2024-02-16 20:35:58
Bitcoin has managed to post double-digit gains recently, ignoring gains in the dollar index and Treasury yields. And with this, the digital device managed to show flexibility in a completely new macro environment, which can open new doors.
The week’s most important cryptocurrency news in one place
Now that bitcoin (BTC) has risen to nearly $53,000, the digital asset’s largest corporate owner, MicroStrategy, has seen its Bitcoin fortune jump above $10 billion. The company, which at the end of January already had 190,000 bitcoins, accumulated a profit of more than 4 billion dollars.
The increased willingness of crypto-investors to take risks is well illustrated by the case in which an investor paid $113,000 in gas fees to try to pocket a good amount of profit on a newly launched ERC-404 token. In the first round, the investor sent 10 ether to the address of a smart contract, which was then followed by a series of transactions and thus he finally got 30 NO tokens. However, the NO token showed a huge drop and collapsed in 35 minutes.
Former PayPal CEO Peter Thiel bought $100 million worth of BTC. The Founders Fund, founded by the former PayPal CEO, invested $100 million in bitcoin in the late summer and early fall of 2023, when the cryptocurrency was still under $30,000. The venture capital company allocated $200 million to buy bitcoin and ethereum in equal proportions.
Ledger has integrated Coinbase’s payment system, i.e. Coinbase Pay is now directly available on Ledger From the Live application. In this way, users can transfer the crypto purchased on Coinbase to Ledger to their hardware wallet without paying additional fees.
How is the rise in the price of Bitcoin happening now?
Bitcoin (BTC) has risen 35% since January 23rd, pushing the price above $52,000. And in just a few weeks, it has already made double-digit gains following the launch of Bitcoin ETFs. But the latest move stands out because it came amid a resurgent US dollar index (DXY) and rising Treasury yields.
The DXY index, which measures the exchange rate of the greenback against major fiat currencies, strengthened by 3% this year, the index was able to show a 1% gain since January 23.
During the previous periods, bitcoin was negatively correlated with the US dollar and could show a sharp rise only during the weakening of the dollar. For example, DXY fell 2% below 90 points in February 2021, when bitcoin rose above $50,000 for the first time.
As the global reserve currency, the US dollar is outsized in the international financial market. Thus, the strengthening dollar has also led to financial tightening around the world, deterring investment in risky assets such as technology stocks, cryptocurrencies and commodities such as gold.
Likewise, a rise in the 10-year U.S. Treasury yield, or the so-called risk-free rate, tends to encourage outflows from other assets. The yield increased from 4.10% to 4.26% in three weeks, and the higher-than-expected US inflation data worsens the probability of an early interest rate cut by the FED.
Increased demand may be behind Bitcoin’s resilience
Bitcoin’s resilience likely stems from strong inflows into US exchange-traded funds. Nearly a dozen ETFs began trading in the U.S. on Jan. 11, and since then the assets have accumulated roughly $5 billion in net inflows.
The fact that the price of BTC did not fall along with the jump in DXY and US yields is due, among other things, to strong ETF capital inflows. So the buying pressure has offset the usual selling pressure, and it looks like this situation is only getting stronger.
In addition to the ETF, demand also appeared from another direction.
We can see many more safe haven countries in recent times. Demand for Bitcoin has increased again from regions like China and Nigeria. We are also likely to see on the exchange rate that certain speculative capital is driving forward the growth of the investor base.
Bitcoin is unfailingly popular as a safe haven currency
China, the world’s second largest economy, is facing deflationary pressures, a real estate crisis and a stock market crash. According to Reuters, Chinese citizens have started turning to Bitcoin amid a stagnant economy. Likewise, Nigeria’s ongoing currency crisis and rampant inflation are also fueling demand for cryptocurrencies.
Bitcoin has always been a safe haven for some. For some, it is a new technological toy, and for others it is just a risk tool. And the demand coming from several directions explains the increasing pressure towards cryptocurrency. The appearance of ETFs does not actually change this, they only act as a channel.
Meanwhile, according to QCP Capital, the CME’s decision to increase the margin required to trade bitcoin futures may have also contributed to the bitcoin rally.
“This has become an important factor in volatility recently. In this case, leveraged players went short, and the new requirement resulted in widespread short covering during a relatively illiquid Chinese New Year weekend. This pushed both spot prices and futures higher. Futures spread trading in BTC has now risen to around 11-12% per annum,” said QCP on X.
The Ichimoku cloud indicates further upside
Traders continue to hold on to all-time highs. Currently, resistance around $52,000 is the battleground. The Ichimoku cloud pattern is currently showing a rare bullish setup on weekly timeframes, and BTC price is breaking through key resistance levels on the upside at these moments.
Analyst Titan of Crypto has suggested that the extreme bull market momentum could push BTC/USD up another 6% in the coming week.
Uploading the weekly chart with data from the Ichimoku cloud outlined an upside target with two milestones yet to be achieved.
“Target levels 1 and 2 have already been reached by the price, but $50,900 is a strong level. If Bitcoin manages to close a weekly candle above this level, target #3 will follow at $55,400,” reads part of the accompanying commentary.
However, one must beware of overheating the market
However, it is worth keeping an eye on the growing greed around Bitcoin.
Looking ahead, concerns about a potentially overheated market have emerged in connection with the downward progression of the BTC price.
In a long X-post, trader and analyst Credible Crypto warned that even if all-time highs are broken and BTC/USD crosses $100,000, the chance of a momentary correction continues to grow.
This is part of the natural market dynamics. Despite significant capital inflows into bitcoin exchange-traded funds (ETFs), nothing can only go up indefinitely.
At the end of the day, any major parabolic rise is accompanied by a major crash, and of course the reverse is also true.
Greed at the level of euphoria is accompanied by a vertical rise in prices, and then the opposite reaction cannot be left behind when this euphoria peaks and dies out.
Although the fear and greed index of bitcoin is currently only in the zone of greed, the 72-point level is not far from the extreme level. In addition, the graph has already been here once this week.
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