Bitcoin (BTC) starts a new week still riding high near $37,000 as macroeconomic data returns to the fore.
The largest cryptocurrency continues to circle its highest levels in 18 months, with excitement over a possible exchange-traded fund (ETF) approval in the United States driving sentiment.
That is getting increasingly greedy, however, as according to the Crypto Fear & Greed Index, conditions match those seen as BTC price action hit its current all-time highs in late 2021.
What could shake up the status quo to produce volatility in the coming days?
The odds of an external trigger are more significant this week. A raft of U.S. macro data, including the Consumer Price Index (CPI), has the potential to disrupt any sideways trading activity across risk assets.
Multiple officials from the Federal Reserve are also due to speak, while the precarious geopolitical situation in the Middle East grinds on in the background.
On the institutional side, meanwhile, the future looks firmly bullish for Bitcoin — ahead of the prospective ETF approval, the Grayscale Bitcoin Trust (GBTC) is closing in on parity with net asset value.
Can Bitcoin markets stay the course and avoid a significant retracement? Cointelegraph takes a look at conditions in the weekly rundown of BTC price volatility catalysts waiting in the wings.
Funding rates flash warning with BTC price stuck at $37,000
Bitcoin’s weekly close set a new 18-month high on Nov. 12, but what followed was not the gains seen after other recent closes.
Monitoring the situation, popular trader and analyst Credible Crypto suggested that this would soon change. The reason, he said, was open interest (OI), now at multi-day highs and apt to spark volatility.
“OI has ramped right back up off the lows which means more positions to squeeze out,” part of an X post read.
Credible Crypto gave a target of $36,600 for a potential local low, with another post adding that Bitcoin was “very close” to further upside.
Countering the optimism over short-term market action was funding rates. These were not only positive, but at their highest since Bitcoin’s November 2021 all-time highs, indicating an overall disadvantage of being long BTC at current levels.
Bitcoin’s funding rates are at the highest level since last ATH. pic.twitter.com/mMlnJleQ5u
— Thomas Kralow (@TKralow) November 12, 2023
“Even though this isn’t always an immediate reason for a flush, ideally this goes back to normal after some more ranging. Good to note that during strong up trends, this can stay this way for weeks or even months.”
Also noting the conspicuous state of play on funding, popular analyst Cauê Oliveira told traders to exercise caution.
“This value suggests that optimism is prevailing in the market, driving a high number of futures contracts to bet on an increase in price,” he wrote in a Quicktake market update for on-chain analytics platform CryptoQuant on Nov. 10.
“However, this setup is dangerous as it can demonstrate excessively bullish sentiment and a price contraction could trigger a cascade of liquidations.”
CPI comes amid fresh U.S. government shutdown turmoil
A classic macro setup marks the third week of November — CPI leads a deluge of data prints that have sparked risk asset volatility in the past.
Due on Nov. 14 for the month of October, the CPI print is keenly watched by inflation monitors, with the Producer Price Index (PPI) following a day later.
Various Fed officials will also take to the stage in speaking engagements both during and after the data releases, providing insights into the Fed’s perspective on inflationary forces in real time.
“Important week for inflation and the Fed,” financial commentary resource The Kobeissi Letter summarized while uploading significant macro diary dates to X.
Key Events This Week:
1. October CPI Inflation data – Tuesday
2. October PPI Inflation data – Wednesday
3. Retail Sales data – Wednesday
4. Philly Fed Manufacturing data – Thursday
5. Building Permits data – Friday
6. Total of 14 Fed speaker events
Important week for…
— The Kobeissi Letter (@KobeissiLetter) November 12, 2023
Popular trader Skew, meanwhile, noted expectations pointing to receding inflation, this despite some unwelcome surprises in October’s data prints.
This should notionally provide a tailwind for crypto markets, but as Cointelegraph reported, Bitcoin’s reaction to even larger target misses has become muted this year.
