JdB42 - EN : Knocking on heaven's door
BTC has managed to regain the $60K area and is preparing to test its ATH. A moderately bullish spot market contrasts with the resurgence of derivative market activity.
The price of Bitcoin has soared by 15%, after forming a weekly low of $53,821. Starting this week with a new high of $62,523, the market is building a key phase in its cycle.
We can see the summit
In recent days, BTC has broken through several price caps as it accelerated. Whether on a 14, 28 or 140 day basis, the spot gradient indicates that the price has been building positive momentum between $50K and $60K.
It can be seen, however, that the recent acceleration in the spot price has not affected the realized price, which is currently printing a timid trend.
Now free of another resistance zone, the price of BTC is sitting above more than 90% of realized volume. 3 volume clusters are likely to act as support in case of a correction.
On the other hand, there is almost no resistance to the upside since very little BTC has historically been traded at such high prices in the past.
Fact : over 95% of the outstanding supply can currently realize a profit.
But while the current price level is creating a selling incentive for some individuals, we notice via the NRPL that profits made during the past week are down slightly.
The continued rise in the NUPL since Sept. 30 indicates an increase in latent profits, a sign that many long-term investors are expecting BTC to have a greater value to sell - or never to sell.
Sitting on their treasure after accumulating tokens through the entire summer, several cohorts including HOLDers and LTHs does not seem to be taking advantage of the current market configuration to exit their positions.
Still, it appears that a few BTC (probably about 3 months old) have been sold as aSOPR works to build a steady rise.
It is also worth noting that the number of small holders (entities holding 0.01 BTC to 0.1 BTC) is back towards the levels reached before the May correction.
CAUTION: On the Bitcoin network, 1 address ≠ 1 entity. Indeed, one entity can generate and use multiple addresses and multiple entities can also control one same address.
I'm taking a quick shortcut here because I just want to draw your attention to a global trend:
Addresses holding 0.01 BTC to 0.1 BTC are back to the ATH level established in mid-Av.
Addresses holding more than 100 BTC are clearly increasing (+ 1.27%) since Sept 15.
This means that around the $60K mark, the attention and interest of several cohorts of investors is growing towards Bitcoin.
Many are choosing to wait for BTC to break its ATH and enter a price discovery phase.
We’re still early
Although there are many players in the market today who are animated by a strong HODL behavior, it is very likely that we are only at the beginning of an euphoric phase.
Analyzing the interest scores of cryptocurrency-related searches (specifically Bitcoin), we can identify one salient fact: the search term ''Bitcoin'' is not decreasing.
While this score had exploded and then dropped rapidly during the mania phase of the 2017 bull run, a different trend has been emerging since the end of 2020.
Indeed, after a rapid growth, the interest score towards Bitcoin has remained above 25 threshold during 2021.
Simply put: a lot of attention is being paid to the cryptocurrency sector. As the price approaches ATH, it is possible that more and more eyes will be on Bitcoin.
However, it is my opinion that the real euphoria phase will begin long after BTC passes $64K.
It will be on the way to $80K and then $100K that the media will get hold of the matter and publish all sorts of writings about the rising prices.
This is when FOMO will take over and when we should see a sharp rise in interest in Bitcoin on search engines.
This is also when we will see the exchanges flooded with stablecoins and fiat while their BTC reserves shrink further.
Overall, these reserves seem to be in good shape at the moment. For the 2nd time since the May correction, the supply of BTC held by exchanges has remained stable on a 30-day basis.
After a strong period of decline since August, the exchanges saw their total supply reach a low of 2.46M BTC.
I repeat : 2.46M BTC. Only 12% of the outstanding supply of BTC is still available on the exchanges.
While the accumulation has slowed since October, I wouldn't be surprised if the following 2 scenarios occur in the near future:
Slight wave of deposits on exchanges as some participants make profits around the ATH.
Strong wave of outflows to wallets of new participants as BTC enters its price discovery phase.
This cycle is far from over and the best is yet to come.
The funds held by ETFs and companies give us this same impression.
While the supply held by these 2 groups nearly doubled between April 2020 and January 2021, it has been moving slowly since.
Overall, ETF supply is down slightly while corporations have been slowly accumulating BTC, even during the May correction.
Overall, these groups of institutions and corporations are not providing substantial demand at this time but may wake up in the near future.
Caution: derivatives markets are heating up
This market environment is giving sellers a hard time as the price rises and they are experiencing liquidations of their short positions.
Since Spet. 30, a total of $193.2 million has been taken out of the hands of individuals attempting to bet on the decline of a Bitcoin in the midst of a supply shock.
It is not a good idea to use excessive leverage at this stage.
The reason I am so cautious is because we have understood the risks involved when derivatives markets get out of control.
When derivatives markets are overexposed to risk, it doesn't take much for the price, if it reverses, to surprise traders and liquidate their positions.
Furthermore, a bull run dominated by derivatives market traction is not appropriate to initiate a viable bull run continuation.
After all, high futures volumes may impact the short term price action but strong hands will set the floor.
So far, the total amount of funds allocated to open futures contracts has grown by 9.3 billion (+47%) in less than a month and exceeds the April level (16 billion).
Institutional investors are resuming their activity and the funding rate for perpetual contracts has been positive and increasing for 22 consecutive days.
Expect volatility in the coming weeks.
Nasdaq's approval of the first U.S. ETF will lead to others and the excitement created by the approach of the ATH may quickly create a FOMO effect or a cascade of liquidations.
To Sum Up
Overall, Bitcoin's market structure is bullish:
After a strong acceleration, price momentum is declining around its ATH.
Very little resistance in terms of realized volume in the spot market.
Some LTHs are taking profits but are not looking to exit the market permanently.
Whether the price rises or falls, attention to the cryptocurrency market remains stable although more spot demand would be desirable to create constructive price action.
Derivatives markets are heating up and indicating bullish sentiment following the damage done by sellers over the past month.