Bitcoin’s next move hinges on institutional demand despite shutdown optimism

Bitcoin is slipping modestly lower on Tuesday to 106k, pairing some of yesterday’s rebound, as investors weigh up progress towards ending the US government shutdown and more buying by Strategy against weak institutional demand. 

Bitcoin tested a key resistance just shy of 107k on hopes that the US government shutdown will end imminently. Late yesterday, the Senate passed a funding deal that would reopen Federal operations. The bill has moved to the House of Representatives for consideration, where it is expected to be approved. The US government reopening would restore economic stability and resume US economic data releases, which are critical for the Fed and markets to assess the health of the US economy. 

News of the likely reopening lent support to Bitcoin and other cryptos, while investors preferred US equities and Gold. The reopening is expected to increase liquidity, which could benefit BTC over the coming weeks and months. 

Institutional demand remains weak for now

However, any bullish narrative for BTC is dependent on institutional demand ramping up again. BTC ETFs recorded net inflows of just $1.15 million on Monday. This comes after spot BTC ETFs recorded $558.4 million in net outflows on Friday, the largest single-day withdrawal since August and the third-largest ever. The inflows also end a streak of net outflows totaling $1.22 billion. BTC ETF demand would need to pick up to support the price. 

Worries over weak institutional demand are overshadowing news that Strategy, the world’s largest corporate holder. Purchased a further 487 BTC this week. This takes Strategy’s total holding to 641,692 coins. 

61% of institutions plan to boost crypto exposure 

According to a Sygnum Bank report involving 1,000 professional and high-net-worth investors, institutional investors could return to cryptocurrency allocations by the end of the year. The bank’s Future Finance report found that 61% of respondents plan to increase digital investments, while 38% plan to do so in Q4.  

The report noted that diversification was the main reason to invest in crypto rather than “megatrend”. This suggests that the focus has shifted from speculation to a recognised portfolio component. 

The macro backdrop is looking more favourable, with greater certainty and data expected should the government reopen. However, institutional investors need to return to the market for BTC's price to move meaningfully higher. 

BTC technical analysis 

BTC trades in a falling channel dating back to Oct 6 ATH before finding support at 99k. The price has rebounded from the 99k November low but has run into resistance at 106.5k, the 38.2% Fib retracement on the 74.4k low and 126.6k high.  

BTC would need to rise above 106.5k to bring 110k, the horizontal resistance, and 200 SMA into focus. A rise above the 200 SMA makes a clear case for renewed upside. 

Sellers supported by the RSI below 50 and the shooting star candle will look to push the price lower towards 100k, the 50% Fib retracement, and the psychological level. Below here, 95k comes into focus. 

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