Bitcoin [BTC] continues to attract the interest of investors, including those from traditional financial institutions, who are increasingly seeing Bitcoin as a reliable long-term investment.
Unlike previous phases where Bitcoin was frequently traded for short-term gains, a significant amount is now being held in cold storage, indicating a strong level of confidence among investors.
The start of Q4 has witnessed a decline in Bitcoin exchange inflows to their lowest point this year, suggesting that investors and institutions are banking on sustained growth for BTC as its market capitalization expands through wider adoption.
The Impact of China’s Liquidity Boost
Chinese equities are outperforming global markets, largely due to a liquidity injection via a government stimulus package.
This influx of liquidity is affecting assets with risk-on characteristics, such as BTC, which has historically shown a close correlation with the performance of Chinese stocks.
Subsequent to the People’s Bank of China rolling out its most substantial stimulus since the onset of the pandemic towards the end of September, Chinese internet stocks have surged by a whopping $2 trillion.
Many traders interpret this rapid rise in Chinese stocks as a potential precursor to a similar upward trend in Bitcoin, further reinforcing why BTC is witnessing diminished exchange inflows, setting the stage for an upward price movement.
In addition to the liquidity boost, the past week has seen a noticeable divergence between cryptocurrency and cash-backed Bitcoin futures open interest.
A growing number of traders are now using cash as collateral for their leveraged positions rather than Bitcoin itself. This transition is positive as cash-backed margins help lower volatility and the risk of involuntary liquidations, fostering a more stable trading atmosphere.
Meanwhile, individual traders continue to pursue high-leverage profits, adding to the market’s volatility.
This contrast between institutional prudence and retail trader enthusiasm underscores the maturation of the Bitcoin market. The focus is now shifting towards sustainable growth driven primarily by institutional involvement.
Is a $77,000 Bitcoin Achievable?
The Volatility Adjusted Power Law Index predicts a fair price of $77,000 for BTC, factoring in its long-term growth trajectory and volatility. Despite the hovering around $60,000, the fair value has increased from $70,000 to $77,000 over the past month.
The growing liquidity stemming from China’s stimulus measures and a drop in futures market volatility indicate that Bitcoin is gearing up for a potential surge. Bitcoin seems poised for an upward breakout, with the possibility of hitting $77,000 as Q4 unfolds.
Source: Sina/X
With a surge in global liquidity, the prospect of BTC reaching $77,000 appears more plausible. This is particularly true if economic circumstances and institutional backing continue to fuel growth.