This post was most recently updated on October 1st, 2020
Earlier this week, the price of Bitcoin suddenly took a bullish spike increasing by 6% to jump from below $10,150 USD to over $10,740 USD. This supports the already positive sentiment to inject cautious bullish optimism in traders, investors and analysts.
Looking to find steady inclines the next level, if Bitcoin price can test and find support at $11,000 USD, it might be able to reclaim $12,000 USD again. Predictions across the market point towards a possible rally if Bitcoin can test the next support without bearish correction.
What is affecting Bitcoin price?
At present, the factors impacting the price most are:
- Trader sentiment and interest in the market
- Negative funding rates
- Bitcoin whale activity
- The declining price of the US dollar and the weakened global economy
Consistent Bitcoin trader sentiment and market interest
Earlier this year, Bitcoin sentiment hit an all-time high according to crypto data analyst firm The Tie. Using data to score the sentiment, the firm measures the difference between positive and negative Bitcoin reviews at specific time periods. The firm believes that the high sentiment was prompted by the halving event. As miners, investors, and traders knew the supply in mining the reward would be cut, the sentiment surrounding the cryptocurrency soared, indicating a positive future of the asset.
Not only has the sentiment of Bitcoin increased, but interest in the market has increased. More traders are talking about Bitcoin, with Twitter volume around the cryptocurrency market hitting a record high. This has likely been trajected by the decentralised finance (DeFi) market and investor intrigue towards the cryptocurrency industry as a result. As interest in Bitcoin increases, it is highly plausible that it will correlate with low-key to large-scale adoption in the cryptocurrency market.
Aggregate monthly cryptocurrency tweet volume hit a YTD high of over 1.5M tweets in August pic.twitter.com/QflPUW8iXk
— The TIE (@TheTIEIO) September 24, 2020
Bitcoin futures and negative funding rates
Despite the fact that Bitcoin price is hovering around $10,000 USD, the funding rate for Bitcoin across various futures exchanges is negative. Bitcoin futures exchanges make use of funding to balance the market to prevent the market from swaying to one side for a prolonged period.
If long-term investors banking on a Bitcoin price increase makes up a majority, it will require paying out the short-term contract holders. If there is a negative funding rate, it can cause a short squeeze which results in a Bitcoin price surge. If the short-term traders sell making way for long-traders the surge will represent be longer-term health. Conversely, if short-term Bitcoin traders dominate the market, the surge might be followed with a correction as they sell for profit.
DonAlt, a pseudonymous trader, commented on the funding rate being at a negative rate despite Bitcoin price sitting above $10,000.
It’s very, very weird seeing sentiment be this bearish, with neutral or negative funding above $10k.
Don’t think I can remember a time where that has happened before.
— DonAlt (@CryptoDonAlt) September 24, 2020
At the same time as short-term traders invest in Bitcoin, some of the larger Bitcoin whales are moving their investment to exchanges.
Bullish whale activity
Market activity from the Bitcoin whales, large-scale investors in the cryptocurrency market, has been increasing. Whalemap, an on-chain analyst firm, considers the movement from the whales as a bullish sign. Whale activity has been increasing progressively, which could promote a massive spike or selloff. Whalemap researchers, with trends and historic data analysis, believes that the movement of funds from Bitcoin whales will be a catalyst for the market.
Top buyers were moving their coins yesterday. From my personal experience looking at this metric, next day after top buyers move, we go up. Can someone keep track of this maybe? pic.twitter.com/GJVv0uxeHw
— whalemap (@whale_map) September 24, 2020
The weak global economy and decline of the US dollar
As the dollar continues to struggle as a result of the global pandemic, investors are pulling out of fiat investment and heading to safe-haven investment. Inverse correlation is a common theme between hedge assets, such as gold and the Bitcoin market, and the US dollar. If fiat currencies continue to battle to regain strength, it would not be surprising if investors head to alternatives.
Amsterdam Stock Exchange trader Michael van de Poppe believes that Bitcoin could be finding support towards the $11,000 mark if the dollar continues to weaken:
Nice, we’re holding here.
Looks ready to test the $10,700-10,800 areas and maybe even $11,200-11,400 if the Dollar slows down for a bit. pic.twitter.com/vxAhMbjNQ5
— Crypto Michaël (@CryptoMichNL) September 24, 2020
The digital market will benefit from a weak traditional market, which might send Bitcoin price into record territory for 2020. Earlier last month, the cryptocurrency hit a new record for the year, which represent a bullish sign as we head into the final calendar quarter for the year.
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