BTC Fundamentals: New Money Flowing into the Market But A New ATH in OI Indicates a Top
For the first time since February, the world's leading digital currency scraped above $10,000. Currently, up over 7%, BTC/USD is trading around $9,900 while managing the daily trading volume of $3.4 billion on top ten exchanges with real volume, as per Messari. Vijay Ayyar, head of business development at crypto exchange Luno said.
“Markets have been bullish since the March lows and this is across asset classes, including crypto.”
“Money-printing by the Fed and other central banks globally have given a lot of confidence to investors that the economy will be supported no matter what.”
But what’s even more interesting is the growing network fundamentals.
The understated aspect of the impressive price surge which was overshadowed by the just three days away halving is bitcoin’s development activity which has grown notably throughout this year, reported Santiment.
During the March sell-off, the development activity which is based on Github events went down to 15.29 from late January high of 41.14 which went up back to 57.57 on April 30 and is currently just above 40.
On-chain transactions are also gaining momentum, especially with big amounts.
Since May 3rd, the on-chain volume for transactions greater than $10,000 has been increasing consistently. From the last 7-day low of 7.88k transactions, it has now risen back over 11k.
According to IntoTheBlock, this heightened activity has been fueling this bitcoin price rally.
New money flowing into the market
Just like transactions, the volume is rising not only on spot exchanges but also derivatives platforms. But open interest has beaten the volume on regulated platform CME. In dollar terms, CME open interest is up 45% this week.
Rising ahead of halving, CME bitcoin futures open interest jumped to a new all-time high at $399 million. The fact that daily trading volume is not seeing the same growth indicates it is “less trading-driven and more exposure-driven activity on CME,” tweeted Arcane Research.
CME bitcoin futures open interest rising rapidly ahead of halving pic.twitter.com/JEIyzieUIf
— skew (@skewdotcom) May 7, 2020
Perpetual swaps open interest is also on the rise this week, reaching $1.63 billion.
Additionally, Bitcoin Options had a second consecutive day of strong activity this week, of nearly $10 million each, up from less than $1 million in most of April.
Total bitcoin options open interest through $1bln for the first time! pic.twitter.com/7Dscbu03lh
— skew (@skewdotcom) May 8, 2020
“When Price and Open Interest are on the rise it usually represents a bullish signal. The reason for this is because new money is flowing into the market and investors are buying Bitcoin.”
“the previous 2 CME open interest spikes indicated a top for BTC. We're approaching the OI levels again. Might get a blow-off top to 10k+ first though before the pump fades.”
A strong indication of an inversion in bitcoin price would be a high open interest with high volume, he said.
Confidence in bitcoin ahead of halving
As we shared, the number of active entities on the bitcoin network has already climbed to its highest level since the 2017 bull run.
Bitcoin holders also continue to increase their position over three past eight weeks. Long term investors accumulating bitcoin even at current price levels suggests confidence in the flagship cryptocurrency leading up to the halving next week.
Before halving, price is already up over 35% YTD which has 81% of current bitcoin supply in a state of profit.
But with so many investors in profitable positions due to a significant increase in bitcoin price in anticipation of the halving could also trigger some to “realize gains in the short term.” Lennard Neo, head of research at Stack AM Pte. said,
“With the Bitcoin halving fast approaching, we believe a short-term pullback is highly likely immediately post-halving, as traders begin taking profits.”
“In the longer-term, we can expect Bitcoin to register significant price appreciation toward the end of 2020 and early 2021.”