Supply Crunch As Bitcoin Breaches $18,300
Crypto Briefing | Nov 20, 2020 06:45AM ET
Stack Funds suggests several causes for the latest price surge. According to data from market aggregators and analytics firms, Bitcoin’s price rose above $18,300 this week due to a “supply crunch.” Stack Funds, which monitors the crypto market, says that this price is a three-year high for Bitcoin. It also notes that the price increase has generated 14% return for investors in a single week.
In technical terms, Stack Funds notes that three-month, 25-day skews have broken below 20% and that call option prices are greater than puts.
It concludes from this data that market sentiment “has remained optimistic.”
The firm also believes that “upside premium is robust,” meaning that prices are unlikely to fall soon. Bitcoin previously reached $17,000 on Nov. 17, marking the early stages of this week’s surge.
h2 What Caused This Week’s Price Surge?/h2Stack Funds believes that this price surge is similar to Bitcoin’s 2017 bull run, when the coin’s price briefly touched $20,000. It notes that a “supply crunch” is partially to credit for Bitcoin’s rising prices this year.
The firm adds that “it is evident that [the] balance sheet of [Bitcoin] is running thin.” By some measures, Bitcoin is being sold off by exchanges at a rate of 214 BTC per hour, and exchanges have just 1.2 million BTC on hand.
This is partially due to May’s block reward halving, which reduced miner rewards and slashed inflation.
Possible news of an effective COVID-19 vaccine may also contribute to rising prices. Stack Funds notes that the S&P 500 stock index gained 1.1% over the past week, while gold remains stable. The fact that those markets have performed positively makes it likely that vaccine news has encouraged Bitcoin investors to buy as well.
Finally, this month also featured a major adoption event: PayPal’s decision to introduce Bitcoin trading.
Get The News You Want
Though PayPal has not revealed its trading volumes, the company decided to double its buying limits within days—a sign that demand for Bitcoin is truly on the rise.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.