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Bitcoin is back above US$80,000. The question is whether it can stay there.
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The cryptocurrency jumped as much as four per cent on Thursday as stocks rose, Treasury yields fell and the dollar weakened after Federal Reserve Governor Christopher Waller signalled he would support keeping interest rates unchanged if inflation continues to ease. The move gives bitcoin another shot at holding a level it has repeatedly failed to sustain.
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That test comes with demand from United States investors still looking uneven. Inflows into U.S.-listed spot bitcoin exchange-traded funds picked up in August but have proven inconsistent, including two days of sizable outflows in the past week. The seven-day average of the Coinbase premium, which compares prices on the largest U.S. exchange with international platforms, has also remained negative for more than four months.
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The mixed signals leave bitcoin caught between an improving market backdrop and questions about the durability of the buying behind its rebound. Glassnode said the seven-day average intake for the ETFs reached US$290 million a day during the rally, but trading activity remained subdued compared with previous bull runs.
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“Inflows driven by discrete policy headlines that lack broader market velocity often coincide with local inflection points,” Glassnode said in a note.
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A hawkish speech from Federal Reserve Chairman Kevin Warsh at the Jackson Hole symposium last week had revived expectations that the central bank may raise rates again if inflation stays elevated. The policy-setting Federal Open Market Committee is scheduled to meet Sept. 15 and 16.
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Bitcoin also faces a possible price ceiling. Glassnode estimates that long-term holders are targeting the US$83,000 and US$86,000 range to sell their bitcoin, leaving the cryptocurrency below the zone where investors are expected to take profits.
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A significant portion of the August rally appeared to be supported by a short squeeze, leaving questions around how much higher bitcoin could be expected to go in the current environment.
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“We suspect that a good chunk of that rally was driven by short covering, which has left positioning close to flat,” said Tony Sycamore, an analyst at IG Australia. “Technically we continue to expect dips back into the mid to low US$70s to be well supported by buyers leaning against the 200-day moving average at US$69,507.”
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Bitcoin was trading around US$80,400 as of 10:58 a.m. in New York on Thursday.
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