BTC Outlook: The Flagman Cryptocurrency Needs an Incentive to Stay Above $40,000

BTC Outlook: The Flagman Cryptocurrency Needs an Incentive to Stay Above $40,000
  • Institutional demand looks strong, pointing to a broader bullishness among individual investors.
  • Overreliance on big announcements from corporations creating excessive panic over BTC’s stay above $40,000.

Bitcoin’s stay within the $40,000s territory seemed to be in jeopardy as it fell by 3.22% in 24 hours to trade at $38,746 at 1005 GMT on Friday. The cryptocurrency has recently found new momentum and was about 20% higher than its value seven days ago at the time of writing. Of the top 10 cryptocurrencies, only XRP has gained more over that period.

The rise beyond $35,000 confirmed but $40,000 looks tasking

BTC is currently hovering around the $38,000s territory, after a steep rise in the past ten days that have seen it bring an end to weeks of flirting with a sub-$30,000 price. The latest rise has been attributed to investors’ reaction to rumours of a possible acceptance of the cryptocurrency by Amazon.

The rumours were fueled by the e-commerce giant’s posting of a cryptocurrency-related job position. However, the company has since denied the rumours, but the market has held steady, with demand-driven growth looking more likely in the coming days.

Heading into the weekend, however, the market will require more incentives to float above $40,000. BTC’s price reached the $40,000 mark for the first time on Monday and has appreciated every successive day after that. The last time it hit that price was on June 16th, and it has gone as low as $28,668 in the intervening period. However, key support levels have largely remained above $30,000.

A closer look at BTC’s performance reveals that the market may have been disproportionately bearish. With $1.7 billion worth of Bitcoin options contracts expiring today, the bears are certainly going to rue missed chances. In the past four days, Bitcoin has risen by over 10%. Today, therefore, marks the first time since May 21st  when a $40,000 call (buy) option could be profitable.

Organic individual demand looks strong, but Institutional influence still holding back BTC

Going forward, traders may need to look at the broader market fundamentals rather than one-off announcements and speculations related to institutional acceptance of BTC. For example, PayPal’s announcement this week that it is planning to offer crypto trading in the United Kingdom should be looked at as an organic demand-driven growth indicator, as opposed to institutional interest.

During the company’s Q2 earnings call on Wednesday, it was revealed that the crypto-market had performed exceptionally well, despite the plunge experienced since May. In making the announcement, PayPal CEO Dan Schulman stated that the company was keen on increasing the functionality of cryptocurrencies in its platform, including integrating smart contracts and DeFi. Two weeks ago, the company raised its cryptocurrency weekly purchase limit to $100,000, driven by customer demand.

About a week ago, a leaked video revealed that the largest DeFi platform, Uniswap, has been negotiating with several fintech, including PayPal, on ways of integrating DeFi on those platforms.

These developments show that BTC and other cryptocurrencies are increasingly being accepted as investment assets by the mass market.

Strong institutional interest despite Q2 slump

Elsewhere, MicroStrategy announced a historic loss of almost $300 million in its Q2 earnings call. This is the biggest loss ever posted by the business analytics firm, and it is attributed to the cryptocurrency market slump in the quarter. The company’s heavy investment in the crypto market has seen it become the largest institutional holder of Bitcoin.

However, the company is still bullish on Bitcoin, and CEO Michael Saylor revealed this week that the company’s institutional clients were still very much interested in investing in BTC despite last quarter’s troubles. For perspective, at the height of the crypto-market dip last month, the company raised half a billion dollars through bond sales to finance its cryptocurrencies purchase plan. Despite the harsh crypto market conditions at the time, the issuance of the bonds was massively oversubscribed, with orders worth more than $1.5 billion coming in.

These developments are proof that long-term market momentum is building up, and this will likely drive BTC towards higher prices and help it attain greater stability.

Technical analysis

Bitcoin is currently at $38,746 and has shed nearly $1300 in the past 24 hours. A bullish control is likely to drive the price up near the day’s opening to hit $40,009, where it will meet the first resistance. 

BTCUSD chart

Beyond that point, a further push by the bulls could see BTC rise to $41,435. If the bears take charge, then a pull-down to the first support at $36,007 and a second one at $34,660 is possible.

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