Bitcoin traders brace for new highs after BTC Pump to $68K

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15 Oct 2024

Bitcoin traders are preparing for potential new highs as the cryptocurrency pushes toward the $68,000 mark, driven by strong market dynamics and key indicators. On October 15, Bitcoin registered an impressive intra-day high of $67,953, just shy of the $68,000 resistance zone.

This surge marks one of the highest price levels seen in the second half of 2024, as the digital asset inches closer to reclaiming its $70,000 milestone.

A Rising Tide: Key Drivers Behind the Surge

The ongoing rally has drawn attention due to several pivotal factors. Notably, Bitcoin experienced a 6.17% uptick in mid-October, surpassing its previous high of $66,450 from late September. This movement suggests renewed optimism among traders, particularly in anticipation of a potential breakout above $70,000 before the end of the year. As expectations build, the rally's strength can be attributed to a combination of increased demand, institutional interest, and a tightening supply in the market.

One of the critical metrics currently supporting this upward trajectory is Bitcoin's apparent demand. According to Ki Young Ju, CEO of CryptoQuant, apparent demand is a metric that measures the difference between new Bitcoin supply (through mining) and the change in long-term holdings (Bitcoin that has remained inactive for over a year). When the supply shrinks more than the new production, it signals that demand is increasing, as more coins are entering circulation.

This metric is currently reflecting levels not seen since February 2024, just before Bitcoin hit its all-time high of $73,800 in March.

Bitcoin apparent demand. Source: CryptoQuant

Axel Adler Jr., an on-chain analyst, echoes these sentiments, pointing to a 3% increase in Bitcoin purchasing demand from new investors over the past 10 days. Adler noted that this rise in demand is a positive signal for the market, indicating that more retail and institutional players are entering the space. “Demand for coin purchases from new investors has resumed,” Adler wrote, emphasizing the bullish nature of this trend.

Institutional Involvement and the ETF Boom

The growing interest in Bitcoin can also be attributed to the rapid expansion of Bitcoin exchange-traded funds (ETFs). BlackRock’s iShares Bitcoin Trust, for example, recently crossed $10 billion in assets under management (AUM) within just seven weeks. This achievement underscores the overwhelming demand for Bitcoin as an investment vehicle, particularly among institutional players.

The rise of Bitcoin ETFs has become a pivotal driver of price movements in 2024, as they now account for approximately 75% of new Bitcoin investments. This surge in demand is expected to continue, with analysts predicting that Bitcoin ETFs could surpass gold ETFs in assets under management within the next few years. If this trend persists, Bitcoin’s liquid supply of 1.3 million BTC could be entirely managed by ETFs by September 2024

Bitcoin new investors’ coin purchase demand by Axel Adler Jr. Source: X.com

The anticipation surrounding Bitcoin ETFs, coupled with the upcoming Bitcoin halving event, has further fueled investor confidence. The Bitcoin halving, scheduled for April 2024, is a pre-programmed event that occurs every four years and reduces the block reward for miners by half. Historically, halving events have led to significant price rallies, as the reduced supply creates deflationary pressure on the asset. Previous halvings in 2012, 2016, and 2020 were followed by new all-time highs for Bitcoin within 12 to 18 months

Leverage and Market Risks

While the fundamentals supporting Bitcoin's rally appear strong, there are also risks associated with the current market dynamics, particularly in the derivatives sector. The recent price increase has been largely driven by the Bitcoin futures market, with open interest rising by $800 million over the weekend leading up to October 15. However, this surge in open interest also highlights the growing role of leverage in the market, which can lead to heightened volatility.

Maartunn, a market analyst, has expressed caution regarding the use of excessive leverage in the market. He noted that last week’s price decline was triggered by “an overdose of leverage,” which resulted in a sharp correction after Bitcoin reached a high of $64,500. A similar situation may be unfolding in the current rally, as prices have risen by 10% since October 11, while open interest has surged by nearly 18%. These conditions suggest that the market could be primed for another correction if the leverage-driven rally becomes unsustainable.

Bitcoin heater chart. Source: Capriole investments

Capriole Investments’ Bitcoin heater chart, which measures market sentiment based on futures activity, indicates that the market is currently in an “overheating” phase. The chart shows that Bitcoin’s futures market is above the overheating threshold (represented by a red line), suggesting that greed and overleveraged positions are dominating the market. This level of activity could result in a pullback if the market fails to reset in the coming days.

Overcoming Resistance: The $68K Barrier

Despite the optimism surrounding Bitcoin's potential for new highs, the cryptocurrency faces significant resistance at the $68,000 level. Historically, Bitcoin has struggled to break through this price zone, which has acted as a strong supply barrier. On October 15, Bitcoin briefly entered the supply zone between $67,000 and $68,300 but experienced a sharp correction after testing the descending trendline that has been active since March 2024.

As observed in previous market cycles, Bitcoin has often experienced corrections following periods of higher highs (HH), with each HH followed by a consolidation phase before the price attempts to break higher again. Based on this pattern, analysts believe that Bitcoin may struggle to breach the $70,000 level this week unless it can close a daily position above $68,300. A decisive move above this resistance zone could set the stage for a sustained rally toward new all-time highs.

Hansolar, an on-chain analyst, has referred to the current market environment as a “disbelief” rally, where Bitcoin is trading at a "discounted rate" on exchanges before its value experiences a significant upward shift. The disbelief phase often occurs when the market remains skeptical of a rally's sustainability, despite strong underlying fundamentals. If Bitcoin can successfully overcome the $68,000 resistance and hold its position, this disbelief may soon give way to broader market optimism.

As Bitcoin continues its ascent toward $70,000, traders are cautiously optimistic about the cryptocurrency's future. Key metrics, such as apparent demand and ETF growth, suggest that Bitcoin is well-positioned for further gains. However, the risks associated with leverage and market volatility remain, particularly as the asset approaches critical resistance levels.
The coming weeks will be pivotal for Bitcoin, as traders monitor the market’s response to these challenges. If the cryptocurrency can successfully break through the $68,000 barrier and consolidate its gains, it may pave the way for new highs in the final quarter of 2024.