Bitcoin (BTC) has crossed into bullish territory with the biggest weekly gain in 2.5 months.
- The top cryptocurrency by market value climbed nearly 6.6% in the seven days to Oct. 11, capping its biggest single-week percentage rise since the last week of July.
- The flipping of the stiff resistance of $11,200 (Sept. 18) into support is bullish, according to Stack Funds research analyst Lennard Neo.
- So far, however, the follow-through to the breakout has been poor: The cryptocurrency is currently trading in the red near $11,250, having printed highs near $11,500 over the weekend.
- However, the pullback may be short-lived, miner outflows suggest.
- Last week, bitcoin miners sold more than they generated and ran down inventory by around 1,000 BTC, according to data source Bytetree.com.
- The miners' rolling inventory (MRI) figure, which tracks the changes in how much bitcoin miners are holding, held well above 100% last week; the five- and 12-week MRIs are also above 100%.
- Miners liquidate their holdings almost on a daily basis to cover operational costs but will offer more when they feel the market has the strength to absorb the additional coins without harming price.
- As such, the increased miner outflow is sign of strength in the market, according to Charlie Morris, chief investment officer at ByteTree Asset Management.
- Additionally, payment company Square's recent disclosure of major bitcoin investments has given market players a fresh shot of confidence, Philip Gradwell, chief economist at the blockchain analysis firm Chainalysis, told CoinDesk.
- The major portion of the last week's 6.6% rise happened after Square announced its bitcoin investment on Thursday.
- While the path of least resistance for bitcoin appears to be on the higher side, a move to the next major resistance at $12,000 may remain elusive if the resurgence of the coronavirus cases across Europe, tanks global equities and boosts haven demand for the U.S. dollar.
- "The macro-environment factors still play a strong factor in the direction of BTC as its correlation to the SPX [S&P 500] continues," data analytics firm Santiment noted.
- Disclosure: The author holds small positions in bitcoin and litecoin.