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Sunday, November 27, 2022

Market Wrap: Bitcoin Rallies Ahead of $50K Resistance

Cryptocurrencies are ending the week on a strong note as bitcoin broke above $48,000 for the first time since May. The world’s largest cryptocurrency is up about 4% over the past 24 hours and could face resistance near $50,000-$55,000 heading into the weekend.

On Thursday, Coinbase announced that it will purchase more than $500 million in cryptocurrencies to add to its holdings. The crypto exchange’s CEO, Brian Armstrong, also tweeted that Coinbase will invest 10% “of all profit going forward in crypto.”

The Coinbase announcement encouraged bitcoin buyers to return at the $45,000 support level. Bitcoin’s price jump also coincided with stabilization in equity markets after a pullback earlier this week. 

Several analysts noted that extreme overbought conditions have unwound since April, which is providing support for the crypto rally. 

“Right now, bitcoin and other cryptos have enjoyed technical support (as they were becoming mildly oversold),” Santiago Espinosa, a strategist at MRB Partners, wrote in an email to CoinDesk. 

“At this juncture, some cryptos can continue to do well if policymakers neglect inflationary pressures and regulatory issues don’t become a mainstream problem,” Espinosa wrote. 

Bitcoin’s negative correlation with gold intensified over the past few months as inflation expectations eased. Gold is down roughly 6% year to date, compared with a 65% gain in bitcoin over the same period. 

The correlation between bitcoin and the iShares long-duration Treasury bond exchange-traded fund (TLT) briefly turned positive in July as the crypto selloff stabilized. Lately, bitcoin’s relief rally has coincided with a pickup in the 10-year Treasury bond yield, which stalled near the 1.40% resistance level. 

The growth in bitcoin futures volume relative to spot volume could reflect greater participation from sophisticated traders. “Over the last year, futures and perpetual swaps have become the most popular financial instruments in crypto,” tweeted Delphi Digital. Futures and perpetual futures account for over 60% of total daily bitcoin volume. 

Perpetuals are gaining ground relative to spot market activity and are quickly becoming the prime source of price discovery, according to Delphi. 

Bitcoin perpetual swaps are a  type of derivative in cryptocurrency markets similar to futures contracts in traditional markets.

Delphi also noticed a similar trend in ether, although spot markets still play a larger role than futures markets with that crypto.

The bitcoin miners’ positioning index (MPI) has flattened over the past two weeks. The MPI tracks whether miners are shifting their BTC positions higher or lower.

The sideways movement in MPI suggests that “profit-taking by miners is clearly slowing along with the stagnation of the price increase,” CryptoQuant wrote in a Friday blog post.

CryptoQuant expects a downward price adjustment in BTC before a decisive move above the $50,000 price level. A breakout in price could encourage miners to build positions. 

All digital assets on CoinDesk 20 ended up higher on Friday. 

Notable winners of 21:00 UTC (4:00 p.m. ET):


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