Bitcoin (BTC) briefly saw new 2023 highs this week, but ultimately failed to break out of its range — is the bull run over?
BTC price action continues to struggle with overhead resistance near $50,000 amid increasingly volatile conditions.
For traders, however, there is reason to believe that patience is all that is needed in order for more significant price moves to enter.
From on-chain data to supply shocks and “reset” derivatives markets, the stars are aligning for the next leg up in the ongoing Bitcoin bull market.
Cointelegraph takes a look at these factors in more detail and discovers who remains firmly optimistic on what BTC/USD will do next.
BTC price daily bull flag points higher
As the United States spot Bitcoin exchange-traded funds (ETFs) saw their first day of trading, BTC/USD in turn went up nearly $3,000 — and then down even more.
While initially promising, Bitcoin ultimately lacked the momentum needed to beat out sellside pressure as it neared the $50,000 mark for the first time since December 2021.
That said, with the Jan. 11 daily candle close, Bitcoin did manage to preserve its bullish structure, according to popular trader and social media commentator Alan Tardigrade.
Uploading a chart to X (formerly Twitter), Tardigrade noted that BTC/USD is now in a “bull flag” structure within an overall uptrend — a classic consolidation process.
“Latest candle keeps within a Bull Flag waiting for BREAKOUT,” part of his commentary promised.
Equally indicative of a classic bull market’s early stages is Bitcoin market cap dominance.
As Cointelegraph reported, Bitcoin, which was the first mover last year, is now relinquishing its share of the crypto market cap to major altcoins — itself typical of how previous bull markets have begun.
For both Tardigrade and fellow trader Matthew Hyland, the writing is on the wall.
A nice “Head & Shoulders” pattern on #Bitcoin Dominance has been spotted by @MatthewHyland_ for days.
The chart comparison here explains to you how bearish $BTC.D and how bullish $ETH.D are.
Please note that both the horizontal support/resistance zone on BTC.D and descending… pic.twitter.com/8gXLyeyYWE
— Trader Tardigrade (@TATrader_Alan) January 12, 2024
Funding rates reset as open interest simmers
Laying the foundations for the sustainable BTC price gains, derivatives markets remain “neutral” compared to recent weeks.
Data from statistics resource CoinGlass shows that a broad “reset” has occurred on funding rates across exchanges despite Bitcoin’s upside progress.
Largest global exchange Binance now had neutral funding on Bitcoin at the time of writing on Jan. 12, in line with OKX and Bybit.
Open interest, meanwhile, while elevated, is now below levels seen in early December, when BTC/USD first entered its current trading range.
High levels of open interest have preceded several major “flushes” in recent weeks, during which a snap price dip unwinds large numbers of positions.
Analyzing the trend on Jan. 10 — ETF approval day — on-chain analytics firm Glassnode nonetheless noted the increasing dominance of CME Group as a portion of overall open interest.
“This indicates a growing presence of institutional investors within the Derivative space,” it told X subscribers.
Do not fear the Bitcoin supply squeeze
The notion that U.S. institutions now have carte blanche to engage in Bitcoin exposure has some wondering about long-term supply impact.
Related: This Bitcoin ’bull cross’ is about to hit for the first time since 2016
With its finite supply and a portion of tokens already lost forever, Bitcoin could see a major supply “squeeze” should major players demand large stocks for their products.
While proponents predict that this will merely push the price up to the benefit of existing hodlers, some are concerned about an increasingly illiquid market.
Among them is Daniel Roberts, CEO and founder of Bitcoin miner Iris Energy.
“There’s a major issue with the Bitcoin ETFs, which few are acknowledging,” he warned on X alongside a chart of Bitcoin’s current illiquid supply from CoinMetrics.
“We’ve never had an ETF where the underlying has a limited supply. If ETFs buy the 30% of available Bitcoin, or those holders also refuse to sell, then we have a major problem.”
Responding, some of Bitcoin’s household names — including Blockstream CEO Adam Back — were as unfazed as ever.
“There is no problem,” popular pseudonymous analyst Bit Paine argued.
“Number goes up.”
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.