Bitcoin trades lower now, but expected to rebound
18:01, 27 October 2021
Leveraged trading in Bitcoin and $800m in Bitcoin liquidations in the past 24 hours is putting downward pressure on Bitcoin prices, which may trade as low as $55,000 in the near term, researchers from 21Shares said Wednesday.
But Bitcoin fundamentals remain strong and over the longer-term, Bitcoin could top $80,000 over the next year, they added.
“The reason Bitcoin is trading under $60,000 today ($58,969 as of 11:45 am EDT according to CoinDesk), is leveraged trading over some of the exchanges,” said 21Shares research lead Eliézer Ndinga. “We’ve seen around 100,000 traders have liquidated over $800m in the past 24 hours.”
Volatility
Ndinga estimated there is a 40% chance Bitcoin prices will reach as low as $55,000 in the near term, noting exchanges such as Binance and FTX offer customers leverage to trade in cryptocurrency assets. “Whenever there are drawdowns, we see exacerbation in volatility,” Ndinga added.
“Fundamentals have not changed, especially in terms of inflation and supply-chain dynamics, not just in the US but around the world. We are seeing increased adoption among banks and institutions, not just retail adoption because banks see Bitcoin has outperformed the S&P 500, Bitcoin has been the best performing asset of the past decade,” said Ndinga.
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New adopters are selling
Ndinga noted that by analysing activity on the blockchain, the recent sellers are primarily new adopters of crypto assets and the long-term Bitcoin holders can withstand any short-term price fluctuations.
“Most of the selling pressure is coming from buyers in the past three to 12 months. We can see on the blockchain who the long-term investors are,” Ndinga noted.
Boosting the long-term view is the finite Bitcoin supply, combined with the halving of Bitcoins in circulation every four years, which will push prices higher over time while conceding relative volatility is here to stay. This halving last took place on 13 May 2020 and is scheduled to occur again in 2024. By 2040, total Bitcoin supply will be capped at 21m.
Higher price on the way?
“With the finite Bitcoin supply plus institutions adoption of Bitcoin, ATMs, even Twitter is allowing Bitcoin transfers. In the next few months to a year, we wouldn’t be surprised to see Bitcoin hit $80,000,” said Ndinga.
“I don’t like to make price predictions,” added 21Shares research associate Adrian Fritz. “A year from now Bitcoin will be higher than it is today.”
About 21Shares
21Shares is a Zug, Switzerland-based cryptocurrency asset manager with offices in Zurich and New York that offers exchange traded products (ETP) backed by various cryptocurrencies and crypto indexes, including Bitcoin, over seven European exchanges.
An ETP is a collateralised debt security issued by a special purpose vehicle (SPV) tracking the performance of an underlying asset.
Structured similarly to an exchange-traded fund (ETF) in that it tracks the performance of an underlying asset or index, ETPs are not offered in the US and ETFs are not offered in Europe. 21Shares works with ARK Investment Management to offer the ARK 21Shares Bitcoin ETF Trust, the prospectus for which was filed with the US Securities and Exchange Commission on 28 June.
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With CFDs, you never actually buy or sell the underlying asset that you’ve chosen to trade. You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional stock trading you enter a contract to exchange the legal ownership of the individual shares for money, and you own this equity.
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