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Bitcoin

Markets Report: Bitcoin Embraces $10,000 But Big Futures Gap Could Weaken Bulls

Institutional interest is leaning on $9,400 but against a backdrop of safe haven records, Bitcoin may retain five figures.

Bitcoin is surprising everyone, and the week has barely started—$10,000 is back, but can it hold or even go higher?

Modern Consensus takes a look at what’s in store for the Bitcoin market this week, part of a summary released every Monday. We also publish weekly wrap-ups on Fridays, the latest installment of which can be found here

Fiat weakness fuels a Bitcoin renaissance

The weekend produced something unusual for the Bitcoin price: volatility. In contrast to previous weeks and even months, Saturday and Sunday saw major moves for BTC/USD, which sealed its latest trip to five figures.

On Monday, the higher levels persisted, with Bitcoin hitting highs of $10,320 in its strongest performance since February.

The backdrop to the gains came in the form of an investor flight to safe havens, specifically gold. The precious metal beat all previous records to hit all-time highs in US dollar terms, and analysts believe that the bull run is not yet over. 

XAU/USD has a 30% chance of hitting $2,000 by the end of the year, Citigroup analysts predicted this week, quoted by Bloomberg

Markets Report
Gold is at its highest ever against the US dollar. (Photo: Skew)

Upside potential comes thanks to worries across macro arenas due to tensions between the US and China. At the same time, this week will see a stimulus announcement from Washington, and the Federal Reserve will comment on interest rates. 

Bitcoin, heavily correlated to stock markets, could feel the impact of a change of direction at the Fed. Nonetheless, the weekend’s action came in spite of broadly calm conditions elsewhere.

Commenting on the past few days, popular trader Josh Rager described Bitcoin as being in a “disbelief phase.”

“This wick better not be a tease like the last few,” he added in Twitter comments. 

“Every time we hit right below the previous high of the trend[.] Want to see price make it back above $10,473[.]”

As Monday has progressed, it has become apparent that momentum wanes for Bitcoin above $10,300 — a daily range with $10,150 at its floor is currently in place.

Markets Report
Bitcoin is making significant progress as the week commences. (Photo: CoinMarketCap)

Bitcoin futures gap opens $700 below spot

Upcoming moves may well be in the hands of institutional traders on Bitcoin derivatives markets. 

Monday’s higher open marked a divergence from the flat weekend trading of previous weeks, with a gap of around $250 opening up on CME Group futures.

A historical trend in Bitcoin dictates that BTC/USD rises or falls from its Monday position to fill any void left in futures over the weekend. On this occasion, that would imply a correction, however briefly, to $9,600 or lower. 

Markets Report
CME Group’s Bitcoin futures has a new gap — and it’s noticeable. (Photo: TradingView) 

“Weekly at the CME shows a gap back at $9615 which is the play everyone is looking at at the moment,” fellow trader filbfilb told subscribers of his Telegram trading channel.  

“Again, volume nothing really to mention and not a material change in the COT (commitment of traders) report either[.]”

Filbfilb added that the numbers coming from charts reinforced his existing long position in place since the previous week. Overall, the mood was buoyant. 

“Overall bullish but just throwing it out there that a big volume move and close across [$]10500/[$]11000 will result in the continuation everyone else wants,” he wrote.

No retail FOMO… yet

For trader and advisor Scott Melker, meanwhile, the current state of Bitcoin is definitively different to the start of previous protracted bull markets, such as that which produced BTC’s all-time high of $20,000.

“The 2017 bull run was fueled almost entirely on retail fomo—average people buying to get rich quick. They’re not here,” he tweeted. 

“Crypto is being fueled this time by institutional buying and other smart money. What happens when PayPal and Venmo open the doors to retail?”

Melker was referring to previous rumors that PayPal was about to support cryptocurrency, something which that company did not confirm. Nevertheless, the news accompanied a modest price pump, short lived in a market dictated by stock market movements.

Even if a correction hits, the previous few days have conspicuously broken a mid-term trend for Bitcoin: one of price compression. 

As Modern Consensus previously examined, BTC/USD spent multiple weeks in a pattern of lower daily highs and higher daily lows, creating a narrowing wedge which by definition had a limited lifespan before volatility became all but zero. 

At the time, confidence remained high that Bitcoin’s strong network fundamentals would ultimately spark a price run later on. The theory that price in particular follows hash rate has long been a popular mantra of figures such as RT host Max Keiser. 

Updated 10:14 a.m. July 27 to correct subtitle from $9,600 to $9,400.

Updated at 12:03 p.m. to correct byline.

Anthony Bevan is a journalist focusing on disruptive finance and cryptocurrency, along with the changing face of the market as Bitcoin gains mainstream adoption. Journalists covering cryptocurrency for Modern Consensus May hold positions in some of the currencies they write about.