Six Charts Illustrate Why Bitcoin’s Surge Back to $100K+ Could Be More Sustainable Than in January

Bitcoin is once again trading above the $100,000 mark, leading many investors, who often recall recent trends, to think this rally will mirror the previous period from December to January, when bullish momentum waned and prices plummeted back to the six-figure range, eventually hitting lows around $75,000.

Current observations, illustrated in the subsequent six graphs, indicate a more resilient crypto market compared to December-January. This suggests a greater likelihood of upward movement for Bitcoin.

The concept of financial conditions encompasses a variety of economic factors, such as interest rates, inflation, credit availability, and market liquidity. These conditions are shaped by benchmark government bond yields, particularly the U.S. 10-year Treasury yield, the dollar’s exchange rate, among other influences.

Stricter financial conditions tend to inhibit risk-taking within financial markets and the broader economy, whereas looser conditions tend to encourage it. Presently, indicators like the 10-year yield and dollar index suggest that financial conditions are significantly more favorable than they were in January, supporting a continued ascent for Bitcoin.

As of now, the dollar index, which gauges the greenback’s strength relative to other major currencies, is positioned at 99.60, a decline of 9% from its 109.00 high in January. The yield on the U.S. 10-year Treasury note has decreased to 4.52%, down 30 basis points from January’s 4.8% peak.

The 30-year yield has surpassed 5%, returning to previous January levels but generally considered to be supportive for both Bitcoin and gold.

The total market capitalization of the leading two stablecoins, USDT and USDC, has surged to a historic high of $151 billion. This represents an increase of nearly 9% compared to the mean of $139 billion during December-January, suggesting that more capital is available for potential investments in Bitcoin and other cryptocurrencies.

Leading Bitcoin’s recent price increase since April’s lows of around $75,000 is a trend where institutions are making predominantly bullish directional investments instead of engaging in arbitrage strategies. This is evidenced by significant inflows into U.S.-listed spot Bitcoin exchange-traded funds (ETFs) and relatively muted open interest in CME Bitcoin futures.

According to available data, the notional open interest in CME Bitcoin futures has reached $17 billion, representing the highest level since February 20, although it remains below the December peak of $22.79 billion.

In contrast, cumulative inflows into 11 spot ETFs have hit a record $42.7 billion, compared to $39.8 billion in January, indicating strong investor interest.

Typically, significant Bitcoin price peaks are accompanied by rampant speculative activity in the market, such as the rapid valuation increases of lesser-known tokens like DOGE and SHIB. Currently, there are no signs indicative of such speculative fervor, as the combined market capitalization of DOGE and SHIB remains substantially lower than their January highs.

The perpetual futures market for Bitcoin is currently showing demand for leveraged bullish bets, as BTC approaches record levels. However, the overall market positioning appears to be moderate, with indications that there is no excessive leverage or signs of overheating, as funding rates are significantly lower than those observed in December.

The funding rates, which reflect the cost associated with maintaining perpetual futures positions, indicate a positive sentiment towards long positions, suggesting that bullish market views are prevalent.

The current Bitcoin market is markedly calmer, as evidenced by Deribit’s DVOL index, which tracks 30-day expected volatility and is significantly lower than levels seen during the last major price surges in December-January and March 2024. This low volatility signals that traders are not anticipating extreme price fluctuations or market uncertainty, pointing to a potentially more stable and sustainable upward trend.