Bitcoin is still trading in a range in the lower timeframes, currently at $54,277. The first cryptocurrency by market cap gains almost nothing on a daily basis, but a massive 23.9% on a weekly basis. Bitcoin back to $64k? why are the bulls winning this time?
The market’s general sentiment has shifted bullish; as investors appear to be anticipating further gains in Q4, 2021, a period that typically favours the bulls.
According to investment firm QCP Capital, BTC’s recent return to the mid $50,000 range was caused by a “short squeeze.” The big move to the upside was triggered by a large number of liquidations in short positions on Chinese crypto exchanges.
Furthermore, QCP Capital discovered that institutions were driving Bitcoin’s reclaim of the $50,000 mark; as evidenced by an increase in Chicago Mercantile Exchange (CME) open interest and; an increase in the premium for these derivatives versus the spot price of BTC. According to QCP Capital:
The unusually large premium indicates an overwhelming amount of outright buying. Both factors combined lead us to believe that there has been large institutional buying of BTC in the past week.
According to the investment firm; additional factors appear to have worked in favors of Bitcoin bulls; including the dissipation of uncertainty surrounding Chinese real estate company Ever Grande; the very likely approval of a BTC ETF based on CME Futures; BTC gaining more prestige as an investment vehicle, and others.
QCP Capital; on the other hand, points out some potential roadblocks that could prevent BTC from reaching previous highs and beyond. First, there is a lot of leverage in the crypto market; as evidenced by the BTC Futures Aggregated Open Interest, which is three times higher than it was in October 2020.
In previous months; when the leverage in the futures sector reaches a certain point, BTC’s price has taken significant downward action. Furthermore, QCP Capital said:
The options market continues to indicate downside nervousness in spite of the spot rally. ETH risk reversals (RR) continue to be skewed to the downside (puts are more expensive than calls). BTC has only just turned from a persistent downside skew to neutral.
What Could Work Out For The Bitcoin Bulls
Bitcoin’s price is expected to fall in the short term, according to QCP. On October 7th; the Tom Demark Sequential, a metric used to determine whether a price move has been overextended in a particular direction; flashed a TD 13 sell signal, as shown below.
According to a separate report by investment firm CoinShares; three factors are lining up for more appreciation in Q4, 2021: regulation, adoption, and the macro environment.
According to the report; the BTC Bulls have some but not all of these three factors in their favour on previous occasions. Concerning regulation; CoinShares believes the United States is “starting to warm to crypto”; as a result of statements made by FED and SEC Chair; Jerome Powell and Gary Gensler, on cryptocurrencies.
Furthermore, the impact of El Salvador on driven BTC adoption may have been underestimated. Following the adoption of the Bitcoin Law; many countries; including Ukraine, Brazil, and Paraguay; have expressed a desire to make BTC legal tender, which could spark a new wave of institutional adoptions. The firm said:
From an institutional perspective, our most recent survey representing US$400bn of assets under management (AuM), highlights growing institutional participation. Average portfolio weightings in digital assets now represent 1.1% of AuM, although this varies considerably across different institutional investor types.
Finally; macroeconomic factors such as high inflation; rising commodity prices, deteriorating labour conditions; and others may continue to be a tailwind for store of value assets such as Bitcoin (BTC). CoinShares said:
(…) it is likely that bitcoin will appreciate against those currencies, even if its purchasing power were to remain stagnant.
Source: NEWSBTC
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