Analysts Predict Bitcoin's Path to Potential $100K High

Bitcoin Bulls Stay Hopeful Amid Price Swings and Inflation Worries

by Faruk Imamovic
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Analysts Predict Bitcoin's Path to Potential $100K High
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Bitcoin, the world's leading cryptocurrency, has experienced significant price fluctuations recently, testing the nerves of investors and traders alike. On May 14, Bitcoin's price fell by 3.3%, retesting the crucial $61,000 support level, which quickly found defenders. This dip marked the second unsuccessful attempt within a week to break through the $63,500 resistance. Despite this setback, the bullish sentiment remains intact among Bitcoin enthusiasts, as indicated by the stability of BTC derivatives metrics.

Analysts and traders are divided on Bitcoin's future trajectory. While the current trend may appear bearish, some experts believe Bitcoin still has a promising chance to revisit and surpass the $70,000 mark. One notable trader, Cryptotoad, highlighted the resilience of the $60,500 support level. However, he emphasized that a higher high, possibly a daily close above $67,000, is necessary to break the prevailing bearish pattern. His analysis suggests that although a price recovery is possible, the trend may point towards prices below $57,000 in the near term.

Impact of U.S. Inflation Data on Bitcoin

The market's response to Bitcoin's price movements on May 14 was also influenced by broader economic factors, particularly the United States Producer Price Index (PPI) data for April. The PPI showed a 0.5% month-over-month increase, indicating rising wholesale inflation. This data was interpreted by the market as a signal that the U.S. Federal Reserve might maintain higher interest rates for an extended period, which is generally unfavorable for risk-on assets like cryptocurrencies and growth stocks.

Interestingly, some argue that inflation can be beneficial for Bitcoin due to its fixed supply and deflationary nature. However, in times of economic uncertainty and fear, investors often flock to safer assets such as cash and short-term bonds. This sentiment was reflected in the yields on 2-year U.S. Treasury notes, which fell to 4.84% on May 14 from 5.03% on May 1, indicating increased demand for these government-backed securities.

Despite the expectation that higher inflation might dampen sentiment towards Bitcoin, derivatives data did not reflect increased pessimism. The annualized BTC futures premium, a key indicator of market sentiment, remained stable at around 8%, suggesting that professional traders were not overly concerned about the recent price volatility.

Resilience in Bitcoin Derivatives Market

To gauge the sentiment of professional traders following Bitcoin's drop to $61,000, it's essential to examine BTC monthly futures contracts. In neutral markets, these contracts usually trade at a 5% to 10% premium compared to BTC spot markets due to the longer settlement period. Despite the adverse macroeconomic conditions and Bitcoin's repeated failures to sustain prices above $63,500, the futures premium remained in the neutral zone, indicating a resilient market.

Additionally, the Bitcoin options market provides insights into traders' expectations for future price movements. Typically, if market makers and whales expect a significant price drop, the BTC options skew metric would exceed 7%. Conversely, a skew below -7% often indicates market enthusiasm. Since May 8, the BTC options 25% delta skew has stayed within a neutral range, suggesting that professional traders are not anticipating major downside risks.

Bitcoin bears have managed to demonstrate strength, as the last daily close above $65,000 was on April 23. However, Bitcoin bulls appear unshaken by the lack of upward momentum, with many investors temporarily shifting to cash positions. If inflationary pressures in the U.S. persist, market participants might reconsider their strategies, potentially paving the way for Bitcoin to aim for the $70,000 mark in 2024.

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Bitcoin© Getty Images
 

Bitcoin's Potential to Surpass $100K: Key Factors

Interest Rates and Bitcoin's Future

The potential for Bitcoin to reach new all-time highs, possibly even surpassing $100,000, hinges on several factors, including interest rate movements. Timothy Peterson, an analyst and founder of Cane Island Alternative Advisors, believes that the U.S. high yield rate must fall below 6% to 7% for Bitcoin to achieve a sustainable all-time high. Currently, the U.S. high yield rate stands at 7.54%, indicating that there is still room for rate reductions to spur Bitcoin's growth.

Peterson predicts that if yield rates drop to the desired range, Bitcoin could reach the $100,000 milestone by the fourth quarter of 2024 or, at the latest, the second quarter of 2025. This outlook is based on the expectation that the Federal Reserve will eventually lower interest rates, a move anticipated by nearly two-thirds of economists surveyed in a recent Reuters poll.

Lower interest rates generally lead to reduced yields on safe-haven assets like bonds, prompting investors to seek higher returns in riskier assets, such as Bitcoin. This shift in investor behavior could provide the necessary momentum for Bitcoin to reach new heights.

Market Trends and Analyst Perspectives

Other analysts also weigh in on Bitcoin's future prospects. Mike Novogratz, the founder and CEO of Galaxy Digital, believes that Bitcoin's price will remain in a consolidation phase, ranging between $55,000 and $75,000 over the next month. He predicts that prices might bounce higher towards the end of the second quarter, driven by a combination of market events and broader economic conditions.

Novogratz's views are supported by the performance of spot Bitcoin exchange-traded funds (ETFs), which initially attracted significant institutional interest but have seen a decline in inflows amid Bitcoin's price downturn. Despite this, Novogratz remains optimistic about the long-term adoption of Bitcoin by traditional financial institutions. He notes that the process of integrating Bitcoin into wealth management systems is ongoing and will continue to drive demand over time.

Additionally, Novogratz points to potential catalysts for future price increases, such as the Federal Reserve eventually cutting interest rates or a favorable outcome from the upcoming U.S. presidential election. He believes these events could provide clarity on the regulatory landscape for cryptocurrencies, further boosting investor confidence.

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