Two weeks ago, few investors had expected Bitcoin (BTC) prize to collect higher than $ 20,000. In fact, most had predicted a BTC price of $ 30,000 by mid-2022 or at best the end of 2023.
This means that many holders were likely caught off guard when the BTC price rose to $ 34,800 just 17 days after crossing the $ 20,000 mark.
Overall, analysts expect a sharp correction after Bitcoin’s 150% gains since November, but currently there are no fundamental indicators to support this view.
Despite the recent bullish euphoria surrounding Bitcoin’s price action, the digital asset fell significantly as the price fell USD 5,600 in 3 hours. More than $ 1.2 billion in liquidations followed that red candle, and typically this kind of move would raise the alarm and lead analysts to predict a possible trend reversal.
Every time Bitcoin makes a new high, investors expect some form of correction. Despite failing to break the USD 34,500 resistance, the price quickly bounced off the below USD 28,000 dip on January 4. This event may have spooked some buyers money, but if you look under the hood, it’s a very optimistic sign.
In the past week, Bitcoin’s dominance rose to its highest level since March 2017, reaching 73%. Significant buying activity from institutional investors is associated with the movement, including Grayscale addition of 72,950 BTC in December.
In addition, investments from MicroStrategy, Ruffer Investment, MassMutual and SkyBridge Capital are further indisputable evidence of the institutional influx. Thus BTC becomes their favorite and almost exclusive investment option among cryptocurrencies.
Bitcoin’s decline in dominance triggered a mini altcoin season
Regardless of the moves of professional traders, retailers have a huge impact on altcoins. Hence, the Bitcoin rally created an alt season opportunity and DeFi-related tokens seem to benefit the most.
In the past week, Bitcoin outperformed the top 15 altcoins, which rose 9% on average. More importantly, the overall volume has skyrocketed, dispelling any doubts about weekends or low-market holiday pumps.
Grayscale’s GBTC premium is normalized
The Grayscale Bitcoin Trust (GBTC) premium peaked at 41% on December 21, but has since adjusted to the 90-day average of 19%. It is worth noting that only qualified institutional clients are allowed to acquire shares directly from Grayscale. The rest of the traders have to buy it in the secondary market and this is the reason for some of the disruptions.
This extraordinary level is partly explained by the temporary suspension of the issue of new shares. By discontinuing supply to institutional clients, any additional demand must be met through secondary sales, creating pressure for a higher premium.
Perpetual futures funding remains stable
Professional traders tend to dominate longer-term futures contracts with fixed expiration dates. Thus, by measuring how much more expensive futures are compared to the regular spot market, a trader can measure their bullishness level. The fixed calendar 3-month futures usually trade at a premium of 1.5% or higher over regular spot exchanges.
Anytime this indicator fades or goes negative, it’s an alarming red flag. Such a situation, also called backwardation, indicates that the market is turning bearish.
The chart above shows that the indicator briefly held levels above 5%, flirting with overbought levels. Nonetheless, it holds more than 3% despite its recent drop below $ 28,000 on Jan. 4.
Hence, the indicator has maintained above the 1.5% minimum threshold, indicating optimism from professional traders. This data is slightly positive as the recent unexpected fluctuation has not shocked buyers.
On the other hand, if tiered liquidations had caused the lung to deleverage, this would have been worrisome.
Social network activity spiked
Data from TheTie also shows that a recent price hike for BTC occurred as tweets related to ‘Bitcoin’ hit their highest level since December 2017.
While a significant surge in Twitter activity doesn’t necessarily equate to vigorous retail purchases, it certainly helps to attract more attention as the cryptocurrency continues its upward trend.
Put-to-call ratio options
The best way to measure general market sentiment is to measure whether there is more activity through call (buy) options or put (sell) options. Generally, call options are used for bullish strategies while put options are for bearish.
A put-to-call ratio of 0.70 indicates that the open rate of put options lags 30% behind the more bullish calls and is therefore bullish.
In contrast, a 1.20 indicator prefers put options at 20%, which can be considered bearish. One thing to note is that the statistic aggregates the entire BTC options market, including all calendar months.
Over the past week, investors have been leaning towards downward protection strategies. As a result, the put-to-call ratio increased to 0.68 from 0.56 on December 27. Hence, the indicator has reverted to the three-month average, favoring the more bullish call options at 32%.
This data shows that investor optimism remains relatively stable after last week’s 17% BTC price hike.
All in all, each of the five indicators discussed has maintained a neutral to bullish range. Professional traders have maintained their bullish stance despite the January 4 price swings and this is an encouraging result for bulls.
As BTC quickly recovered the USD 31,000 support, bulls showed their confidence by adding positions after each dip. Finally, there are no signs of exhaustion or excessive leverage by buyers.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the view of Cointelegraph. Every investment and trade move carries risks. You should do your own research when making a decision.
