Institutional demand fuels Bitcoin

December 18, 2024

Reading time: 5 minutes

Bitcoin surges to $106K as institutional demand sparks supply squeeze

Key points:

  • Bitcoin’s price hit a new all-time high, driven by institutional accumulation and a supply shortage.

  • The Stock-to-Flow (S2F) reversion model signaled profit-taking levels, highlighting critical thresholds of 2.5 and 3.0.

News - Bitcoin has hit a new milestone, surging to a new ATH past $106K after gains of over 3% in 24 hours. This price surge has been fueled by significant institutional demand, as evidenced by the 25,000 BTC drop in OTC desk balances over the past month.

With 40,000 BTC leaving desks since 20 November, the resulting supply squeeze has created ideal conditions for Bitcoin’s bullish momentum.

The apparent demand for Bitcoin continues to outpace the supply, with market absorption driving prices through critical resistance levels. At press time, the cryptocurrency was firmly above its 50-day and 200-day moving averages - A sign of ongoing support for the rally.

Institutional accumulation and S2F analysis - CryptoQuant’s Stock-to-Flow (S2F) reversion model highlighted critical thresholds of 2.5 and 3.0 for profit-taking, offering structured insights into market behavior. A reading above 2.5 suggests moderate profit-taking opportunities while exceeding 3.0 signals potential market overheating.

As Bitcoin’s price edges higher, traders can leverage these thresholds to balance risk and reward. For instance, at its peak of $106,352, the S2F reversion model provided clarity for navigating market euphoria.

While short-term consolidation remains possible, Bitcoin’s trajectory is bolstered by institutional confidence and strong network activity. The cryptocurrency may now target the psychological $120,000-level too. However, skeptics believe heightened enthusiasm could pave the way for increased volatility.

Peter Schiff doubles down on skepticism - The popular Bitcoin critic recently criticized Michael Saylor’s spree of BTC purchases. Schiff claimed that Bitcoin’s value lacks intrinsic merit, while calling out high-profile endorsements as opportunistic rather than genuine.

Saylor, however, defended Bitcoin as a hedge against inflation and a tool for long-term wealth preservation.

Tether backs European stablecoin StablR amid regulatory shifts

 

Key points:

  • Tether has invested in Malta-based StablR, supporting its EURR and USDR stablecoins.

  • Major exchanges like Binance and Kraken continue to offer trading support.

News - Tether, the issuer of the largest stablecoin USDT, has expanded its European presence by investing in StablR, a Malta-based stablecoin issuer. Announced on 17 December, the partnership reaffirms Tether’s commitment to regulated stablecoin initiatives as Europe’s Markets in Crypto-Assets Regulation (MiCA) prepares to take full effect on 30 December.

StablR operates two stablecoin projects: The Euro-pegged EURR and the US dollar-pegged USDR, both utilizing Tether’s Hadron tokenization platform. Currently, EURR has a market cap of $3.4 million, representing just 1% of the $370 million Euro-based stablecoin market dominated by EURS and EURC.

The regulatory landscape - Tether’s investment comes at a time of uncertainty for USDT in Europe, with Coinbase delisting the stablecoin to comply with MiCA. However, major platforms like Binance, Kraken, and Crypto.com continue to support USDT trading, highlighting mixed regulatory interpretations.

While Coinbase views USDT as a non-compliant asset, European regulators are yet to issue definitive guidance, leaving exchanges to navigate the evolving landscape.

Room for growth amid shifts - Despite challenges, StablR’s recent progress, including securing an Electronic Money Institution license, positions it for long-term growth. In fact, founder Gijs op de Weegh emphasized on the firm’s focus on compliance and institutional liquidity.

Ohio lawmaker proposes Bitcoin reserve fund for state treasury

Key points:

  • Ohio’s House Republican leader introduced the Ohio Bitcoin Reserve Act, granting the state treasurer authority to hold Bitcoin.

  • Bitcoin reserves are being considered a hedge against economic instability and currency devaluation.

News - Ohio House Republican leader Derek Merrin has introduced HB 703, the Ohio Bitcoin Reserve Act, proposing that the state treasury allocate Bitcoin as part of its asset management strategy. The bill, unveiled on 17 December, aims to provide flexibility for Ohio to embrace Bitcoin as a financial reserve while not mandating its purchase.

Merrin described the move as a proactive step to counter the U.S dollar’s devaluation, stating, “Ohio must embrace technology and protect tax dollars from eroding.”

However, with the 135th General Assembly set to adjourn on 31 December, the bill will need to be reintroduced in the 136th session starting January 2025.

Bitcoin as a strategic reserve asset - This initiative is in line with similar efforts in Texas and Pennsylvania, where lawmakers have recently proposed holding Bitcoin in state treasuries. Texas’s Strategic Bitcoin Reserve Act, introduced on 12 December, suggests maintaining Bitcoin reserves for at least five years.

Pennsylvania’s proposal allows up to 10% of its treasury balance in Bitcoin, citing its potential as a hedge against economic uncertainty.

