Bitcoin futures holding support

Cryptocurrency enthusiasts counting on Bitcoin to bounce back above the $40,000 level face a challenge due to faltering demand for the biggest fund tracking the digital asset, according to analysts polled. The pace of flows into the $20 billion Grayscale Bitcoin Trust “appears to have peaked” based on four-week rolling averages. The fund slid 22% over the past two weeks through Jan. 22, outpacing a 17% drop in Bitcoin in the same period. At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out above $40,000 and that is the reason we have been floating under 35,000 for the past few sessions.

The risk is that momentum traders will continue to unwind Bitcoin futures positions causing that 28,000-35,000 price range for bitcoin futures to perhaps hold at least into the FOMC announcement for later this week when the dollar will likely move based on Fed forward facing statements related to continued support of the bond buybacks.

Bitcoin’s red-hot rally lost momentum after the largest cryptocurrency reached a peak of almost $42,000 at the end of the first week in January when analysts at that time were prospecting between prices peaking at 60,000 to bearish comments suggesting that we fall right back to 20,000. Bullish analysts present an argument stating that institutional interest has helped strengthen Bitcoin’s use as a hedge against dollar weakness and inflation which appears to be catching a foot hold here in the US, while bearish analysts continue to believe that the latest surge is yet another speculative bubble, mirroring the 2017 mania that preceded a rapid collapse.

In the past few days, prices have been volatile in the mid-$30,000s and the digital coin is still sitting on a gain of almost 275% over the past year from its’ recent squeeze higher from languishing at or below 20,000 for a long period. As of this posting, Bitcoin futures are trading at 34275.

While analyst opinion remains that the near-term balance of risks is still tilted to the downside the price moves do not suggest that we fall back into the 20,000-price range.

Longer-term Bitcoin holders and miners likely sold to groups of institutional investors during the 2020 rally, as the average age of coins traded rose starting in October 2020 and has remained elevated since. For traders who like to speculate with the futures in the intraday timeframe or play with stocks that support mining, here is our intraday analysis for the bitcoin futures.

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