Large trading volumes in the bitcoin spot market are helping push prices upward to a fresh record high. Ethereum-based DeFi value locked is also setting records, with rising crypto values playing a part.
Bitcoin trading on Bitstamp since Jan. 4.
The price of bitcoin continues to make incredible gains Thursday, an upward trajectory that helped the world’s oldest cryptocurrency hit a record $40,324. Prices north of the new, big figure were short-lived, however. A sell-off quickly saw nearly $3,000 shaved off the price in a matter of 30 minutes, though it has since rebounded to $39,143 as of press time.
“Bitcoin’s move upwards is fueled by institutions and institutional analysis pointing to price targets called for by firms including $146,000 by JPMorgan and $400,000 by Guggenheim,” said Guy Hirsch, managing director for U.S. at multi-asset brokerage eToro.
“There is likely to be some profit-taking, causing intermediate dips in price, but all signs point to a continued move higher in the short to medium term,” he added.
“It’s been a wild first week of the year for bitcoin, already up and down 15%-20% moves a few times during this period,” said Cindy Leow, investment manager at multi-strategy trading firm 256 Capital.
Historical bitcoin price the past four months
Source: CoinDesk 20
“This move is a hybrid of 2013 and 2017 post-halving price action, where 2013 saw a practically vertical move built up over many months while the late 2016 rally saw many more regular corrections that panned out over months,” Leow added. “The overall market sentiment seems to be a mix between disbelief and euphoria, which leads us to think that the retail peak is not in yet and there may still be room to go for this trend to develop.”
Weekly bitcoin spot price on Bitstamp since 2013.
“We remain cautiously bullish, noting that funding rates across most crypto-assets are now persistently high, as are futures premiums and call volume,” Leow concluded.
Funding premiums on major derivatives venues remain high, signaling traders are willing to pay quite a bit for leveraged positions.
Bitcoin swaps funding on major derivatives exchanges the past six months.
“From here I have an initial target of $50,000 in mind and would love to say that we hit it in three to six months, but I think the power behind the market just now means we have a chance of hitting it in a few weeks,” said Chris Thomas, head of digital asset at Swissquote Bank.
If spot bitcoin volumes can continue on a tear, Thomas’ prediction might not be out of the question. Daily volumes on the eight exchanges tracked by the CoinDesk 20 have been over $5 billion for six days in a row including Thursday’s $6.6 billion tally as of press time.
Spot USD/BTC volume on eight major exchanges(Shuai Hao/CoinDesk Research)
“After $50,000, I think there will be some very realistic institutional sellers who have to take profits as they will likely have doubled their money at that point,” Thomas said. “It would be prudent to do so and a crash to sub-$20,000, which is not out of the question, could result in difficult discussions with their bosses.“
Nevertheless, 2021 is off to a good start for the cryptocurrency market. “It is early January and bitcoin has broken through $40,000,” noted Denis Vinokourov, head of research at crypto brokerage Bequant.
Value of crypto locked in DeFi is up while investors withdraw
The total value locked in decentralized finance, or DeFi, crossed the $22 billion mark for the first time Thursday. Crypto investors “lock” assets in DeFi smart contracts to gain a “yield” or percentage return in exchange for providing the liquidity.
Total value locked in DeFi the past three months.
Source: DeFi Pulse
However, the amount of ether locked in DeFi is dipping, to below 6.8 million ETH as of press time.
Total ether locked in DeFi the past three months.
Source: DeFi Pulse
In addition, the amount of bitcoin locked has fallen precipitously, down to 30,456, representing a 53% drop from the all-time high of 64,993 BTC locked in October.
Total bitcoin locked in DeFi the past three months.
Source: DeFi Pulse
Where investors are moving all this crypto to from the DeFi sphere is anyone’s guess, but some degree of profit-taking is likely happening in what has been a red-hot market.
“The charts serve as a good leading indicator of price movement,” said Misha Alefirenko, founder of crypto market maker VelvetFormula. “This means people are redeeming back their BTC and ETH and that looks very bearish.”
Digital assets on the CoinDesk 20 are mixed Thursday, but mostly green. Notable winners as of 21:00 UTC (4:00 p.m. ET):
- Oil was up 0.85%. Price per barrel of West Texas Intermediate crude: $50.94.
- Gold was in the red 0.21% and at $1,913 as of press time.
- The 10-year U.S. Treasury bond yield climbedThursday jumping to 1.076 and in the green 3.4%.