Bitcoin Price Will Rise in 2023, So Why Are Retailers Waiting on the Sidelines?

The total market capitalization of the cryptocurrency market surpassed $1.55 trillion on December 5. Notably, this milestone marked a 19-month high, propelled Bitcoin to become the world's ninth-largest traded asset, surpassing Meta's $814 billion capitalization.

Despite the recent bullish pace, analysts note that retail demand has remained relatively stagnant. Some attribute this inflationary environment to falling interest rates, with interest rates hovering above 5.25 percent. While columnist Rajat Soni's post may have dramatized the situation, the gist is essentially true.

Retail investors are not paying attention to #bitcoin.

They worry more about whether they will be able to pay the rent or put food on the table.

Maybe they'll start focusing on the next peak (IMO sometime in 2025) and go somewhere before FOMO…

— Rajat Soni, CFA (@rajatsonifnance) December 2, 2023

Several U.S. economic indicators recorded record highs, including wages, salaries and household net worth. However, analyst Ed Yardeni pointed out that the “Santa Claus parade” may be early this year, with the S&P 500 gaining 8.9% in November.

This increase reflects declining inflation and strong employment data. Yet, investors are cautious, with nearly $6 trillion of “dry powder” sitting on the sidelines in money market funds.

Did Retailers Miss Out on Bitcoin and Ether's Recent Profits?

In the absence of a reliable indicator to track retail engagement in cryptocurrencies, a comprehensive dataset is necessary to draw conclusions beyond relying solely on Google Trends and crypto-related app download levels. In order to determine if retailers have missed the mark, it is important that the indicators are aligned with various sources.

The Tether (USDT) premium in China serves as an important measure of retail demand in the crypto market. This premium measures the difference between the yuan-based peer-to-peer USDT trade and the US dollar rate. Overbought activity puts upward pressure on premiums, while bear markets often witness USDT flooding into the market, with declines of 3% or more.

On December 5, the USDT premium against the yuan reached 1%, a slight improvement from previous weeks. However, it remains in neutral territory and has not breached the 2% limit for more than half a year. While the retail flow is attracted to Bitcoin or altcoins, China-based investors should mainly convert money into digital assets.

Turning the focus to Google Trends, searches for “buy bitcoin” and “buy crypto” show a stable pattern over the past three weeks. While there is no definitive answer to satisfy the needs of new retail traders, these questions typically center on how and where to buy cryptocurrencies.

Notably, the current 90-day index is close to 50%, showing no signs of improvement in the near future. This data seems counterintuitive, considering that Bitcoin is up 53 percent over the past 50 days, while the S&P 500 is up 4.5 percent over the same period. Importantly, over the longer term, current search rates are below the all-time high of 90% in 2021.

Related: Why Is Bitcoin Price Rising Today?

Finally, it is important to dive into the derivatives markets, especially perpetual futures, which are the preferred instrument for retail traders. Also known as reverse swaps, these contracts have an embedded price that increases every eight hours. A positive funding rate indicates strong interest in longs (buyers), while a negative rate indicates shorts (sellers) are looking for additional leverage.

Weekly funding for most coins fluctuates between 0.2% and 0.4% on a weekly basis, indicating that demand for leverage is slightly higher in the long term. However, during bullish times, this measure can easily exceed 4.3%, which is currently not among the top seven coins in terms of futures open interest.

At present, the influx of retail participants in this cycle is still not easy, especially given the overly optimistic new arrivals. While some analysts point to Coinbase's app trend, it's important to consider that Binance is currently under scrutiny from regulators, with founder Changzheng Zhao facing potential legal issues. Therefore, existing retailers may migrate from offshore exchanges to Coinbase instead of heralding a wave of new crypto enthusiasts.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.