Bitcoin Consolidates Around $34,700 Amid Economic Uncertainty, Future Looks Bullish
Summary:
Bitcoin (BTC) shows signs of stabilization, witnessing a narrow fluctuation of 4.5% over the last two weeks. Despite stagnant prices, investors display optimism driven by potential impacts of the forthcoming 2024 halving and the possible approval of a Bitcoin spot ETF in the US. While the economic downturn impacts oil prices and triggers nervousness among investors, the BTC futures market enjoys robust health, marked by steady growth, a high futures premium and a favoring of call options. This aligns with a bullish year-end forecast for Bitcoins.
Over the last fortnight, Bitcoin (BTC) has shown signs of stabilisation, fluctuating within a modest 4.5% range, with a notable consolidation around the $34,700 point. Despite static pricing, a positive sentiment persists, bolstered by a surge of 24.2% since October 7, largely attributed to the potential impacts of the forthcoming 2024 halving and the anticipated greenlight for a Bitcoin spot ETF in the US.
Investors remain on edge about a gloomy global economic forecast. Those pessimistic about future economic strength point to global economic shrinkage indicators, as the US Federal Reserve clings to interest rates surpassing 5.25% to rein in inflation. A case in point, China’s exports in October were down 6.4% from the previous year, and in parallel, Germany recorded a 1.4% month-on-month fall in October’s industrial production.
Global economic downturn is directly impacting WTI oil prices, which recently slipped under the $78 mark – a low not seen since late July. This decline has occurred despite possible production cuts from major oil exporters. On November 6, sentiments turned bearish following comments by Neel Kashkari, the President of the US Federal Reserve Bank of Minneapolis. Kashkari’s statement that the inflation issue is unresolved and still requires addressing sparked a rush towards safer assets. Investors found solace in US Treasuries, driving the 10-year note yield to a six-week low of 4.55%.
In contrast, the S&P 500 hit nearly seven-week highs, reaching 4,383 points, contradicting forecasts of global economic slowness. This anomalous behavior can be credited to the amassed $2.6 trillion in cash and equivalents that S&P 500 companies collectively hold, offering a buffer against persistently high interest rates. Even with exposure to major tech stocks, the market nonetheless offers scarcity and dividends, features that appeal to investors in uncertain times.
In the meantime, Bitcoin's futures open interest has hit a record not seen since April 2022, standing at $16.3 billion. The importance of this achievement is further underscored as the Chicago Mercantile Exchange (CME) cements its position as the second-largest BTC derivatives market.
The spotlight has recently been on the growing use of Bitcoin futures and options. Investor enthusiasm for leverage is driven by perceived key bullish factors for 2024: A potential spot BTC ETF and the Bitcoin halving. The health of the market can be measured by the Bitcoin futures premium, or the difference between two-month futures contracts and the current spot price.
The BTC options market also offers insightful data, comparing call (buy) and put (sell) option demands. The past week has seen a 0.60 average for this indicator, suggesting a 40% inclination towards call (buy) options. Concurrently, Bitcoin options open interest has enjoyed a 51% growth over the past month, reaching a high of $15.6 billion.
While some might expect caution or hedging as BTC prices reach an 18-month peak, the current derivatives market condition shows steady growth without over-enthusiasm. This aligns with a bullish forecast, focusing on $40,000 and higher prices by the end of the year.
Published At
11/7/2023 9:30:00 PM
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