Bitcoin trends to the upside on the daily chart after experiencing some bearish movement over the weekend. As of press time, the benchmark cryptocurrency is trading at $63,136 with a profit of 3.8% on the 24-hour chart.
The rally was driven by increased institutional demand as the first Bitcoin-linked Exchange Traded Funds (ETFs) were launched in the United States. Both products saw record trading volumes with ProShares surpassing the launch of the Gold ETF by reaching $1 billion in less than 3 days.
petto dollar Total trading volume is almost $1 billion today (versus $993 million but deals are still flowing). Easily the largest single day of any ETF by “normal” volume. More than 99.5% of all ETFs (including some big companies like $ . dayAnd ARKK dollarsAnd SLV dollars). challenged our expectations… pic.twitter.com/rWIPSAJboT
Eric Balchunas October 19, 2021
This pushed the Chicago Mercantile Exchange (CME) open into the stratosphere, hitting a new all-time high of $5.44 billion for futures, according to a report by Glassnode. The CME OI Index rose more than 265% in October 2021 alone, as shown in the chart below.
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The derivatives market has been tightening across the board with higher funding rates as Bitcoin soared. This triggered a FOMO effect which led to a correction as the over-leveraged traders suffered losses in the past days.
Bitcoin appears to be making a quick recovery and holding $60,000 as a critical support, but as Glassnode noted, the overheated futures sector is putting the entire market at risk of further bearish price action.
(…) Funding rates remain at similar levels as observed before the early September influx. With futures open interest remaining near all-time highs, there is still a risk of further decline to liquidate further leverage.
Bitcoin Investors Expect More Gains
In support of the current bullish sentiment in the cryptocurrency market, Glassnode noted a decrease in activity from long-term coin holders. These investors have been reaping profits for the past two weeks after a period of accumulation.
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As explained by the research firm, Bitcoin long-term (LTH) holders showed typical behavior when BTC price entered price discovery. As the chart below shows, there appears to be an inverse relationship between the total supply of BTC held by LTHs and the price of this cryptocurrency.
When there is a drop in LTH spending, the bitcoin price tends to the upside in a huge rally as seen in late January and early February 2021.
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Combining the behavior of LTHs, and the resumption of BTC accumulation already, with the behavior of short-term holders (STHs), Glassnode concluded that the overall sentiment is that Bitcoin is reaching new highs:
(…) STHs have stopped spending during this correction. With LTH supply already starting to recover, the most likely explanation is that the vast majority of coin holders are still expecting and waiting for higher prices.
