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Analysts declare new bull run with new ATH predictions as BTC breaks $71,000, ETH soars

23 May, 2024

Bitcoin (BTC) is back on the rise, breaking through the highly anticipated $70,000 mark but encountering significant resistance levels around the recent all-time high of $73,800. Market participants are watching closely to see if it can beat previous records in the coming days, with some of the more optimistic predictions coming from 10x Research, the crypto research platform headed by analyst Markus Thielen. 

Traders are increasingly confident that BTC has found a local bottom and anticipate further upside after two months of consolidation. Although predictions can vary widely, the prevailing mood in the market is bullish. Key factors influencing BTC's price include US economic policy updates, with the Federal Reserve releasing minutes from its May meeting and upcoming US unemployment data, as well as positive rumours surrounding the approval of spot Ethereum (ETH) ETFs in the US.

10x Research suggests new all-time high, recommends enhancing portfolio yield with a 'covered strangle'

In a recent analysis, 10x Research highlighted that Bitcoin could be on the brink of reaching new record highs if it manages to decisively break above the $67,500 resistance level, which, at the time of writing on 23 May, it already has. Markus Thielen, head of 10x Research, wrote:

"A breakthrough above $67,500 could potentially lead to new all-time highs, a scenario that our Bitcoin ETF model predicts."

10x Research's model counted on BTC's price being buoyed by positive inflows into spot Bitcoin ETFs. US spot Bitcoin ETFs have seen renewed interest, with nearly $1 billion in inflows last week, the best performance since March. Bitcoin ETFs now hold about 2.8% of the total BTC supply, which has contributed to the bullish sentiment. Exchange BTC reserves have dropped to a seven-year low, currently at 1.9 million BTC, indicating strong demand.

In a separate note, Thielen's firm also advised Bitcoin investors to consider a 'covered strangle' strategy to enhance their portfolio yields. 

The 'covered strangle' involves selling an OTM call option at a strike price higher than Bitcoin's current market price and an OTM put option at a strike price lower than the current market price. The premiums from selling these options add to the investor's yield. Specifically, 10x Research recommends selling a $100,000 strike call and a $50,000 strike put, both expiring in December 2024, while holding Bitcoin in the spot market.

According to 10x Research, this strategy could generate an additional 17% yield on top of the gains from holding Bitcoin. Selling the call option could yield 11%, and selling the put option could yield 6%, resulting in a combined 17% yield. This strategy is particularly beneficial when the market outlook is bullish, but the uptrend is expected to be gradual, keeping implied volatility low. In such conditions, OTM options lose value faster as expiry nears, benefiting the seller.

However, this strategy is not without risks. If Bitcoin's price falls below the $50,000 strike price of the put option, both the long position in Bitcoin and the short put option will incur losses, which could be substantial. Therefore, any traders considering this strategy should go in with full knowledge of the risk and be prepared for a high-stakes game.

Macro influences

The macroeconomic environment will be shaped by the US Federal Reserve's upcoming communications and US jobless claims data, which could impact risk assets. Bitcoin's 51% year-to-date gain reflects investor anticipation of US monetary expansion, with the M2 monetary base surpassing $21 trillion in April 2024. This increase in circulating money suggests rising inflationary pressures despite cautious spending by companies and individuals. The Federal Reserve's strategies to manage inflation and avoid a recession could impact liquidity and make scarce assets like Bitcoin more attractive to investors.

Market sentiment and future outlook

The Crypto Fear and Greed Index stands at 70/100, indicating "greed" but not at extreme levels seen during previous peaks, such as in March 2024, when it stood at 90/100. Research firm Santiment notes the most bullish sentiment since January, suggesting that buyer FOMO remains low, which is essential for sustaining the positive trend.

Overall, Bitcoin's near-term future looks cautiously optimistic, with key resistance levels in sight and macroeconomic factors playing a significant role in its potential breakout.

Ether and Tether boost bull market

Bitcoin has never lost its place as the leader of the crypto pack despite a market crowded with contenders. Nonetheless, altcoins also have their part to play in the current bullish trend, with the fortunes of all the major cryptocurrencies being interlinked to some degree.

Ethereum soared over 19% to $3,700 following the increased probability of a US spot ETH exchange-traded fund (ETF) approval. Other major cryptocurrencies, including Ripple (XRP), Cardano (ADA), Solana (SOL), and Dogecoin (DOGE), saw gains of between 3 and 6%.

The rapid price increase of Ethereum resulted in over $260 million in market-wide short liquidations, the largest since 28 February. Ether shorts accounted for over $115 million of the liquidations, while Bitcoin shorts were just over $99 million, as reported by Coinglass.

Short positions are bets against rising prices. Liquidation occurs when an exchange forcibly closes a trader's leveraged position due to a partial or total loss of the trader's initial margin, typically because the trader fails to meet margin requirements.

The market rally began late Monday after Bloomberg analysts Eric Balchunas and James Seyffart increased the odds of a spot ether ETF approval from 20% to 75%. Subsequently, CoinDesk reported that the US Securities and Exchange Commission (SEC) requested aspiring ether ETF exchanges to update 19b-4 filings ahead of a key deadline this week.

Market participants view approval of an Ethereum ETF as a bullish event, potentially attracting substantial institutional capital. The spot Bitcoin ETF that began trading in January has accumulated $12 billion in total inflows, with top trading firms and state funds among its holders. Some institutional traders, such as Singapore-based QCP Capital, anticipate further increases in ETH's prices if spot Ethereum ETFs are approved, with a drop back down to $3,000 following a denial. QCP Capital also stated on Tuesday: "Exchanges are being asked to update 19b-4 filings on an accelerated basis, suggesting approval is imminent."

Tether's recent activities could also impact Bitcoin's price. Tether minted $1 billion worth of its stablecoin USDT on 17 May, bringing its yearly total to $31 billion. This increase in USDT supply has been linked to Bitcoin's price movements. Additionally, Tether's decision to invest 15% of its net profit in Bitcoin could further drive up the price of the original cryptocurrency. As of 31 March, Tether acquired 8,888 BTC, making it one of the largest Bitcoin holders.

Spot Ether ETFs to be decided by a five-person SEC vote

The fate of spot Ether ETFs could hinge on a single vote from SEC Chair Gary Gensler this week, following a precedent set earlier this year.

In January, the approval of spot Bitcoin ETFs was determined by a five-commissioner panel. Crypto-friendly Commissioners Hester Peirce and Mark Uyeda voted in favour of the ETFs, while Commissioners Caroline Crenshaw and Jaime Lizárraga opposed them. Gensler's decisive vote led to the approval of spot Bitcoin ETFs with a narrow 3-2 margin on 10 January, suggesting his influence could be pivotal once again.

The same five SEC commissioners are scheduled to vote on VanEck's spot Ether ETF on 23 May, making this Thursday a day to watch.

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