As a seasoned analyst with over two decades of experience in the financial markets, I’ve seen my fair share of bull and bear runs. The recent 9.4% rally of Bitcoin to above $100,000 has caught my attention, reminding me of the dot-com bubble days when everyone was clamoring for the next big thing.
On December 4th to 5th, Bitcoin (BTC) experienced an unexpected 9.4% jump, driving its price past $100,000 to a record-breaking new high. This sudden increase sparked a flurry of interest from buyers using leverage, causing traders to ponder if the surge is sustainable and speculate about the strategies of large investors (whales) and market manipulators.
The premium (basis rate) for Bitcoin futures last surpassed 20% annually compared to spot markets was on March 24, which coincided with Bitcoin reaching and exceeding $70,000. Earlier, even when Bitcoin hit its peak of $73,757 on March 13, the premium for Bitcoin futures still fell short of 20%.
As an analyst, I’d rephrase it as follows: Traders often utilize leverage for short-term transactions, and a yearly premium of 40% equates to just about 3.8% over a 40-day period. Given cryptocurrency investors’ optimistic outlook on price fluctuations, the current 20% basis rate shouldn’t cause alarm, particularly after Bitcoin surged by approximately 46% in the last 30 days.
Identifying the specific cause that propelled Bitcoin to reach $103,844 is difficult due to multiple factors influencing traders’ optimism. On December 4, it was reported that President-elect Donald Trump chose Paul Atkins, a known supporter of cryptocurrencies and former Securities and Exchange Commissioner, as the potential head of the agency. This appointment could have positively impacted Bitcoin’s price by creating a more favorable regulatory environment for digital currencies.
As a crypto investor, I found it intriguing to see the contrasting views from global leaders on the same day. Vladimir Putin, the Russian President, expressed his admiration for Bitcoin’s resistance to censorship, deeming it “inevitable.” On the other hand, Jerome Powell, Chair of the US Federal Reserve, acknowledged Bitcoin as a competitor to gold, despite its speculative nature. Both perspectives highlight the growing influence and potential impact of this digital currency on traditional financial systems.
Even for those who believe Bitcoin should not be used as a store of value due to its volatility, its $107 billion spot exchange-traded fund (ETF) market is too significant to overlook. Similarly, MicroStrategy, the publicly traded company that has been issuing shares and debt to acquire Bitcoin, is expected to join the Nasdaq-100 index in 2025.
The possibility of MicroStrategy joining the Nasdaq-100 index could boost Bitcoin’s value, since this would allow passive investment funds tracking the index to invest in MSTR shares, thereby increasing their indirect ownership of Bitcoin assets and potentially fueling market interest and demand for Bitcoin.
Bitcoin options market signals continued confidence in bullish trend
To determine if professional Bitcoin traders exhibit excessive confidence, it’s beneficial to scrutinize the options trading market. In contrast to futures contracts, options allow traders to participate in both call (buying) and put (selling) positions. By studying the discrepancy between demand, we can gather insights into the overall market sentiment, which can be a valuable tool for analysis.
From December 2nd onward, put options at Deribit have trailed call options by about 48%, a pattern consistent with previous weeks. This trend suggests that derivatives markets may not have been the primary factor fueling Bitcoin‘s surge past $100,000. Instead, it seems that traders are optimistic about the possibility of more price increases.
Bitcoin is vulnerable to external influences, as investors express concerns that the world economy might be at a halt. Although there’s no immediate threat like a housing market crash or tech bubble burst, the stock market’s evaluation poses a risk if profits remain stagnant. Over time, when fear prevails, investors often sell their successful investments, which may potentially decrease Bitcoin’s value.
Brian Leonard, a portfolio manager at Keeley Teton, stated on Dec. 5 that while Bitcoin currently holds record levels, there’s not much excitement or overconfidence surrounding it. He explained that in the past, such records were often accompanied by more reasonable valuations. Essentially, this suggests that Bitcoin’s immediate path may still be connected to traditional financial markets.
As a fellow crypto enthusiast, I want to clarify that this write-up serves as a general guide and should not be construed as legal or financial advice. The personal insights, perspectives, and viewpoints shared here belong solely to me and may not necessarily align with those held by CryptoMoon. Always remember to conduct your own research and consult professionals when making investment decisions.
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2024-12-05 22:10