BTC closed last week at $30,500, a 15.6% increase from the $26,300 price at the end of the previous week. After the news of a BTC ETF filing by Blackrock, one of the top worldwide asset managers, followed by the applications of Wisdom Tree, Invesco, and Valkyrie, the BTC price strongly increased.
The Armchair Trader went back into BTC on 21 March as I could see momentum building behind the price. As of 31 May, we were up 18.6% on the trade, unleveraged. Informal conversations I conducted in January and February with institutional participants in the market, including senior management at banks and hedge funds, demonstrated that big hitters remained committed to Bitcoin and digital assets.
On Friday, the first leveraged BTC futures products were approved in the US. This should not suggest anything regarding the outcome for Blackrock and the other companies’ filings for a spot BTC ETF, since futures products have already been approved in the past. The news concerns the x2 leverage incorporated in the product, Volatility Shares now has 2x Bitcoin Strategy ETF (BITX), which represents a new milestone for BTC and digital assets in the financial products market.
Positive price action on Bitcoin
BTC has traded around the $30,000 level in the last five days, also reaching the highest year-to-date price of about $31,500 during Friday’s trading session. More important, it is the first time since February 2022 that BTC has shown a positive delta on the year-on-year price metric.
This alone does not tell us if the bear market is over and we are at the beginning of a new uptrend, but the combination of good news on the macroeconomic level and the news concerning the BTC adoption by institutions gave the market a boost, following an already convincing Q1 in 2023.
According to Matteo Greco at Fineqia International, BTC keeps leading the market uptrend. He says the BTC dominance, the metric that measures the BTC capitalisation compared to the whole digital asset market capitalisation, reached 51.50%. This represents a steep increase from 49.7% at the end of the last week and 42.10% at the beginning of the year.
Greco thinks this data, combined with the low trading volume during 2023, confirms the trend of a less speculative environment during the last few months. Investors have rebalanced their portfolios towards a bigger BTC exposure, reducing the volatility and risk of their digital asset portfolio. I would concur with this based on my own findings with European funds.
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What about the mining difficulty??
During last week the mining difficulty, the metric which calculates the degree of difficulty required to mine new BTC blocks, reached a new all-time-high. Since October 2022, the mining difficulty has increased, and the tough market conditions have led to BTC’s mining price to be higher than the BTC market price.
What this tends to do is to force miners to sell most of their mined BTC to keep their mining farms functioning. However, now we are currently seeing for the first time a premium of the BTC price compared to BTC mining costs. If this trend follows, this could reduce the miners selling pressure of BTC and potentially lead to a continuation of the current uptrend.
