BTC - Quietly - Rallies to $60k

I remember tripping out that I was buying BTC at $8k. I actually got rekt on Bitmex during the March 2020 crash for 0.6 BTC and didn’t buy anymore *that day* because I was so shook. Now (embarrassingly), I’m checking Coingecko like 200 times a day feeling off when I see we’re lower than we were the last time I checked. All the while, knowing that even if we did pop up to the elustrius $100k mark, I still wouldn’t sell. What’s wrong with me (us?)?

As Director of Global Macro at Fidelity Investments, Jurrien Timmer points out, this recent rally from ~$30k has come with little fanfare. As per the chart below, we can see that the percentage of coins held by short-term investors is down to just 15%, below levels typically seen at bottoms. This might mean that there could be a lot more room to run if we just simply stay on track and especially if there is an event *cough* ETF *cough* that brings in momentum chasers to pile in.

Anyway, it’s already been an awesome Q4 and we’re only 15 days in. Very excited to see how the rest of the year pans out — never a dull moment. More to come after a quick recap of the week at the desk by our head trader Dan Wright.

What we saw at the desk

It was a short week after Thanksgiving and we saw the usual profit taking on Tuesday. Equities and USD sold off hard but BTC and ETH held their own. By the end of the week clients were scrambling to get back into their long term positions as BTC and ETH broke out above recent highs. BTC is now looking to break through the all important 60k level with ETH looking to test 4k. Risk on is now the flavour of the day and heading into the weekend. With the rumour of the SEC approving a Bitcoin futures ETF soon it could be a wild weekend of trading for us on the desk.

Okay, why we’re really bullish

As Bitcoin pushes toward all time highs, it seems like a great time to outline the underlying factors fuelling the recent rally.

ETF Speculation: Yes, I know… we’ve been waiting on a US BTC ETF for years. Frankly, there’s just been too much chatter for me to ignore this go around. And then there’s this:

SEC Chair, Gary Gensler has repeatedly mentioned his willingness to consider a BTC Futures (CME Futures to be exact) backed ETF. Who will get the nod? Will it be fund giants Fidelity or Invesco? VanEck, Valkyrie and Galaxy are also up for approval by end of this month.

“Buy the rumour, sell the news.”

True. I’m not exactly sure how this will go if an ETF is approved but Pantera recently made a comment that previous major build-ups around CME BTC Futures and Coinbase listing have marked local price tops — so, word of caution.

Although:

If Bitcoin is digital gold then perhaps it might follow the same path as gold did once the NYSE listed the first gold ETF in Nov 2004 — the price never came back.

A hedge against inflation: As global supply chain disruptions have made inflation a major worry for central bankers, BTC’s “inflationary hedge” argument has gained more supporters. Although BTC’s correlation with risk-on assets is decreasing with time, it is still quite high and has a long way to go before it become a true hedge.

JPMorgan noted in it’s recent research report that “There are tentative signs that the previous shift away from gold into bitcoin seen during most of Q4 2020 and the beginning of 2021 has started reemerging in recent weeks.”

Taproot Upgrade: If you don’t know what Taproot is or why it’s important, I wrote a Taproot for dummies piece in May that you can check out. Bottom line is that it’ll go live sometime in the beginning of November, and will improve Bitcoin’s smart contract functionality. After Taproot, the Bitcoin Network will support DeFi applications, oracle input data, and simple executable scripts.

US claims Bitcoin mining crown: The latest CCAF data shows the U.S accounting for 35.4% of the global hashrate — the world’s total computational power used to mine bitcoin — as of the end of August, more than doubling from 16.8% at the end of April. Bitcoin mining in China on the other hand, has been almost entirely wiped out. Shifting mining (which should be as decentralized as possible) from an authoritarian state to the US is very bullish when considering the long term health of network security.

Look, Q4 has historically been the most interesting in terms of BTC price action, and 2021 is lining up to be no different. Hopefully, we are in for some fireworks this season.

Have a nice weekend and…

In case you missed it…

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