What to expect - If passed, Ohio’s Bitcoin Reserve Act could set a precedent for other states exploring crypto adoption in public finance. Merrin, a vocal crypto advocate, hopes the bill will streamline discussions in the upcoming legislative session, paving the way for Ohio to strengthen its financial strategy through Bitcoin.

Coinbase justifies wBTC delisting over ‘unacceptable risks’

Key points:

  • Coinbase delisted wBTC due to perceived risks linked to Justin Sun’s association with the asset.

  • wBTC issuer BiT Global has filed a lawsuit accusing Coinbase of favoritism towards its competing product, cbBTC.

News - Coinbase has clarified its decision to delist wrapped Bitcoin (wBTC) in November, pointing to concerns about the asset's potential association with Justin Sun, the founder of the Tron blockchain. In a 25-page response to a lawsuit filed by wBTC issuer BiT Global, Coinbase stated that Sun’s involvement posed an "unacceptable risk" to its customers and the platform's integrity.

BiT Global’s lawsuit is accusing Coinbase of favoring its competing product, Coinbase Wrapped Bitcoin (cbBTC), in an alleged breach of listing standards. However, according to the exchange, its actions were driven by due diligence after Sun’s partnership with BiT Global was announced in August.

Customer safety over controversy - Coinbase explained that Sun’s history of alleged fraud and market manipulation raised serious questions about BiT’s reliability as a wBTC steward. Despite repeated inquiries, BiT Global reportedly refused to clarify Sun’s role or ownership ties, prompting Coinbase to act decisively.

“No law compels Coinbase to host an asset tied to an individual with a long history of alleged misconduct.”

Implications for the industry - The move underscores how perceived associations with controversial figures can impact asset listings on major platforms. While BiT Global has not commented on the allegations, the fallout highlights the increasing scrutiny faced by crypto projects linked to high-profile controversies.

Coinbase’s decision reflects a growing focus on safeguarding customer trust, even as the legal battle raises questions about fairness and transparency in the exchange’s operations.

Did you know?

  • Blockchain trilemma refers to the challenge of balancing decentralization, security, and scalability where improving one aspect often compromises one or both of the others, making it a significant hurdle for developers designing efficient blockchain networks.

  • Litecoin was created in 2011 as a “lighter” version of Bitcoin, offering faster transactions by reducing block generation time to 2.5 minutes compared to Bitcoin's 10 minutes, making it more suitable for everyday payments.

  • GameFi combines gaming and DeFi, enabling players to earn crypto through gameplay by integrating blockchain-based assets like NFTs and tokens, which can be traded, sold, or used across various decentralized platforms.

Top 3 coins of the day

Hedera (HBAR)

Key points:

  • HBAR was trading at $0.29343, at press time

  • Altcoin showed some signs of consolidation on the charts

What you should know:

Hedera has seen a positive trend in the last 24 hours, emerging as one of the market’s top gainers. HBAR has maintained its bullish position above the 50-day and 200-day MAs for a while now, confirming upward momentum. A falling wedge pattern emerged too, typically signaling a potential bullish breakout. The RSI stood at 60.14, reflecting moderate buyer strength while staying below overbought territory, suggesting room for further gains. Key support lay at $0.25, aligning with recent lows, while the immediate resistance was near $0.31.A breakout above the wedge and the $0.31 resistance could trigger renewed upward momentum towards $0.35. However, a drop below the support may lead to short-term retracement, with traders advised to watch for volume confirmation.

Lido DAO (LDO)

Key points:

  • At press time, LDO was trading at $2.061, down 1.58%.

  • Altcoin was one of the market’s biggest losers in the last 24 hours.

What you should know:

Lido DAO (LDO) has been one of the biggest losers in the last 24 hours. Its recent pullback of -19.33% indicated a short-term correction phase. However, LDO maintained its bullish structure, trading above the 50-day and 200-day MAs, with a golden cross confirming upward momentum. The Choppiness Index (CHOP) at 51.54 suggested that the market was indecisive, reflecting consolidation. Immediate support lay at $1.95, aligning with previous breakout levels, while resistance was seen near $2.20. If buyers step in, a move above $2.20 could retest $2.40. Conversely, a drop below the support may open the door to a correction towards $1.75. Traders should watch for volume and CHOP changes for trend clarity.

Key points:

  • At press time, LINK was trading at $27.13, down 2.60% in the last 24 hours.

  • LINK has maintained a strong uptrend after crossing key resistance levels.

What you should know:

While Chainlink has declined over the last three days, it remains the highest gainer amongst the top 20 assets over the last seven days. LINK was bullish at press time too, trading well above the 50-day and 200-day MAs, with a golden cross confirming upward momentum. The RSI stood at 62.13, reflecting solid buyer demand without overbought conditions. However, LINK faced resistance near $28.40, and a breakout could push the price toward the psychological $30-level. The support was at $24.50, aligning with the 50-day MA. A dip below this could trigger a move to $21. Trading volume declined slightly as well, suggesting a consolidation phase. Traders should watch for renewed volume and price action near resistance or support zones for clearer signals.

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