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Markets Report: Bitcoin sees $17,600 lows but institutions keep buying

Sentiment shifts to the mid to long-term prospects for Bitcoin as price action takes a definitive breather from the bull run

Bitcoin is ending another week on a bearish note as it explores more of a giant $1,300 futures gap and bulls are nowhere to be seen.

As volatility lessens but a lack of buyer support leaves the bull run short of steam, talk is turning to where a realistic floor might lie. Modern Consensus takes a look at the week’s events and considers what the coming days could have in store. 

Fresh lows conclude a lackluster week

Monday began on a strong note with Bitcoin returning to the mid $19,000 zone, only to see rejection at $19,400 — something which would form a key target later on. 

Thereafter began a series of step-down price moves, culminating in the loss of $19,000 and then $18,000 support. The middle of the week produced a brief glimmer of hope as BTC/USD returned to hit highs of $18,640, but this was also short lived. By Friday, the pair had dived below $18,000 once again to put in lows of $17,585.

With Bitcoin down over 6% on weekly timeframes after putting in its highest-ever weekly close last Sunday, opinions are mixed as to what is fuelling the market’s cold feet.

Chief among traders’ considerations is the record CME futures gap—a $1,300 chasm left behind as Bitcoin steamed to all-time highs earlier in December. The latest retreat has allowed roughly half of the gap to be filled, with Modern Consensus noting that the lower bound lies at $16,900.

This, however, is not the only bearish force at work in the current environment. A look at exchange orderbook data shows that strong buyer support does not appear to sync with the gap. Rather, definitive protection against major losses is only set to kick in at around $16,300.

Conversely, strong selling preparations are in place at $19,400 and $20,000, making Bitcoin’s chances of beating out resistance to continue its bull run all the more unlikely. 

Macro factors provide a third obstacle, with uncertainty over the U.S. coronavirus stimulus and Brexit contrasting with a fall in stock markets and the associated rise in the strength of the U.S. dollar. A classic scenario in many respects, a stronger dollar comes hand in hand with Bitcoin price suppression.

Bitcoin is being held at $17,600 by an area of modest support. Source: Material Indicators

Commenting on the status quo, trader Michaël van de Poppe said that investors should be “relatively cautious” about longing Bitcoin at current price levels—implying the potential for further downside remains.

Having failed to clinch $18,400, the area around $17,600 is the one to watch, he advised in an update on Friday. 

“Trend is still down, but we might see a potential bullish trigger if $BTC flips back above $17,800 for support,” he added in a tweet. 

“Then the next trigger is $18,500. However, not doing that -> $17,000 and $16,300 next.”

Big players don’t care about the bears

Despite the lackluster short-timeframe movements, however, Van de Poppe, like many other market participants, was bullish on the overall climate.

“The crucial part is that Bitcoin is flowing out of the exchanges towards hardware wallets… there’s new adoption, there’s new long-term perspectives right now, which means that those are in cold storage for the long term which is only a bullish case,” he said.

With funds continuing to leave exchanges, news of fresh corporate buy-ins continues to hit the headlines. The latest is insurance firm MassMutual, which confirmed it had purchased $100 million in BTC.

At the same time, NYDIG, the crypto institutional investment provider through which MassMutual acquired its holdings, confirmed the insurance giant had acquired a stake in it.

“We are proud of this incredible moment in the history of both Bitcoin and the insurance industry,” Robert Gutmann, co-founder and CEO of NYDIG, stated in an accompanying press release

“This reflects the expansion of Bitcoin to insurance company general investment accounts, as well as NYDIG’s unique ability to meet the complex needs of the most demanding institutional investors.”

Fellow executive Ross Stevens, who co-founded Stone Ridge, NYDIG’s parent company which itself bought 10,000 BTC in October this year, described Bitcoin as “asymptotically unprintable sound money with an uncorrelated risk premium.”

This reinforces the idea that belief in long-term upside for Bitcoin is all but a given in the current macroeconomic environment, and that current price weakness will soon become all but a blip on the radar.

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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.