Speculation about the duration of the current run is endless, with Bitcoin now a stable news item even in the mainstream press. But what’s keeping the BTC price up? Is it simply the relentless slew of good news, or are there on-chain indicators that can predict future price moves?
Since retesting the $50,000 barrier in early March, the price of Bitcoin (BTC) has held pretty consistently above that level. Even a pullback in the last week of March couldn’t sustain, with bulls pushing the price back up toward a new all-time high close to $65,000.
The FOMO effect
The argument that good news is buoying the market is self-evident simply because it’s undeniable that we’ve seen a kind of FOMO snowball effect among institutions over recent months.
The bull run kicked off in the last quarter of 2020, and the fact that prices suddenly spiked in October amid news that PayPal was entering the crypto space cannot be ignored. Further bullish action followed when JPMorgan launched its long-awaited JPM coin.
This year, MicroStrategy went on an epic buying spree, accompanied by Tesla’s endorsement with a $1.5-billion investment. The big banks, including Goldman Sachs and Citigroup, expanding their service offerings to cryptocurrencies has added further credibility to the argument that crypto is taking its place as an established asset class. Most recently, the excitement of Coinbase’s listing on Nasdaq — the first of its kind in the crypto industry — has also played a part in ensuring that digital assets remain firmly on the global news agenda.
On a macro level, the ongoing push to get a Bitcoin ETF approved by United States regulators also provides further bullish sentiments. — although, in the view of one analyst, it could still be another two years before approval is forthcoming.
Was $25,000 an institutional price trigger?
While the theory that good news is propping up Bitcoin prices may not create a long-term bull case in and of itself, the market action has evidently been sufficient to make big investors and institutions sit up and take notice. A report from eToroX published in January, which interviewed institutional players, seems to agree with this notion.
The report found that BTC had to reach a high enough price to make it attractive to institutions when balanced against other barriers to entry, such as regulatory risk, the potential for fraud and access to the necessary infrastructure. One respondent had even gone as far as defining a price threshold of $25,000, indicating that the current prices are more than enough to keep institutional investors engaged.
Johnny Lyu, CEO of KuCoin, also believes that underlying fears regarding the state of the broader markets are playing a part in institutional cryptocurrency adoption, telling Cointelegraph: “The recent rise is related to the fear of long-lasting quantitative easing and global inflation.” He further gave an inside look by saying that “trading behavior on KuCoin shows that Western investors are more involved in this run compared to their Asian counterparts.”
The rationale here is that Western countries have proven less capable of handling the spread of COVID-19, resulting in more government spending and a heavier economic impact. However, Robbie Liu, a market analyst at OKEx Insights, pointed out that there’s still significant interest from Asian investors. He highlighted that the appetite for stablecoins is a bullish signal:
“In the Asian market, USDT also entered a positive premium since March, meaning one USDT has traded above one U.S. dollar. This premium similarly reflects strong demand for access to the cryptocurrency space.”
When good news isn’t necessarily good news
The problem with the idea that prices are driven entirely by positive sentiment resulting from news headlines is that it doesn’t create a case for long-term price sustainability. Put simply, if the good news dries up, prices could reverse, creating a similar snowball…