Bitcoin weekly outlook- Does BTC manage to resume rally?
Bitcoin exploded above $34,000 for the first time on Sunday, continuing a record-breaking rally that has seen it gain more than 300 percent in 2020.
Ki Young Ju, CEO of blockchain analytics firm CryptoQuant, was quick to point out that institutional investors have bought about $1 billion worth of bitcoin via over-the-counter trades. His claim was based on the so-called „Coinbase Pro Outflow“ indicator, which shows the Crypto Profit total number of Bitcoin transferred to the exchange’s cold wallets for safekeeping.
According to Ju, the wallets support Coinbase’s OTC services, which allow institutional investors to buy large quantities of bitcoin (Go to the Bitcoin Buying Guide) without affecting the spot market.
Another insane Coinbase outflow. 35k BTC. Institutions FOMO buying https://t.co/8pEBgTd9Jl
– Ki Young Ju 주기영 (@ki_young_ju) January 2, 2021
Meanwhile, more bullish evidence came from traditional markets. A recent survey by the American Association of Individual Investors shows that about 55 percent of investors remain bullish on riskier assets in 2021.
This is because of the lack of high-yield alternatives in cash and cash-based markets.
Bulls expect ultra-low interest rates to continue to support government bonds. Their yields have fallen to near all-time lows.
Meanwhile, the Federal Reserve’s accommodative fiscal policy, combined with the US government’s relentless spending to help Americans through the recession caused by the corona virus, has put pressure on the US dollar.
All in all, there is no alternative for investors but to put their capital into riskier markets such as equities, gold and – of course – Bitcoin.
Bitcoin’s move towards $35,000
Bitcoin’s gravity-defying move towards $35,000 also came before the minutes of the December 2020 Federal Open Market Committee (FOMC) meeting.
Federal Reserve Chairman Jerome Powell said after the two-day meeting last month that they would continue to buy bonds until the US labour market recovers from its dangerously high levels. This week, the minutes of that meeting will shed more light on the central bank’s strategy.
As usual, more moderate tones would keep the US dollar on its downward path, especially when it has already fallen more than 12 per cent against a basket of foreign currencies since its mid-March peak. Consequently, institutional investors have increased their bids for bitcoin after years of listening to the anti-inflation, anti-fiat narrative.
„Many in policy/market circles see the Bitcoin rally as simply a speculative bubble,“ explains Mohammad A. El-Erian, Allianz’s chief economist.
Bitcoin’s technical outlook
Optimistic fundamentals aside, Bitcoin’s technical bias is becoming increasingly bearish due to the overheated rally.