Nearly 80% of Crypto Investors Still Net-Invested in Bitcoin

  • Investor interest in bitcoin remains reasonably high.
  • This after a year-long bear market that took BTC's price down well over 80%.

Bitcoin (BTC) investors remain net-invested in the flagship cryptocurrency despite it losing well over 80% of its value during 2018.

Research data published by DailyFX indicates that investors are beginning to take more interest in bitcoin and other crypto-related investments. According to the market research, investor interest in bitcoin was at its highest in November 2018. DailyFX’s research analyst, Fan Xu, explained: 

Bitcoin: Retail trader data shows 77.5% of traders are net long with the ratio of traders long to short at 3.44 to 1. The number of traders net long is 0.4% lower than yesterday and 6.2% higher from last week, while the number of traders net short is 2.7% lower than yesterday and 6.4% lower from last week.

"Traders Are Further Net-Long Than Yesterday"

Despite the seemingly positive outlook for bitcoin, Xu noted the data analysis suggests BTC's price is not likely to recover anytime soon. According to Xu’s market research: 

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger bitcoin-bearish contrarian trading bias.

While it’s difficult to accurately forecast future prices of cryptocurrencies, researchers at Element Digital Assets Management predicted in September 2018 that there was a “serious chance” BTC's price would drop below $3,000.

At the time, bitcoin was trading in the $5,500 to $8,500 range (since July 2018) - which was a sign that short-term traders had been dominating the crypto market. Thejas Naval, the portfolio director at Element Digital Assets, pointed out there are “short-term players that are using structured derivative vehicles with leverage to express intraday speculation.”

Meanwhile, the firm’s quantitative research head, Kevin Lu observed that the crypto market was “in an ultra reflexive state [as it had been] moving within a range in response to seemingly every bit of news.”

Vays: 40% Chance BTC Drops To $1,000-$2,000 

Notably, former Wall Street trader and prominent crypto commentator Tony Vays recently revealed that he thinks there’s an 85% chance that bitcoin has not yet reached a bottom. According to Vays’ analysis and his discussion with well-known analyst Murad Mahmudov, there’s a 40% chance bitcoin’s price will hit a bottom between $1,000 to $2,000. There’s also a 10% chance, Vays noted, that BTC's price could drop below $1,000 as most cryptos are still overpriced.

In addition to bitcoin’s price dropping lower, Vays and Mahmudov predicted that ether, cardano (ADA), bitcoin cash (BCH) and XRP could all potentially trade at significantly lower prices in the coming months.

BlockFi Updates Terms of Service for Its BTC and ETH Interest Accounts

On Tuesday (April 23), FinTech startup BlockFi announced new terms of service for its Bitcoin (BTC) and Ether (ETH) interest accounts, and said that it had made the BlockFi Interest Account (BIA) available in India.

BlockFi, which is based in New Jersey, United States, was founded in July 2017 by Zac Prince (CEO) and Flori Marquez (VP of Operations) and launched in August 2017. Among others, it is backed by ConsenSys Ventures, Fidelity subsidiary Deonshire Investors, Morgan Creek Digital, and Mike Novogratz's Galaxy Digital. 

In April 2018, BlockFi started offering USD loans collateralized by your cryptoassets (Bitcoin and Ether). Roughly six months later, it expanded the range of cryptoassets that it accepts as collateral to Litecoin and stablecoin Gemini dollar (GUSD).

Then on March 4, BlockFi launched the BlockFi Interest Account (BIA):

... users can securely store their Bitcoin or Ether at BlockFi and receive 6% annual interest, paid monthly in cryptocurrency. Interest earned in a BIA compounds monthly, delivering an industry-leading APY of 6.2%. The program has been in private beta since the beginning of 2019 and already holds over $10 million in assets from retail, corporate, and institutional crypto investors."

BlockFi said that this product offered the following advantages over competitors:

  • compound interest
  • institutional backing
  • interest paid monthly in crypto (i.e. in BTC if you have a Bitcoin interest account and in ETH if you have an Ether interest account)
  • no-notice withdrawals

We also found out via the FAQ section of the BlockFi website that although "there is no minimum or maximum deposit for the BlockFi Interest Account," only "deposits over 1 BTC or 25 ETH will accrue interest" and that "6% interest will only be earned on balances below 250 BTC or 7500 ETH."

Sadly, on March 20, some bad news was announced for holders of the BlockFi Interest Account with large balances (over 25 BTC or over 500 ETH). 

BlockFi said that since the launch of the BIA program, it had discovered that "approximately 75% of BIA clients have a balance of less than 5 BTC or 150 ETH," and that the "median account balance is $7,000 USD."

Furthermore, it had seen "unanticipated demand from businesses like crypto hedge funds and VC firms," and realized that these firms open large BlockFi interest accounts "as a way to bolster their returns." 

BlockFi added that "starting April 1st, only BIA balances of up to and including 25 BTC or 500 ETH (equivalent to roughly $100,000 and $70,000 respectively) will earn the 6.2% APY interest rate," while "balances over that limit will earn a tiered rate of 2% interest."

The second bit of bad news—this one affecting everyone not just BTC/ETH whales—was that from April 5, it will be "adding a flat withdrawal fee of 0.0025 BTC and 0.0015 ETH."  

In today's announcement, BlockFi had several interesting things to say:

  • As of April 2019, BlockFi is holding $53 million in crypto deposits for its clients in BIAs, and these funds are earning interest every day.
  • BlockFi is "retroactively" (as of April 1) reducing the minimum balance requirement for the Bitcoin BIA from 1 to 0.5 BTC. It hopes to reduce this minimum balance limit even further in the near future.
  • For Ether BIAs, from now on, only balances up to 250 ETH will earn the higher interest rate (i.e. 6.2% APY), whereas balances over this limit will earn only the lower interest rate (2% APY). BlockFi says that its "ability to pay interest to our clients is based on crypto market lending conditions," and since (1) it needs to "work with institutional counterparties to generate this yield" and (2) "demand for borrowing ETH has dropped" during the past month, its has no choice but to adjust "ETH tier rates" accordingly.
  • The BIA product is now available in India. This brings the total number of countries served by BlockFi to 65.


Featured Image Courtesy of BlockFi