- Bitcoin’s price surge is fueled by institutional demand, growing mainstream acceptance, and a derivatives market boom.
- The derivatives market surge, while driving prices higher, also increases volatility and the risk of liquidations.
- ETF inflows have approached $2 billion in three days, further boosting Bitcoin’s rally.
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Bitcoin prices continue to rise and print fresh highs as speculation continues to grow around a favorable outlook toward crypto from the incoming Trump administration. To further support these rumors, leaks about a potential White House crypto expert appointment and rumors of Trumps social media companies interest in a buyout of crypto trading firm Bakkt has aided the rally.
The Crypto Fear and Greed index shows markets are in a period of extreme greed.
Source: FinancialJuice
The question is whether this will lead to pullback or are we set for more gains in the coming weeks?
Bitcoin’s Impressive Climb Amid Derivative Market Surge
One big reason Bitcoin’s price has gone up is because institutional demand continues to rise.. They’re putting a lot of money into Bitcoin, which makes it more trustworthy. For example, MicroStrategy has bought a lot of Bitcoin and made a good profit as its value has increased.
The way the market works also helps. More people are accepting Bitcoin as a real type of investment. Since there’s only a limited amount of Bitcoin available and more people want it, the price keeps going up on the basic rule of supply and demand.
The derivatives market is a big factor in Bitcoin’s price increase. Bitcoin’s Open Interest, which shows how many contracts are active, has reached $63 billion. This is a record amount and is much higher than in 2021 when it was over $20 billion. Back then, Bitcoin’s price was at its highest, around $69,000.
Source: Coinglass
The derivatives market surge does pose risks however with volatility expected to be higher and price swings a more common occurrence. This is simply down to leverage with wild price swings likely to lead to an increase in liquidations.
Over the past 24 hours, liquidations have totaled $450 million with around 60% of this coming from short positions. The old adage rings true for Bitcoin as well, ‘the trend is indeed your friend’.
ETF Flows Surge Approaches $2 Billion in Three Days
ETF flows have only increased over the past few days with a total nearing $2 billion over the period 18-20 November. Since November 1, Bitcoin ETFs have only experienced 5 days of outflows with 9 days of inflows.
The rise in ETF adoption is likely to continue now given the hype around the Trump Presidency and his perceived pro crypto stance. If the ETF flows continue to grow it is likely that we have not seen the last of the current Bitcoin rally.
Source: Coinglass
Technical Analysis BTC/USD
Bitcoin (BTC/USD) is on a tear this week in particular, having traded just below $90k handle on Monday.
Since then, we have had 3 consecutive days of gains boosted by a combination of factors. The difficult part about the technical outlook is that there is no historical price action to base any analysis off.
As we discussed earlier in the article, there is the risk of swings due to the surge in the derivatives market. Looking at the RSI, it has been in overbought territory since Bitcoin has breached $75k. Another sign that despite the RSI being in overbought territory there is no guarantee that a pullback will materialize.
For now, immediate support is at 95000 with a break lower eyeing a move toward 91804 and then the 90000 psychological level.
Looking at a move to the upside and the 100000 mark could lead to some wild price swings as market participants may eye some profit taking as well. Beyond this at the moment, I will be keeping an eye on the round numbers/psychological numbers around 105000 and 110000.
Bitcoin (BTC/USD) Daily Chart, November 21, 2024
Source: TradingView.com (click to enlarge)
Support
- 95000
- 91804
- 90000
Resistance
- 100000
- 105000
- 105000
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Zain Vawda
He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.
He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
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