What factors make a rise in the price of Bitcoin likely?
17. Dezember 2020
Despite the apparent stagnation in the price of Bitcoin, today we bring you four factors that indicate a possible rise in its price.
The last few weeks have been dominated within the crypto market by news generated around the Bitcoin price. This is because, after several years during which the crypt currency has generally remained below $10,000 per BTC. Finally the virtual currency entered its biggest bullish rally so far. So, when the market seems to have calmed down, we’ll explain what factors make a rise in Bitcoin’s price likely.
Investors think Bitcoin won’t exceed $50,000 by 2030
The futures market
The first element that allows us to predict that the Bitcoin bullish rally has not come to an end, is the situation in the market of perpetual futures contracts on Bitcoin. In this market, exchanges charge commissions, usually every eight hours, as a method to guarantee that there are no problems in the balance sheet of the trading platform.
These commissions vary according to the supply and demand situation of these Bitcoin perpetual futures contracts. If there is a strong demand for them, the commission is positive and is charged to the buyers. While if there is pressure from the supply side, the fee is charged to the contract holder.
Thus, the current commissions in this market of around 2% are an extremely positive signal for BTC. It shows that investors in this type of product are looking to acquire long-term future contracts, thus relying on BTC’s price performance.
Commissions in the perpetual futures market seem to indicate a future rise in the price of Bitcoin. Source: CoinTelegraphThe commissions in the market for perpetual futures contracts seem to indicate a future rise in the price of Bitcoin.
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Institutional investors‘ interest in Bitcoin
One of the key factors behind the rise in Bitcoin’s price is the growing interest of institutional investors in cryptomonics. Thus, throughout the year millions of dollars of institutional investment funds have been poured into the crypto market.
And now, when the price of cryptomoney seems to have stagnated at about $20,000 per BTC. Interest from institutional investors does not seem to be receding. On the contrary, the main company serving as an intermediary between institutional investors and the market, Grayscale, continues to aggressively acquire Bitcoin.
Thus, in the last week alone, Grayscale added 14,050 Bitcoins to its Kryptonian balance sheet, bringing its total to 561,130 BTC, or $10.7 billion. A true record in the interest of institutional investors in BTC, and a clear indicator of the upward trend that still exists in the market.
Grayscale continues to acquire BTC regardless of the price of the crypt-currency. Source: bybt.comGrayscale continues to acquire Bitcoin regardless of the price of the crypt currency.
The price of Bitcoin futures
On the other hand, another indicator that allows us to know the trend of the Bitcoin price is the market of future contracts on Bitcoin. These, unlike perpetual future contracts, do have a pre-set expiration date.
Thus, by observing the price at which these contracts are traded, we can get an idea of where investors think BTC is headed. Knowing that if the spread between these futures contracts and the spot market is very high, the upward trend in the Bitcoin price is strong.
A difference of 1.5% is considered normal, while anything below that is considered very pessimistic. Currently the BTC futures market works with a 4% differential with respect to the spot market. A sign of extreme optimism among investors.
The difference between Bitcoin futures contracts and the spot market is widening. Source: Digital Assets Data / CointelegraphThe difference between Bitcoin futures contracts and the spot market widens. Source: Digital Assets Data / Cointelegraph: CoinTelegraph
The put/call ratio situation
Finally, the last element that makes us foresee an upward trend in the price of Bitcoin, is the put/call ratio situation. This ratio measures the proportion of call and put options in the market. If this ratio favors call options, we know that the market has a strong upward trend.