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Daily Bitcoin and Crypto Analysis

DAILY BTC ANALYSIS

December 31, 2020

As Bitcoin hits another all-time high, you may be surprised to know there is very little to report today. Having scoured the on-chain metrics, miner flows, exchange balances, and wallet balances, I can only say that everything appears to be ticking along nicely.

There have been some bold headlines regarding a potential lack of liquidity, which obviously warms the heart of hodlers, but in reality, the market has never been so liquid. At the start of this year, spot trading volumes eclipsed those of derivative platforms, and as we head into 2021, derivatives now trade 3 times the volumes of spot. 

 

The charts below show the total number of Bitcoin sent to and from the different types of exchanges. If you are surprised to see more Bitcoin heading to derivatives exchanges than spot exchanges, don't be. The growth and appeal of derivative exchanges can be summed up in one word: Leverage. 

Super bullish Bitcoin? Simply move 1 BTC to a derivative exchange that offers you 20 to 1 leverage, and hey presto, you are now able to buy 20 BTC. Obviously, if the price drops 5%, you just lost 1 BTC, but that doesn't seem to have deterred traders this year, as derivative volumes continue to trend higher than those of their zero leveraged, spot cousins. 

The chart below shows the data from yesterday, and clearly shows the attraction of leverage:  More Bitcoin. More addresses.  

I've traded a lot of commodity futures over the last 25 years, but I can't recall ever sending a barrel of oil to the exchange for margin. The real coming of age for the crypto-derivatives market will be when the fiat on and off ramps, like those of the CME, allow participants to trade without using the underlying product to finance their involvement... 

 ...and at that point, who needs Bitcoin? 

 Okay, I'm being facetious. 

 We would have bought them all anyway... 

 Mwhahaha.


Technical Analysis

Another strong rebound from support at $26,520 has seen Bitcoin push higher to register another new all-time high of $28,580. Prices have since softened, dropping back to support at $27,295 before tracking sideways.   

$28,387 is once more the target for the bulls as they look to take Bitcoin north of $30,000. Should support hold at $27,295, the stage will be set for the final fireworks of 2020. If we break down below $27,295, the we expect to see a quick move down to $26,520. A deeper retracement toward $25,575 and $24,655 appears to be unlikely, but will grow in probability should we fail to punch through $28,387. 


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