Bitcoin (BTC) enthusiasts were elated on October 2nd as the cryptocurrency experienced a remarkable 5.5% intraday surge, briefly hitting $28,600. However, this excitement was short-lived as the launch of Ether futures exchange-traded funds (ETFs) failed to generate the expected trading volumes. Despite this rally, Bitcoin grapples with several hurdles preventing it from breaking through the formidable $28,500 resistance level.
Macroeconomic Headwinds Impacting Bitcoin’s Trajectory
Recent comments from U.S. Federal Reserve representatives have overshadowed Bitcoin’s price prospects. Vice Chair for Supervision at the U.S. Federal Reserve, expressed concerns about a potential economic slowdown and the adverse effects of higher interest rates on financial stability. These remarks and the uncertainty surrounding interest rate hikes in 2023 have created downward pressure on Bitcoin.
Moreover, the actual yield on U.S. 10-year Treasuries reached a 15-year high on October 3rd, partially attributed to inflation adjustments. This surge has bolstered the U.S. Dollar Strength Index (DXY) to a 10-month peak, making the U.S. a more appealing investment destination than Europe and China. Such macroeconomic forces are influencing Bitcoin’s performance.
Lacklustre Activity in Bitcoin Trading Metrics
Bitcoin’s trading metrics are revealing a need for more substantial support. Typically, Bitcoin monthly futures trade at a premium to spot markets, indicating sellers’ demands for additional compensation to defer settlement. However, Bitcoin futures contracts are trading below the 5% neutral threshold, residing in the neutral-to-bearish range. This suggests a weakened demand for leveraged long positions.
Furthermore, spot trading activity on traditional exchanges has plummeted to levels not witnessed since late 2020, signifying reduced participation by institutional investors. Regulatory scrutiny has played a role in this decline, with major U.S.-based trading firms distancing themselves from the cryptocurrency markets in anticipation of events in May 2023, resulting in a noticeable decrease in trading volumes.
Ebbing Confidence in the Approval of a Spot BTC ETF
Investor expectations concerning approving a spot Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) have been pivotal in Bitcoin’s 68% gains in 2023. However, the recent launch of Ether futures-based ETFs on October 2nd fell short of generating the anticipated demand, raising doubts about the appetite for cryptocurrency-based ETFs.
Furthermore, despite a favourable court ruling for converting Grayscale’s GBTC Trust into a spot Bitcoin ETF, it continues to trade at a 19% discount compared to its Bitcoin holdings. This discrepancy underscores a need for more investor confidence in the SEC’s willingness to approve a spot Bitcoin ETF, as investors would have the option to redeem their shares at par value post-conversion.
In conclusion, Bitcoin’s uphill battle to surpass the $28,500 resistance level can be attributed to macroeconomic pressures, dwindling trading activity, and waning confidence in approving a spot Bitcoin ETF. These challenges have created a complex environment for Bitcoin’s short-term price performance, necessitating vigilance among investors as these factors continue to shape the cryptocurrency market’s dynamics.