Bitcoin (BTC) Holds onto Bullish Factors
Bitcoin (BTC) may be volatile in the short term, especially when it comes to leveraged positions. But overall, the coin’s network and public support have never been better.
BTC abandoned the $60,000 range and it seems $69,000 was the temporary top for this bullish cycle. While some predictions await another upward move, BTC only briefly broke above $50,000 in a short-lived weekend pump.
BTC started the new week at $49,197 on depressed volumes of $22B. The Bitcoin fear and greed index recovered to about 28 points, still signaling extreme trader fear based on the types of trades.
BTC Back to Rebuilding Leverage
BTC now enters another period of rebuilding leveraged positions, with funding rates for futures trading remaining negative since the last crash.
The expectations are that this funding rate anomaly will be short-lived, with another series of highly active trading and recovery. So far, BTC has had several deleveraging events, the latest one in September.
One of the signs for an expected rally and recovery are the CME futures levels, where a gap is usually a sign for other markets to follow.
The immediate expectation is BTC may move sideways and consolidate before any more significant price moves.
BTC Locked In for ETF
Despite the curbs before US-based Bitcoin ETF, the Canadian fund seems to be active on the market. The investment vehicle needs actual BTC coins as collateral, and may be one of the big factors in buying coins.
The physical buying and taking coins off exchanges continues, both for large-scale investors and for some retail buyers. MicroStrategy continued adding to its wallet, turning it into one of the biggest holdings of BTC.
Lightning Network Grows Capacity
The Lightning Network keeps boosting its capacity and acceptance, turning into a safer tool for BTC transfers.
The network added close to 300 BTC in the past weeks, breaking records all the time.
Lightning Network, however, may become less anonymous. On-chain explorer companies have added surveillance to BTC transfers and can build a richer history of transactions.
BTC Mining Sets Record
The Bitcoin mining drive continues at full pace, with new hashrate added to both US-based farms and to unknown mining pools, suspected to originate in China.
Based on current data, mining is now just above the levels from May 2021, when the first Sichuan crackdown happened.
In the past two-week difficulty adjustment period, the difficulty factor rose by more than 8%, signaling more active competition. BTC mining has entered the stage when 90% of the BTC supply is already created, leaving rewards to diminish in the coming years.
Will BTC Follow Previous Cycles
The significant rally in 2021 sparked some expectations BTC may behave in ways similar to the 2017 late-year rally. However, BTC is much more liquid in the past two years, speeding up some of the trading cycles.
Based on the Rainbow chart, BTC is still in the holding zone. BTC at this price is still not conforming to the stock-to-flow model, which suggested prices of $100,000 at the end of the year.
Now, the question remains whether BTC will build up leverage again, to move through another appreciation cycle and quickly recover the $57,000 level. Another scenario allows for deep losses and a potential for a deep bear market.
BTC Recovers Dominance
The BTC market cap dominance recovered from levels just under 40% to around 41.3%. The recent Ethereum (ETH) and altcoin rallies moved some of the notional value to up and coming projects.
But the new crop of assets remains volatile, and for some coins and tokens the price appreciation turns out to be a short-lived pump. Previous leaders like Solana (SOL) have abandoned the expected trek to higher valuations. SOL sank toward the $164 tier, with Terra (LUNA) abandoning the $78 price record to retreat to $60.
ETH also showed weakness, after holding up better over the weekend. ETH sank to $3,987.21, setting another challenge to recovery to the recent consolidation around $4,300.
Crypto Economy in 2021 Still Fragile
In 2021, the cryptocurrency market managed to build up its economic activity through DeFi, play to earn games and liquidity mining. However, this structure is fragile and may be affected deeply by rapid asset price moves. The devaluing of incentive tokens and the liquidation of collaterals can spiral out of control within hours, and be only partially mitigated by algorithmic tools to boost collaterals.
Despite this, startups continue to build, with some choosing a double model of free games which can also be used alongside blockchain tokens. Gaming features have also been added to popular meme coins such as Shiba Inu (SHIB) and may continue to boost markets in the coming year.
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