Bitcoin has been struggling to hold the $97,000 level for over a week now. Today, it is struggling to reclaim even $96,000.
Bitcoin’s latest pullback comes amid speculation that around 19,800 BTC worth around $2 billion worth of seized bitcoins by US government were transferred to Coinbase, which could signal a potential selloff.
Government offloads of bitcoin are usually a source of downward pressure due to the large volumes that are being sold in a short period of time. Earlier this year, we saw a similar selloff when the German government sold off from its 50,000 BTC.
However, this sale is uncertain and could be a transfer to Coinbase for custody purposes. While the move has been criticized by the crypto community, who say that the government should not sell its Bitcoin holdings, a step that goes against Donald Trump’s promise to create the world’s largest strategic reserve of the cryptocurrency when he returns to the White House next year.
In contrast, MicroStrategy continues to build up its massive Bitcoin holdings. Over the course of a week from yesterday, the company purchased 15,400 Bitcoin, bringing its total holdings to over 400,000 BTC. Not only that, Bitcoin exchange-traded funds have continued to see net positive inflows over the past three sessions, totalling $775 million. This could indicate that both institutional and retail investors remain optimistic about Bitcoin’s potential to reach new record highs despite the weak trend.
returning to the downside factors, the decline in futures market activity could explain Bitcoin’s recent lacklustre momentum. After peaking at over $64 billion on November 22, futures open interest have fallen below $58 billion. In contrast, XRP futures, where the coin at its highest levels since 2018, are seeing a remarkable upward momentum, from just under $700 million in early November to over $4.3 billion today. This may explain part of the disparity in performance between the two currencies.
Not far from the cryptocurrency market, the continued gains in the stock market that reached record levels yesterday should boost the risk appetite that Bitcoin needs to continue its gains. Market sentiment has been boosted by better-than-expected manufacturing activity in November, according to the PMI reports from both the Institute for Supply Chain Management and S&P Global. The reports indicated an improvement in demand conditions, which may reflect the strength of the US economy, which in turn is fuelling market gains.
While this week is a critical week for market trends, with a flood of labor market data set to stream in from today until Friday. However, if the upcoming data reinforces the solid picture of the labor market amid rising interest rates, this could further push the risk appetite higher, which could positively impact Bitcoin.
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