The latest Bitcoin rally has continued to new all-time highs, buoyed by institutional demand, rising spot BTC ETF inflows, U.S. Federal Reserve’s second rate cut and pro-crypto Donald Trump’s win. The BTC price has even surged above the $84,000 mark. However, concerns linger among market analysts that these gains may not be sustainable, with three key factors suggesting the rally could face resistance.
“While we remain structurally bullish, we are cautious of any pullbacks especially from leveraged washouts,” noted analysts from QCP Capital. They noted that the elevated funding rates in perpetual swaps and seven-month high basis yields reflect the euphoria surrounding BTC’s current price levels. However, history suggests these elevated basis yields are typically short-lived, raising the question of whether the Bitcoin rally will continue.
1. Upcoming Economic Data & Fed Rate Cut Probability
The fate of BTC price hinges on the upcoming macroeconomic events. This week, the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) will be released on Wednesday and Thursday, respectively, followed by a critical speech from Federal Reserve Chair Jerome Powell on Friday.
Together, these events will shed light on the Fed’s intentions for a potential December rate cut of 25 basis points. Any change in inflation outlook or rate policy could shift market sentiment and potentially trigger a pullback in Bitcoin price.
Advertisement
In the immediate future, analysts expect Bitcoin to trade sideways around these levels. “We expect spot to chop around these levels and vols to soften,” said QCP Capital analysts. This statement indeed emphasizes a cautious outlook given the market’s current leverage levels.
2. Robust Spot Bitcoin ETF Inflows
Meanwhile, spot Bitcoin ETFs have recorded remarkable inflows, totaling around $2.29 billion over the last three trading days. Following Thursday’s rate cut, a single-day inflow of $1.37 billion further underscored institutional interest. Such robust flows have helped the BTC price establish record highs.
However, market volatility has remained relatively muted as profit-taking on long calls has limited any significant spike in volatility. Nonetheless, the strong inflows suggest further upward trend for BTC as the institutional demand grows for the flagship crypto via the various ETF products.
3. Institutional Interest Amid Bitcoin Rally
A major contribution to this latest Bitcoin rally has come from MicroStrategy, which on November 11 announced a substantial addition to its Bitcoin reserves. According to the company, MicroStrategy purchased 27,200 BTC between October 31 and November 10, investing $2.03 billion at an average cost of $74,463 per Bitcoin.
The acquisition boosted MicroStrategy’s Bitcoin holdings to 279,420 BTC, with an aggregate valuation of approximately $11.9 billion. MicroStrategy’s average acquisition cost now stands at $42,692 per BTC, underscoring its long-standing commitment to Bitcoin as a key corporate asset. This growing institutional adoption could boost the BTC price despite cautious outlook from analysts.
Advertisement
Also Read: Bernstein Urges Investors to Embrace Bitcoin and Crypto
