Two weeks ago, few investors expected the price of Bitcoin (BTC) to rise above $ 20,000. In fact, most of them predicted that by mid-2022, or at best by the end of 2023, Bitcoin would have a price of $ 30,000.
This means that many shareholders may be surprised that BTC’s price rose to $ 34,800, just 17 days after it crossed the $ 20,000 mark.
Overall, analysts are expecting a sharp correction that will follow Bitcoin’s 150% rise since November, but there are currently no major indicators to support this view.
Despite the recent bullish euphoria over Bitcoin’s price action, the digital assets faced a massive downturn as the price fell to $ 5,600 in 3 hours. More than $ 1.2 billion in red light recurrences, this type of move usually raises concerns and leads analysts to anticipate a potential reversal.
Every time Bitcoin reaches a new level, investors expect some kind of correction. Although the price did not break the $ 34,500 resistance, the price quickly returned from Jan 4th to below $ 28,000. The accident may have scared some buyers financially, but looking outside the hood is a very optimistic sign.
Over the past week, Bitcoin’s dominance has risen to its highest level since March 2017, reaching 73%. Associated with the move is strong buying activity from institutional investors, including the addition of Grayscale 72,950 BTC in December.
Additionally, investments from MicroStrategy, Ruffer Investment, MassMutual, and SkyBridge Capital are another indisputable evidence of business activity. Hence, BTC has become their preferred and almost exclusive investment choice among cryptocurrencies.
The decline in Bitcoin’s dominance leads to the mini cryptocurrency season
Regardless of the movements of professional traders, retail traders have a huge influence on alt currencies. As such, the rise of Bitcoin has created an opportunity for an alternate season, and the tokens associated with DeFi appear to be the most profitable.
Bitcoin surpassed the top 15 altcoins last week, which rose an average of 9%. Most importantly, the overall volume has increased significantly, removing any doubts about the pumps on weekends or holidays with low market participation.
GBTC is normalized in grayscale
The Grayscale Bitcoin Trust (GBTC) premium peaked at 21% on December 21, but has since been reduced to a 90-day average of 19%. Please note that only eligible institutional clients can purchase shares directly from Grayscale. Other traders need to buy it in the secondary market, so there are some distortions.
Grayscale Bitcoin Trust Premium. Source: TradingView and Grayscale.
This exceptional level can be partly explained by the temporary suspension of the issuance of new shares. If the offer to institutional clients is rejected, the additional need must be met through secondary sales, which creates pressure to increase the premium.
Decision regarding future permanent financing
Professional traders tend to dominate long-term futures contracts with fixed expiration dates. By measuring the amount of the forward contract that is more expensive than the regular spot market, a trader can measure the rate of growth. Futures contracts with a fixed calendar period of 3 months usually trade at a premium of 1.5% or higher compared to regular spot exchanges.
When this indicator turns off or becomes negative, there is an alarming red flag. This situation, also known as a reset, indicates that the market is in a downtrend.
The chart above shows that the index rose above 5% levels, overlapping with overbought levels. However, it is still above 3% despite the recent drop of $ 28,000 on Jan 4th.
As such, the index fell above the 1.5% minimum, indicating the optimism of professional traders. This data is rather positive, as the unexpected flight did not affect the buyers.
On the one hand, if subsequent disposals cause long-term debt contraction, that will be of concern.
Social media has reached its peak
BTC Twitter user activity in relation to US dollar exchange rate. Source: TheTie
TheTie data also shows a recent increase in BTC prices, while tweets related to Bitcoin reached their highest level since December.