly perpetual futures, which are the preferred instruments for retail traders. Also called inverse swaps, the contracts feature an embedded rate that accumulates every eight hours. A positive funding rate highlights an increased demand for leverage by longs (the buyers), while a negative rate indicates that shorts (sellers) are looking for extra leverage.
Despite bullish trends, the weekly funding rates for the top seven coins, reflecting leverage demand among longs, remain modest at 0.2% to 0.4%, avoiding the high levels seen during strongly bullish periods, presently staying below 4.3%.
Today, the influx of retail investors in this bull cycle remains highly elusive, mainly in terms of new entrants showing extensive optimism. While some analysts point to the trend seen in the Coinbase app, it is crucial to consider that Binance is under massive scrutiny from regulators, with its founder Changpeng Zhao facing possible legal issues.
On that note, the existing retail traders may have shifted from offshore exchanges to Coinbase, instead of signaling a new wave of crypto enthusiasts.
