The crypto market is feeling some blues as the Bitcoin price gets back under $55,000.
The week started on a bullish note as Bitcoin went to nearly $58,000, recording a 32.5% uptrend in October. Late on Tuesday, the price dipped to $53,700 only to recover back above $56,600 in the next few hours.
“We believe the market is healthy, and these are, in fact, normal pullbacks that are to be expected,” said Philippe Bekhazi, CEO and co-founder of crypto trading platform XBTO.
“The market is seemingly pricing in the probability of an ETF approval this month. So profit-taking is natural.”
Bitcoin going red has the total market cap also sliding by 4% in the past 24-hours but still keeping well above $2.34 trillion.
Much like in the Q4 of 2020 when Bitcoin gradually made its way to 2017 all-time high of $20,000, after the lacking performance in the second half of Q2 and the Q3, the leading cryptocurrency is flirting with a run towards its ATH of nearly $65,000.
This, however, has been happening while the dollar is near its one-year high. The US dollar index dropped on Wednesday to 94.3 after making a new 2021 high at 94.56 just the day before, a level last seen in late September.
However, Bitcoin no longer holds an inverse correlation with the USD, according to Kaiko’s latest report.
Historically, BTC has moved in the opposite direction to the US dollar, but this trend seems to have dissipated this year. Both the currencies have been experiencing an upward trajectory in contrast to traditional equities, which closed in September with their worst performance since the start of the pandemic.
“Bitcoin’s rising correlation with the DXY suggests that despite a growing risk-off environment, both fiat and crypto assets are treated similarly by investors,” wrote Kaiko.
The Bullish and the Bearish
Meanwhile, the crypto community has started to get bullish yet again, with many calling for new peaks for the trillion-dollar crypto asset in the historically bullish Q4.
While Vijay Ayyar, head of Asia Pacific with crypto exchange Luno sees a record high for Bitcoin at around $80k and $85k possible, others are seeing $100k getting breached this time.
Technically, Bitcoin’s run-up has activated an inverted head and shoulders chart pattern that can see the cryptocurrency climbing to $79k.
As we have reported for the past couple of days, the open interest for Bitcoin derivatives contracts has also been increasing rapidly, now sitting around $20 billion, the level last seen in mid-May. The funding rate has also started to increase, with the highest currently on Deribit at 0.0363%.
In the options market, open positions for the $80k strike call for December 2021 expiry now vastly surpass those for the $40k strike put, according to data from options exchange Deribit.
Not to mention, optimism that the first Bitcoin futures exchange-traded fund (ETF) may be approved by the SEC as soon as this month has traders and investors jumping back into Bitcoin.
That’s why this week’s decline is “not cause for concern,” according to James Butterfill, an investment strategist at CoinShares.
“It hasn’t broken trend and the fundamentals of increase chances of an SEC approval and increasing institutional adoption are likely to be supportive of price in the coming weeks.”
However, not everyone thinks the approval is coming. “The market is over-emphasizing (SEC Chairman) Gary Gensler’s public comments about support for the (CME) and futures,” said Jeff Dorman, CIO at digital asset management firm Arca.
“We believe the concerns the SEC has raised historically regarding market manipulation of bitcoin and unregulated exchanges have not been solved.”
Besides CME’s future basis rising fast, signaling a lot of buying, the Rothschild Investment Corp. disclosed an increase in their GBTC and ETHE holdings. It now owns 138,790 shares of GBTC and 303,554 ETHE, up from 141,405 GBTC and 13,817 ETHE shares, respectively.
However, the Crypto Fear and Greed Index is back to flashing “greed” at a reading of 70 when just last month it was 44 and in “fear” territory. Just yesterday, the index showed “extreme greed” in the market at a reading of 78, so market sentiments are fast-changing and led by price.