Historically, Bitcoin has produced positive returns in the fourth quarter that support bullish price predictions. It rallied to $54,000 on Thursday afternoon after quiet price action. It is currently trading around 5% below the daily high of $55,922.98. Analysts expect trading volumes to remain high and support the continued uptrend into the fourth quarter. 7 master names detailed these predictions…
There was an intense accumulation of buy orders in the Bitcoin rise!
On-chain data shows a large pile of buy orders behind the Bitcoin rally. According to Muyao Shen, it remains unclear why large Bitcoin whales buy from spot exchanges rather than an over-the-counter (OTC) desk. However, some analysts remain cautious, pointing to activity in the Bitcoin options market…
According to QCP Capital;
We continue to see bearish trades with spot rally. A total of 1,200x BTC end-October BTC calls were sold yesterday, followed by over 500x late-October purchases of 50/45,000 BTC today. In the very short term, we may see some corrective price action in BTC.
A call option gives the buyer the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a certain date. A put option gives the buyer the right, but not the obligation, to sell the underlying asset at a predetermined price on or before a certain date.
Bitcoin’s trading volume is increasing!
Bitcoin’s spot trading volume has soared over the past few days, reflecting a resurgence of buying activity. The past few months have been relatively quiet in the crypto markets, but September’s sell-off may have spurred some buyers torn between them. Blockchain data shows continued BTC accumulation by both long-term and short-term holders who are starting to make profits above cost basis, or the original value or purchase price of an asset or investment for tax purposes. Analysts are specifically watching the use of leverage in the Bitcoin futures market to determine if traders are convinced after the recent rally.
“Spot rally does not mean there is no leverage,” Delphi Digital, a crypto research firm, wrote in a blog post. He also said that exchanges lend stablecoins to pay for it later:
Exchanges also lend their customers stablecoins, which are then used to purchase spot assets.
Additionally, Delphi stated that a high spot volume Bitcoin rally would “mean that the overall leverage is much lower than it would be in a futures-based move.”
Ki Young Ju draws attention to purchases from major exchanges
Apart from the spot market, other analysts have seen an increase in trading volume in the perpetual futures market of Bitcoin, a type of derivative in the cryptocurrency markets, similar to futures contracts in traditional markets. CryptoQuant CEO Ki Young Ju said in a blog post:
Whales (large wallets) bought BTC on perpetual futures markets mostly on Binance, Huobi and Bybit yesterday.
So far, analysts are not worried about the spike in trading activity. “Overall, leverage ratios do not appear to be overextended or overheated as we think investors are relatively cautious in their trading tactics,” StackFunds, a cryptocurrency investment firm, said in a news release on Wednesday.
Bitcoin resilience can be seen by the end of the year!
Historically, the fourth quarter of the year tends to produce positive returns for Bitcoin, which is one reason some analysts remain optimistic. According to data compiled by Kraken, October is typically more volatile than September (61% vs. annual average volatility 66%), and BTC tends to finish around 13% higher when looking at historical averages. The exchange said in a research report:
This shows that BTC has become arguably more resilient to traditional market turbulence, as well as seeing a recovery in sentiment late last month after global markets teased about Evergrande fears and negative headlines from China.
And while more upsides are likely this quarter, some analysts expect the possible approval of a Bitcoin exchange-traded fund (ETF) by the US Securities and Exchange Commission later this month could halt the price’s upward move in the short term, as it did later. On this matter, Dan Morehead, CEO of crypto investment firm Pantera Capital, said in a Thursday newsletter:
While we already have two bear markets that are down 83%, I believe they belong to our primitive past – future bear markets will be shallower; the previous two are -61% and -54.
Finally, Morehead expects a repeat of previous major crypto events, such as the launch of Chicago Mercantile Exchange (CME) Bitcoin futures in December 2017 ahead of the BTC price drop. Still, Pantera said that it remains bullish for Bitcoin over the long term.
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