Bitcoin has climbed above $31,000 alongside gains in global equity markets and fresh evidence of growing demand for cryptocurrency from traditional market participants. However, it may be too early to call a trend reversal higher.
The biggest cryptocurrency by market value was changing hands at about $31,300 at press time, a 5% gain on the day, according to CoinDesk 20 data. The bounce comes a day after the cryptocurrency printed its first UTC close below $30,000 since New Year’s day and may have caught out some traders.
There was concern in the market that put-option sellers might take short positions in the spot/futures market on a break below $30,000, amplifying the price drop. Further, fund holdings dropped in the lead up to bitcoin’s break below $30,000, signaling the absence of dip demand from large investors and higher odds of a continued sell-off.
Still, the dip below $30,000 was shallow and short-lived, possibly because of the return to risky assets in traditional markets. The U.S. equity market jumped over 1% on Tuesday as the focus shifted from concern about the Delta coronavirus variant to growth, lifting banks and industrial stocks, according to the Financial Times. Futures tied to the S&P 500 are pointing to a positive open on Wednesday, with a 0.65% gain, according to Investing.com.
Bitcoin crossed above $30,000 early today. Buying pressure strengthened, pushing the cryptocurrency above $31,000, after Financial Times reported that Bank of New York Mellon had joined State Street and four other banks in backing the planned cryptocurrency trading platform Pure Digital.
Earlier this month, BNY Mellon, the largest custodian bank in the U.S., entered into an agreement with Grayscale Investments to handle accounting and administration services for the digital asset manager. Grayscale is a unit of Digital Currency Group, which also owns CoinDesk. Many investment banks have announced plans to launch crypto services this year, citing a surge in interest from their clients.
Crypto market sentiment may have also received a boost from the crypto derivatives exchange FTX’s record $900 million fundraising round at an $18 billion valuation. The big number highlights long-term conviction in the crypto industry, even though bitcoin, the industry leader, has lost more than half of its value since mid-April.
Some in the crypto community are associating the price recovery with the impending bitcoin-centered conference “The ₿ Word” scheduled for Wednesday. According to reports, Tesla CEO Elon Musk, one of the most famous crypto proponents, will participate in a live discussion with Square CEO Jack Dorsey and ARK Investment founder Cathie Wood.
“Bitcoin bottoming just below Elon Musk’s entry price the day before he hosts a big conference to talk about Bitcoin sounds like something that would feel very obvious in retrospect,” one popular trader tweeted.
Nevertheless, some analysts remain cautious. “Bitcoin is still just chopping around,” Joel Kruger, a currency strategist at LMAX Digital, said. “I still think there is a risk for one more decent decline, but we’d need to see a break below the June low of $28,800 to trigger such a move.”
Bitcoin still remains well below the crucial 50-day moving average (MA) resistance. “Bitcoin has been grinding lower below its down trending 50-day MA, which can be considered initial resistance near $35,000, a breakout above which would target the 200-day MA near $44,000,” Katie Stockton, founder and managing partner of Fairlead Strategies, said in a weekly research note published Monday.
On the downside, the June low of $28,800 is a key support level. “Everyone is talking about $30,000 like it’s a big deal, but in reality, it’s the June low at $28,800 which is the key level to watch,” Kruger said.
A breakdown may bring a quick sell-off to the former hurdle-turned-support at $20,000. “The area between $20,000 and $30,000 is lightly traded, there is fresh air between these levels,” Charlie Morris, ByteTree Asset Management’s founder and chief investment officer, noted in a blog post published Tuesday. “Price is supposed to move slowly through the heavy areas, and quickly through the light ones.”
UPDATE (JULY 21 10:53 UTC): Updates bitcoin price, adds BNY Mellon report.