Investors are holding onto their bitcoin for the long term. That means this comeback could be for real

Published Wed, Oct 6 20212:28 PM EDTUpdated Wed, Oct 6 20213:48 PM EDT

Bitcoin rebounded back above $55,000 on Wednesday , and analysts believe a base may be building for a sustainable rally from here. More investors are becoming long-term holders of bitcoin with fewer running for the exits after the latest pullback, data shows. The volatile digital asset has been on a run, surpassing $50,000 earlier this week , a key threshold that traders see as the door to the next major climb. Katie Stockton of Fairlead Strategies said a breakout above $52,900 could target bitcoin's all-time high of $64,800 and that another pullback "does not seem imminent" based on initial support levels. Michael Rinko, crypto analyst at global macro hedge fund Pervalle Global, and others are optimistic about a price run for the asset in large part based on one key metric: long-term holders. Long-term holders of bitcoin are now at an all-time high and account for more than 80% of the cryptocurrency's circulating supply, according to crypto data and analytics firm Glassnode. These are investors or entities that have held their bitcoin for more than 155 days, a threshold set by Glassnode based on the probability a coin will be sold within the next 14 days as a function of its age. The longer a coin sits dormant, the less likely it is to be spent, Rinko said. "We pay close attention to long-term holders as a cohort because historically they have shown the enviable ability to time market tops," Rinko said. "This cohort is made up of crypto OGs who can usually sense when the market is getting too frothy and are all too happy to offload some bitcoin onto retail at the top of market cycles," he said. "Then, in bear cycles when nobody is paying attention, these long-term holders accumulate bitcoin, which effectively sets a floor for bitcoin's price." Rinko added that since the May crash this year , long-term holders have been "rapidly accumulating at a pace we've never seen before" and that retail investors are "nowhere to be found in the data we're looking at." Institutional investors have shown serious interest in cryptocurrencies for the past year and drove much of the bull run earlier this year. "Institutions want some skin in the game and there's real pent-up demand to participate in this market," BitGo CEO Mike Belshe said. BitGo is a digital asset custody, trading, and finance firm that serves institutions and is set to be acquired by Galaxy Digital by the end of the year. On Tuesday, U.S. Bank said its own cryptocurrency custody service is now available to fund managers . "Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class," said Gunjan Kedia , vice chair of U.S. Bank's wealth management and investment services division. "There are major conservative growth-building funds that can't ignore it anymore," Belshe added. "They're actively in the market, looking to help balance their equity bond funds. Large institutions, traditional players are also looking for regulatory clarity and the comments [Federal Reserve Chairman] Jerome Powell made last week were very well received by these companies." The Fed chairman said in a House Committee on Financial Services hearing last week that he has "no intention to ban" crypto in the U.S.

Dado Ruvic | Reuters