It feels like just a few weeks ago we were talking about Bitcoin breaking $10,000, and now the cryptocurrency is positioned to break $12,000. It wouldn’t be the first time Bitcoin has broken that level in the last few days, but if it can stay above the same level for at least a day, it would be the first time in over a year that the cryptocurrency has managed to achieve that feat.

Bitcoin rose above $12,000 for the first time since July 2019 between 4:00 and 5:00 UTC time on August 2, but fell below $11,000 within an hour due to a bear trap at the price barrier. During that time, retail and institutional investors alike were buying Bitcoin, pushing up demand for the cryptocurrency even though a large portion of the market was selling it. Last week, more than 231,000 bitcoins that had accumulated a 25% profit were sold as the price recovered, but the price level remained above $11,000.

At this point, $12,000 looks to be on the horizon, with the two groups slowly moving in the same direction for the first time in months. According to a recent report by Ecoinometrics, long-time “net-long” retail traders are now “trending up,” forcing “smart money” institutions to follow suit.

CME bitcoin futures retail positions | Source: cme bitcoin futures. ecoinometrics

According to the report, last week, “smart money” investors were using a combination of “cash and spreads” to reap the premium and hedge the price of bitcoin on the spot market, rather than going long on bitcoin futures. While this has worked well as a short-term strategy, retail investors have taken longer positions and eaten into profits, which is why long positions are “gaining momentum” and “smart money” is taking notice, the report notes.

“There’s only so much juice you can extract from the arbitrage between futures and cash. So I expect the smart money to move to the net long side as time goes on. “

As a result of this change in mindset, institutions are not giving in to price pressure. This week, when the price fell from over $11,800 to $11,200, the number of open interest, or open contracts, in Bitcoin futures remained strong and did not open the door to a “mass liquidation”-like panic. In addition, volume and spreads appeared to have no impact on the price turn down.

The move is not limited to the west coast derivatives exchanges either, with similar movements also seen on large retail-driven exchanges like Binance, whose CEO Changpeng Zhao told AMBCrypto that the exchange’s open interest increased from $220 million to $580 million in the last quarter, with the $180 million increase marking a significant increase in the exchange’s open interest. The fourth consecutive month of OI growth. He noted.

The crypto market can have periods of high volatility and periods of relative stability, and we won’t really be able to make predictions because it’s driven by demand and supply,”

Given this bullish bias, Binance aims to meet the needs of both sides of the market, with CZ describing retail and institutional traders as “indispensable customers” in the hope of creating a “sustainable market ecosystem”.

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2020-08-14