Bitcoin (BTC) price hit $ 18,815 on Binance today for the first time in nearly three years. After the breakout, BTC is on track to hit new all-time highs in the short term for four important reasons.
The factors that make a new record high likely are growing institutional demand, reduced selling pressure, a locally-driven market rally, and the importance of the $ 18,500 resistance breach.
Bitcoin sees reduced selling pressure
In order for Bitcoin holders to sell, they must first deposit BTC on exchanges. Often times, when BTC foreign exchange reserves fall, it indicates little pressure on the sell side of the market.
According to Glassnode, the Bitcoin account balance on the exchanges has dropped 18% since the start of the year. Analysts at the on-chain market analysis firm said BTC liquidity is continuing its downward trend.
This trend is significant as it shows that despite the rally from $ 3,600 to $ 18,700 within eight months, there is little appetite to sell Bitcoin at the current price level.
The institutional demand is growing
After Rick Reider, BlackRock’s CIO on fixed income, talked about Bitcoin at CNBC, billionaire Mike Novogratz said BTC was now an institutional asset.
During the CNBC interview, Reider said that there is bitcoin to be said here and that it has the potential to move forward. He suggested that millennials prefer BTC and that the increasing reality of digital currencies becoming popular payment options are major positive factors for BTC.
Given the institutional trends, Novogratz said 2021 would likely be as good or better for Bitcoin than 2020. He said:
“Bitcoin is now an institutional asset. Period. The good thing is that most of the institutions are not there yet. So 2021 will be as good or better than 2020. “
The market is in a sell-side crisis
On October 10, a cryptocurrency derivative trader known as “Light” said that Bitcoin was showing signs of a liquidity crisis on the sales side. He then remarked:
“Bitcoin is experiencing the beginnings of a liquidity crisis on the sales side. It’s always been like oil on crack. Production is completely inelastic, and demand is now reflexive. “
Bitcoin’s performance over the past two quarters showed a clear lack of sellers in the market. Especially after the halving in May, the declining selling pressure on BTC is remarkably positive.
In addition to the drop in sellers, crypto derivatives trader “Cantering Clark” noted that the spot market leads the rest of the market. He said:
“Spot Bid takes the lead here.”
The spot market, which leads the derivatives market, is important as the latter allows traders to use high leverage. When the futures market leads a bull rally, the uptrend becomes vulnerable to large price movements.
Maintaining $ 18,000 in support is critical
On November 18, Bitcoin plunged from $ 18,500 to around $ 17,200, minutes after hitting a two-year high.
The sharp rejection that day indicated that large volumes of sales orders over $ 18,500 had been submitted. Today’s second break above $ 18,500 confirms that the market has enough momentum to break through key multi-year resistance levels and turn them around in support.
Because of the combination of these four factors and the fact that global central bank policy of continued injections of liquidity can increase inflation, the likelihood that BTC will soon hit a new all-time high remains high.