Bitcoin has seen an extremely strong rally in the past few months – despite the ongoing decline.
The cryptocurrency is currently trading for $ 37,000 and is up around 100 percent in the past six weeks. Even more in the last six months.
Other cryptocurrencies besides BTC also performed well.
But what’s behind the persistent bull market? A Singapore-based trading desk suspects the Bitcoin rally is largely a by-product of institutional inflows entering the Bitcoin market through Grayscale. Grayscale Investments is an institutional digital asset manager based in New York.
What drove Bitcoin up?
Prop trading firm and liquidity provider QCP Capital estimates that Bitcoin’s recent rally is largely a by-product of Grayscale’s Bitcoin Trust, an institutional investment product for BTC.
Bitcoin began to show signs of weakness (buying pressure on the spot market shifted to buying pressure on futures) when Grayscale temporarily suspended inflows in late December.
The sell-off peaked earlier this week as the fund’s suspension ended, QCP explains :
“Previously, we highlighted GBTC as too big to fail in our New Years update, and the Monday / Tuesday sell-off peaked at the end of their two-week new investor freeze. They reopened on Wednesday and this has contained the sell-off as ~ 5k of BTC has been added to their funds in just the 2 days since then.“
The company believes this is a sign that Grayscale’s inflows are actually a big part of Bitcoin’s demand on the spot side:
„Without a doubt, GBTC inflows will remain the driving force behind the market, at least until a US ETF is approved – something we don’t expect any time soon.“
As for the technical outlook for BTC, they seem confident that the general macro trend for the leading crypto asset will remain bullish.
Bitcoin has maintained its parabolic uptrend for the past week, despite falling as low as $ 30,000, traders say.
Thus, while the increased volatility is a worrying sign, it is so far „in perfect line with an exponential trend at this stage“.
Earlier this week, analysts commented that the extremely high volume seen in the $ 30,000 correction in the Bitcoin market on Monday was likely a sign that a reversal was approaching.
Volume spikes are often a sign of price reversals as they mark exhaustion of a bull or bear trend.