Bitcoin has outperformed significant financial assets and hit a historic level of $35,776 on 6 January. Regarding last night’s price momentum of Bitcoin, many financial analysts, including those from on-chain analysts, are upbeat on the digital asset’s short-term uptrend. However, a small number of them concur that the uptrend has started to display heating signals, yet, the digital asset is not over purchased.
The significant factor propelling the price momentum is the constant rise in demand for Bitcoin from institutional investors and on Coinbase. The biggest cryptocurrency exchange in the US, Coinbase, recorded $100 premiums within the previous week. This implies that concerning Binance and other big cryptocurrency exchanges, the digital coin has registered great prices when trading on Coinbase. Still, this also displays an expanding demand for the digital coin from wealthy investors and mass institution acceptance try a Bitcoin trading app.
Bitcoin price surged last night, gaining about $10 percent in less than 24 hours. On-chain analysts expect Bitcoin price to surge further in view that on-chain figures reveal the market may heat up if the digital asset follows past bull patterns.
Short-Run Bearish Case for Bitcoin
The short-run bearish case for Bitcoin boils down to two easy determinants; low liquidity and the decelerating institutional hoard. The digital coin’s futures market has recorded a historic level of $11 billion in open interest. This indicates that a significant number of investors are counting on the Bitcoin price to increase the momentum in the short run.
If there is higher open interest in the futures market, then the possibility of a short and long-term press increases. Basically, a long term press occurs if many buyers are compelled to trade their assets when the Bitcoin value declines since they are mostly on edge to get loans to trade the digital asset. Therefore, if the Bitcoin price declines to a particular level, many buyers are forced to liquidate.
The challenges mostly arise if the liquidations occur respectively, leading to a cascade. For instance, if $34,000 is the liquidity level for the long contracts applying 10 times leverage when the digital coin declines, this may lead to a liquidation of similar long contracts that started at around $35,000. Therefore, when this pattern proceeds, cascade liquidity may cause a price correction of the asset.
Additionally, a similar determinant that may lead to a price correction of Bitcoin on a short run basis is whether the digital coin’s institutional hoard will decelerate. According to CryptoQuant CEO Ki-Young JU, he considers Bitcoin may hit a local top when the buyer propelled demand on Grayscale stalemates.
Moreover, another significant aspect of the digital coin’s institutional view is the Grayscale Bitcoin Trust, which is mainly the initial gateway of many institutional investors in the US. Therefore, when cash proceeds into the Grayscale Bitcoin Trust decelerate, this may display a reduced institutional demand for Bitcoin.
Mr. JU also expressed that Bitcoin requires more institutional engagement for the digital coin to keep the uptrend momentum and undergo a smaller price correction.