The price of Bitcoin (BTC) remained above $87,000 at press time on Thursday, holding steady after a 1% decline the previous day. Institutional interest waned towards the end of last year, while corporate demand continues to grow. Derivatives data suggests weakness in retail interest due to a decline in BTC futures open interest.
Bitcoin starts the new year with low demand
Bitcoin-focused exchange traded funds (ETFs) in the US recorded outflows of $348 million on Wednesday, almost erasing the previous day’s inflow of $355 million. These ETFs recorded outflows of $1.09 billion, extending the outflow sequence after a $3.48 billion outflow in November.
Additionally, it was the fifth recessionary month last year, while annual inflows stood at $21.07 trillion.
On the corporate side, US dollar-denominated stablecoin issuer Tether announced it had acquired 8,888 BTC over the past three months. Tether’s move with Michael Saylor’s Strategy and MetaPlanet increased their holdings to 672,497 BTC and 35,102 BTC respectively, reflecting an increase in corporate demand.
However, short-term volatility in Bitcoin has led to a decline in retail risk exposure in its derivatives market. CoinGlass data shows that BTC futures open interest (OI) decreased to $54.62 billion on Thursday, from $94.12 billion on October 7. Typically, a decline in OI indicates that traders are either closing positions or reducing leverage, which is a sign of risk-off sentiment.
Technical Outlook: Bitcoin consolidates into a triangle pattern
At the time of writing on Thursday the price of Bitcoin traded below $88,000, down 1% from Wednesday. As previously reported, BTC is extending its sideways trend within a symmetrical triangle pattern FXStreet,
The overhead resistance near $92,000 is just above the trendline and the 50-day exponential moving average (EMA) at $91,629.
Technically, Bitcoin is losing momentum in the short term. The Relative Strength Index (RSI) at 445 is hovering near the halfway line, indicating a neutral stance. Meanwhile, the moving average convergence divergence (MACD) continues to approach the zero line, but fluctuations in the green histogram bars indicate potentially unsustainable bullish momentum.
If BTC price drops below the support trendline near $85,000, it could test the S1 pivot point at $82,784.
Bitcoin, Altcoins, Stablecoins FAQ
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to be used as money. This form of payment cannot be controlled by any one person, group or entity, which eliminates the need for third party involvement during financial transactions.
Altcoins are any cryptocurrency other than Bitcoin, but some people also consider Ethereum a non-altcoin because of the forking of these two cryptocurrencies. If this is true, then Litecoin is the first altcoin built from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, their value backed by the reserve of the asset it represents. To achieve this, the value of a stablecoin is pegged to a commodity or financial instrument, such as the US dollar (USD), whose supply or demand is controlled by an algorithm. The main goal of stablecoins is to provide on/off-ramps for investors looking to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value as cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of the market capitalization of Bitcoin to the total market capitalization of all cryptocurrencies. This provides a clear picture of the interest in Bitcoin among investors. High BTC dominance typically occurs before and during bullish rallies, with investors resorting to investing in relatively stable and high market capitalization cryptocurrencies like Bitcoin. A decline in BTC dominance usually means that investors are moving their capital and/or profits into altcoins in search of higher returns, which usually triggers the explosion of altcoin rallies.
