After a strong rally right at the beginning of this week, Bitcoin is now keeping around $13,000 in the second half.
While BTC has taken a breather, volume across the board and open interest are showing solid sessions.
Quant trader Qiao Wang has a hunch that “Once BTC breaks $14k, we’ll likely be in a different regime in terms of volatility, momentum, retail participation, and so on. A lot of things that worked last few months may no longer work and vice versa. $20k will take this regime to a whole new level.”
Meanwhile, bitcoin’s one-month correlation with the stock market has taken a sharp decline, while with gold, it has started to increase.
And this trading more like gold, a store of value is likely to hold as per Mike McGlone, a senior commodity strategist at Bloomberg Intelligence.
Acting Like Gold
Bitcoin has been showing signs of maturity in terms of lower volatility, trading patterns, and more adoption, similar to gold. Moreover, the macroeconomic factors driving gold price higher are likely to push BTC’s price as well, he said.
“The key thing it has been doing since it went to $100 and then to $1,000 and then $10,000, which has really been the consolidation price for the last three years, it just has a history of adding zeros,” McGlone said in an interview.
#Bitcoin breaching $12,000 resistance vs. the #Nasdaq100 backing away may indicate firmer underpinnings for the crypto in 2021. At similar levels since 2017, diminishing supply and the foundation of an 80% correction, along with an extended period of underperformance, favor BTC. pic.twitter.com/erakFU37On
— Mike McGlone (@mikemcglone11) October 23, 2020
Amidst the market enjoying a rally, Bitcoin has already hit an all-time high (ATH) in the local currencies of some countries like Brazil, Argentina, Turkey, Venezuela, Sudan, Zambia, and Angola.
However, while not bearish, popular trader Loomdart isn’t bullish either as he believes the ongoing institutions’ FOMO buying narrative is “the foundation for a bitcoin” that provides support and lowers volatility. Still, it also doesn’t imply “ceaseless green days.”
Unlike Tesla, “there's no gigantic tranche of short interest waiting to launch us to the heavens. It's way more like gold. As long as derivatives stay muted (oi increase < market cap increase), I simply don't think we have the fuel for a leveraged long,” he said, adding funds rotating from long to short “isn’t encouraging.”
The Next Phase
With all the maturity Bitcoin is seeing: low volatility, publicly-traded companies making it part of their Treasury, mainstream companies like PayPal supporting cryptos, and increased regulatory scrutiny, the chances of the approval of a Bitcoin ETF are seeing an increase.
“It will be challenging for the SEC to justify rejecting a well-crafted bitcoin ETF proposal in 2021, and I assume there will be many of them,” said Jake Chervinksy, General counsel at compound Finance.
Under the Administrative Procedure Act, SEC’s decision can be overturned by a court if it's “arbitrary & capricious,” he added.
While it takes about 9 months from the date of filing to a final decision on approval, once approved, the listing can happen almost immediately. And that could also mean, much like the launch of bitcoin futures in December 2017 marked the top of that bull cycle; the bitcoin ETF approval does the same for this cycle.
Chervinksy even expects Grayscale Bitcoin Trust (GBTC) to restructure as an ETF at that point, as even the crypto asset manager has also hinted at this.
In Q3 of 2020, GBTC had yet another record inflow, for the third time in a row, with the premium still around 20%, but as the bitcoin rally intensifies, the demand for GBTC could see it surging higher yet again.
“Expect the Grayscale bitcoin premium to roar in the next few months, particularly so in H1'21, then come crashing down as market starts to price increasing odds of a bitcoin ETF approval,” said trader and economist Alex Kruger.