Bitcoin has undergone an extremely strong rally over recent months, despite the ongoing drop.
The cryptocurrency, which trades for $36,000, is up around 100 percent in the past six weeks, and even more over the past six months. Other cryptocurrencies aside from BTC have also done well.
But what is behind the ongoing bull market? A Singapore-based trading desk suggests that the Bitcoin rally is largely a byproduct of institutional inflows entering the Bitcoin market via Grayscale. Grayscale Investments is a digital asset manager focused on institutions based in New York.
What’s driven Bitcoin higher?
Prop trading company and liquidity provider QCP Capital commented on Friday morning that Bitcoin’s recent rally has largely been a byproduct of Grayscale’s Bitcoin Trust, an institutional investment product for BTC.
Bitcoin began to show signs of weakness (spot buying pressure shifting to futures buying pressure) when Grayscale temporarily suspended inflows at the end of December.
The sell-off peaked early this week when the fund suspension came to an end, QCP explained:
“Previously we highlighted GBTC as too big to fail in our new year update, and the sell-off on Monday/Tuesday peaked at the end of their 2-week fund suspension to new investors. On Wednesday they reopened again and this stemmed the selloff, as ~5k of BTC was added to their fund in just the 2 days since.”
5/6 On Wednesday they reopened again and this stemmed the selloff, as ~5k of BTC was added to their fund in just the 2 days since. pic.twitter.com/KYuNHYGdNw
— QCP Capital (@QCPCapital) January 15, 2021
The firm believes that this is a sign that Grayscale’s inflows are actually a large amount of the demand for Bitcoin on the spot side:
“No doubt GBTC flows will remain the driving force for the market, at least until a US ETF is approved – something which we don’t yet foresee anytime soon.”
On the technical outlook for BTC, they seem to be certain that the overall macro trend remains bullish for the leading crypto asset.
Bitcoin held its parabolic uptrend this past week despite falling as low as $30,000, traders say.
They added that while the increased volatility has begun to be a worrying sign, it is thus far “perfectly consistent with an exponential trend at this stage.”
Earlier this past week, analysts noted that the extremely high volume seen in the Bitcoin market on Monday’s $30,000 correction was likely a sign that a reversal was near.
Volume spikes are often indicative of price reversals, as they mark an exhaustion of either a bull trend or a bear trend.
One reason that some are concerned is that there has been development in the Mt. Gox case that may result in an influx in the supply of Bitcoin to the market.
COINLAB REACHES DEAL WITH MT. GOX CREDITORS OVER BITCOIN CLAIMS
COINLAB SAYS AGREEMENT SUBJECT TO CREDITOR ACCEPTANCE
CREDITORS CAN CLAIM 90% of BITCOIN THEY ARE OWED FROM MT. GOX
— light (@lightcrypto) January 15, 2021
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