Bitcoin’s price has surged by 17.5% in the past week, surpassing $50,000 for the first time since December 2021. This increase can be partly attributed to the inflows to spot Bitcoin exchange-traded fund (ETF) funds, which began trading on January 11. However, it remains to be seen if these inflows are strong enough to sustain further gains for Bitcoin above $50,000.
Notably, some of the world’s largest mutual fund managers, including BlackRock, Fidelity, and ARK 21Shares, have successfully launched spot Bitcoin ETFs, which have quickly accumulated over $10 billion in assets in less than a month. It is expected that these inflows will continue to increase as trading firms complete their due diligence on these newly launched investment vehicles.
While Bitcoin reaches new multiyear highs, retail investors are closely monitoring the crypto and macro markets. The focus of traders remains on the macroeconomic scenario, particularly after the S&P 500 closed above 5,000 points for the first time in history, following a 13.9% gain in three months. However, the bullish momentum may pause temporarily as investors analyze the quarterly reports of several companies, including Coca-Cola, Airbnb, Coinbase, and DoorDash.
Furthermore, the upcoming release of United States inflation Consumer Price Index data on February 13 will influence the U.S. Federal Reserve’s interest rate decisions. There is a market consensus that multiple interest rate cuts may occur from the current 5.25% level, potentially incentivizing investors to move away from fixed-income assets.
However, it is uncertain whether a shift to risk-on assets would benefit cryptocurrencies. Despite the easier access provided by spot ETFs, Google searches for the phrase “buy Bitcoin” have remained stagnant in recent weeks, suggesting that the asset has not yet garnered mainstream attention.
Data indicates that retail traders often lag behind bull runs, typically entering the cycle a few days or weeks after major price milestones. Additionally, metrics such as the demand for stablecoins in China do not show an increase in retail trader activity. Excessive retail demand for cryptocurrencies usually leads to a premium for stablecoins, while bear markets result in a discount.
Presently, the USD Coin (USDC) stablecoin is trading above the official U.S. dollar currency, maintaining a 1% premium for the past four weeks. This lack of excitement could be interpreted as a positive indicator, suggesting that the typical fear of missing out (FOMO) behavior from retail investors has yet to materialize.
In terms of professional Bitcoin traders, their recent addition to leveraged long positions indicates confidence in the market. The long-to-short net ratio of top traders at Binance and OKX has increased, suggesting a bullish sentiment. This shift in stance reflects a belief that Bitcoin will rally above $45,000.
While there are short-term risks associated with macroeconomic uncertainty and weakness in the Chinese real estate markets, these factors also provide opportunities for investors seeking alternative investments to hedge against inflationary pressure.
The sustainable path above $50,000 for Bitcoin has been achieved without excessive leverage and FOMO from retail investors. However, the continued success of the rally relies on the ability of spot Bitcoin ETFs to absorb inflows.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making investment decisions.