CPI & PPI this coming week
CPI – Tuesday 14th Nov
PPI – Wednesday 15th Nov
Expectations are for a considerable decline of entrenched inflation ~ less inflation expected pic.twitter.com/PrQ0Rsf1Ab
— Skew Δ (@52kskew) November 12, 2023
Adding to the mix is another familiar wildcard — a partial U.S. government shutdown in the making. While so far avoided this year, the need to reach a deal on spending in Congress is once again becoming tangible ahead of the Nov. 17 deadline.
Should it occur, the shutdown would only be the fourth in the U.S. in the past 10 years.
Altcoins in focus as crypto capital inflows return
With a potential ETF approval firmly on the radar for crypto market participants, capital inflows into the industry are being keenly monitored.
Buyer interest forms a key item on the list for a bull market comeback, and the about-turn in inflows is already attracting mainstream attention.
“For the first time in years, crypto markets are beginning to see tons of new liquidity,” Kobeissi wrote in a dedicated X post.
It noted that the combined crypto market cap has increased by $600 billion since November 2022, in the aftermath of the FTX meltdown and Bitcoin’s cycle lows of $15,600.
“That’s a +75% jump in one year while Bitcoin is up +120% over the last year,” it added.
“This comes after years of consistent outflows from crypto markets. One thing we have seen multiple times in the past? A return of liquidity always causes historic moves in crypto.”
It is not just Bitcoin showing potential — altcoin markets are waking up, traders and analysts say.
— Stockmoney Lizards (@StockmoneyL) November 9, 2023
Despite Bitcoin’s dominance of the overall crypto market cap still being strong, analyst CryptoCon suggested not to take this as a sign of comparative altcoin weakness.
“Some people have told you to completely ignore Altcoins because Bitcoin dominance is going up. And as you might have noticed, this is a critical mistake,” he told X subscribers at the weekend.
An accompanying chart showed BTC price behavior in each year of its halving cycle, with altcoins likewise exhibiting specific reactions.
With Bitcoin due for an “early” cycle top in mid-2024, per CryptoCon, altcoins are unlikely to underdeliver.
“I think it is now very likely that Altcoins have already bottomed for the cycle, and those who did nothing will have to buy higher,” he continued.
“Imagine being told, ‘Ignore Altcoins at their bottoms and only buy Bitcoin which is already up.’ That’s happened this year. 2024 is coming, Altcoins are ready to get even stronger!”
GBTC discount passes two-year lows
A yardstick for the return of Bitcoin to the mainstream spotlight — despite the absence of retail interest — is its largest institutional investment vehicle.
The Grayscale Bitcoin Trust (GBTC) is fast approaching parity to net asset value (NAV), the Bitcoin spot price.
GBTC traded with an implied share price higher than BTC/USD in the past, but the past two years has seen the premium become a discount, which at one point neared 50%.
Now, the discount to NAV is just 10.35% — its smallest since August 2021.
Commenting on the phenomenon, William Clemente, co-founder of market research firm Reflexivity, tied GBTC’s reversal of fortune to a prospective ETF go-ahead.
“Looks like the market is pricing in very high probability of BTC ETF approval at this point,” he wrote last week.
Grayscale continues to petition to gain the right to convert GBTC to a Bitcoin spot ETF.
Crypto investors stay greedy
There is no ignoring the desire to squeeze profits after a record-long crypto bear market.
This continues to be aptly displayed by the Crypto Fear & Greed Index, the classic market sentiment gauge, which is now at levels last seen in November 2021.
While not at its extreme levels yet, the index unequivocally shows that the average crypto investor is nearing a state of irrational exuberance.
Fear & Greed stood at 72/100 on Nov. 13, having hit 74/100 on Nov. 6.
Commenting on market psychology at the start of the month, popular trader Pentoshi reminded X readers that extreme levels of both fear and greed can offer the “best opportunities” for those able to time and exploit market volatility at extreme sentiment levels.
Typically, when the index is either below 10/100 or above 90/100, crypto markets are in line for a snap trend reversal.
Now is a good time to share this again
Fear and greed
Markets force participation, they force you to act https://t.co/f1nJOyGaLS
— Pentoshi euroPeng (@Pentosh1) November 12, 2023
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.