Key Points
- Bitcoin’s price has been rising, reaching $98,300, with a consistent increase over six days.
- Demand for Bitcoin is increasing with ETF inflows, while supply dynamics like mining difficulty and hash rate metrics are at record highs.
Bitcoin’s price has been on a steady climb, hitting a peak of $98,300 after finding key support at $91,405.
The leading cryptocurrency by market capitalization has seen its price increase for six consecutive days. This is in line with the ongoing dynamics of demand and supply.
Supply and Demand Dynamics
On the supply side, metrics such as mining difficulty and hash rate have reached their highest levels since the last halving event in April. This has resulted in Bitcoin’s inflation rate dropping to 1.11%, a figure significantly lower than the US consumer price index of 2.7%.
Furthermore, this inflation rate is also lower than the 12% recorded in 2016. Meanwhile, the amount of Bitcoin (BTC) in exchanges has been on a downward trend.
In contrast, demand for Bitcoin is on the rise as ETF inflows persist. These funds have amassed over $128 billion in assets, with BlackRock’s IBIT accounting for over $54 billion.
MicroStrategy has also maintained its buying trend, currently holding over 450 coins. Users of Polymarket anticipate that the company will hold over 500,000 coins by March.
American Investors and Bitcoin
There’s evidence that American investors are purchasing more Bitcoins. Apart from their ETF purchases, data indicates that the Coinbase Premium Index has bounced back after a sharp decrease in December.
According to CoinGlass, it has risen to minus 0.021, up from minus 0.24 in December.
CryptoQuant data also reveals that the index has surpassed the 14-day Simple Moving Average after 26 days — a positive indication for prices.
The Coinbase Premium Index is a significant metric that examines purchases by American investors, including institutions. As Coinbase is the most popular exchange in the United States, a rise in the index suggests that the largest capital pool may be accumulating.
Bitcoin is also facing other potential catalysts, including the inauguration of President-elect Donald Trump and the forthcoming FTX $16 billion distributions.
There’s a possibility that some recipients of these funds will invest in Bitcoin and other cryptocurrencies. Additionally, as reported last week, Bitcoin’s MVRV ratio is still low — an indication that it is undervalued.
Bitcoin Price Analysis
The daily chart indicates that BTC has rebounded in recent days. It has risen for six straight days and consistently remained above the 50-day moving average.
Bitcoin has also found significant support at the key support level of $91,400, which it has failed to fall below several times since December.
Therefore, it’s likely that it will continue to rise as bulls aim for the all-time high of $108,000. A move above this level could lead to further gains, potentially to the 38.2% Fibonacci Retracement point at $114,000.
However, the formation of a head and shoulders pattern could be risky. This could result in a bearish breakdown below $91,400.
Analyst’s Bearish Take
Jacob King, an analyst at WhaleWire, recently issued a stark warning about Bitcoin and the broader crypto market, citing signs of a potential bear market.
In a social media post, King pointed out several developments, including MicroStrategy reducing its Bitcoin purchases, El Salvador seemingly shifting away from crypto-focused policies, and BlackRock selling significant BTC holdings.
King labeled MicroStrategy’s strategy as a “giant scam” and unsustainable. He also noted that Tether (USDT) has paused new minting for over 20 days, coinciding with the coin’s recent price stagnation.
Describing the situation as “the calm before the storm,” King warned that a crypto downturn might coincide with a broader stock market crash, urging investors to reassess their risks.
As of last check on Sunday, BTC was trading at $98,035.
