Bitcoin is trending up on the daily chart after seeing some downward moves over the weekend. At press time, the benchmark crypto is trading at $ 63,136, up 3.8% on the 24-hour chart.
BTC is recovering on the daily chart. Source: BTCUSD Tradingview
The rally was driven by a surge in institutional demand as the first bitcoin-linked exchange traded funds (ETFs) were introduced in the United States. Both products posted record trading volumes, with ProShares’ product outperforming the launch of the Gold ETF, reaching $ 1 billion in less than 3 days.
$ BITO today has a total volume of around USD 1 billion (currently USD 993 million, but the trades are still flowing in). By far the largest day one of all ETFs in terms of “natural” volume. It also traded more than 99.5% of all ETFs (including some big ones like $ DIA, $ ARKK, $ SLV). It exceeded our expectations .. pic.twitter.com/rWIPSAJboT
– Eric Balchunas (@EricBalchunas) October 19, 2021
This propelled the Chicago Mercantile Exchange (CME) open interest into the stratosphere, setting a new all-time high of $ 5.44 billion for futures contracts, according to a report by Glassnode. The CME OI rose by over 265% in October 2021 alone, as can be seen in the graph below.
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Source: Glassnode
The derivatives market has warmed across the board, with funding rates turning positive as Bitcoin rises higher. This set off a FOMO effect which resulted in a correction as over-leverage traders have been shaken off for the past few days.
Bitcoin appears to be bouncing fast and holding onto $ 60,000 as critical support, but as Glassnode noted, an overheated futures sector puts the entire market at risk of further price declines.
(…) The financing rates will remain at a similar level as shortly before the flushing out at the beginning of September. With futures open interest hovering near all-time highs, there is still the risk of another downtrend to remove even more leverage.
Bitcoin investors expect further gains
In support of the current bullish general sentiment in the crypto market, Glassnode noted a decline in activity from long-term owners. These investors took profits in the past 2 weeks after an accumulation period.
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As the research firm explained, long-term Bitcoin holders (LTH) exhibited typical behavior when the price of BTC entered pricing. As the graph below shows, there appears to be an inverse correlation between the total BTC supply of LTHs and the price of this cryptocurrency.
Source: Glassnode
Whenever spending on LTHs falls, the price of Bitcoin rises in a massive rally, as seen in late January and early February 2021.
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Combining the behavior of LTHs already resuming their BTC accumulation with that of Short-Term Holders (STH), Glassnode concluded that the general sentiment is for Bitcoin to hit new highs:
(…) STHs stopped issuing during this correction. With LTH supply already starting to recover, the most likely interpretation is that the vast majority of coin owners are still waiting and waiting for higher prices.
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