Market sentiments are in Bitcoin’s favor as on-chain data signals an influx of retail and with stimulus checks coming in, as long as Fed Chairman Jerome Powell doesn’t pull the rug on equities.
This week, the cryptocurrency market is experiencing some losses. Bitcoin went down to just under $53,350, not long after hitting a new ATH near $62,000 on Saturday.
The new high came amidst the highly leveraged trading as seen in the flying funding rates on perpetual contracts. As we reported, this means not only intense upward momentum but also equally extended drawdowns that normalize the funding rates, which also went negative for the first time in two months.
“There’s just an insane amount of leverage in the system at all times,” Jeff Dorman, CIO for Arca, an investment management firm specializing in digital assets, told Bloomberg.
“During any period of exuberance, you see investors borrowing to lever up, and over the weekend we saw all the risk metrics we watch start to really get frothy. Generally, when that starts to happen, it’s only a matter of time before the slightest hiccup starts to liquidate those levered positions.”
Keep Them Coming
Not only the stock market is looking good, adding to positive market sentiments, stimulus-fueled bets that some of this money will move into Bitcoin also helped prop up the crypto over the past weekend. “The stimulus news was bid up by everyone in the Bitcoin world over the weekend,” said Dorman.
“Then we came in last night, futures were flat, 10-year was flat, and all of a sudden that started to unwind because there wasn’t nearly as much of a bullish overtone as some of the Bitcoin traders thought there might be.”
While this weekend was just some front running, according to a survey released Monday by Mizuho Securities, the majority of Americans are planning to spend their $1,400 stimulus checks on Bitcoin. 100 million checks will be sent to people over the next ten days, as per President Joe Biden.
In the short-term, stimulus checks are bullish for Bitcoin price, but any equity rebalancing and bearish Federal Open Market Committee (FOMC) meeting this week can bring more pain for the crypto asset, according to trader and economist Alex Kruger.
“I lean higher, but if Powell tanks the equity market on Wednesday, take cover aggressively,” said Kruger.
US Treasury yields have also been climbing up, which is not good for the risky-assets, including Bitcoin, ahead of the meeting. This would be time for Chairman Jerome Powell to assuage market expectations’ that the bonds sell-off won’t continue. Yields and prices and are inversely related.
The influx of Retail Traders
The amount of BTC held by exchanges is climbing in 2021. After reaching an all-time high in early 2020, BTC held on exchanges dropped after the March 2020 crash.
But this can be taken as a bullish sign as Coin Metrics says, “this potential signals an influx of retail traders holding their supply in exchanges instead of in their own wallets.”
Retail adoption continues to see a big jump as we reported; they are beating the institutions in Q1 of 2021. In Norway as well, a recent Arcane Research survey found that 7% of all Norwegian adults now own cryptocurrency. This is a growth of 75% since 2019.
As such, in the long-term, the “outlook remains very bullish, as many more leading financial institutions are considering adopting cryptocurrencies,” said Atichanan Pulges, CFO of Bitkub Capital Group Holdings Co., operator of Thailand’s biggest crypto exchange.