Bitcoin is currently facing a crucial battle to maintain the $34,000 level, following a notable surge in its price above $35,000 on October 23. This surge, coupled with a short squeeze, has sparked considerable interest from institutional investors, as evidenced by the record-breaking open interest on the Chicago Mercantile Exchange (CME) surpassing 100,000 BTC.
Charles Edwards, the founder of Capriole Investments, observes that Bitcoin’s recent upward move effortlessly broke through the $32,000 resistance, which had persisted for seven months. He anticipates that the upcoming monthly resistance is unlikely to pose a significant obstacle. Edwards suggests the possibility of a rapid continuation to the mid-range around $43,000 or a short-term consolidation between the support and resistance levels at $32,000-$35,000 before further upward movement.
The ongoing surge in Bitcoin’s price is attributed to several factors, with one of the primary catalysts being the growing optimism around the Securities and Exchange Commission’s imminent approval of a spot Bitcoin exchange-traded fund (ETF). Edwards acknowledges this as a contributing factor but also points to other near-term considerations.
Paul Sztorc, founder of LayerTwo Labs, concurs with Edwards, highlighting meaningful indications of Bitcoin’s broader decoupling from equities. According to Sztorc, market participants have been taken by surprise by this divergence, particularly amidst concerns related to foreign conflicts and rising macroeconomic uncertainty. Sztorc suggests that traders and investors are accumulating Bitcoin in anticipation of future events, such as potential Federal Reserve easing of monetary policy due to rapidly rising yields.
The expectation of easing is linked to the belief that the Federal Reserve may resort to yield-curve control, a measure that historically results in monetary debasement. Sztorc notes similarities to a past divergence during the U.S. regional banking crisis, where Bitcoin outperformed traditional assets.
The noteworthy increase in open interest on the CME, surpassing 100,000 BTC, serves as further evidence of institutional interest in Bitcoin. This surge is seen not only as speculative trading but also as a strategic move by institutional investors to hedge their positions. The implication is that institutional accumulation of spot Bitcoin positions necessitates corresponding strategies to mitigate risk, leading to increased volumes and open interest on platforms like CME.