Bitcoin's bull run may be set to intensify as the market anticipates a pick up in corporate demand prodded on by Tesla's major investment in the cryptocurrency.
"Prices can fly very high, I expect other heavyweights to follow suit," trader and analyst Alex Kruger told CoinDesk over WhatsApp, referring to Tesla's (TSLA) bitcoin purchases made earlier this year.
On Monday, the electric car maker disclosed its $1.5 billion investment in bitcoin and signaled openness to acquire more digital assets, kicking the bitcoin market into overdrive. Bitcoin saw a record single-day move in dollar terms on Monday, rising by over $8,000 to levels above $46,000 and roaring to fresh lifetime highs above $48,000 early today, CoinDesk 20 data shows.
While several publicly listed companies such as MicroStrategy (MSTR)have adopted bitcoin as a treasury asset over recent months, Tesla's move is notable given that it is the first Fortune 500 company to diversify cash holdings into the cryptocurrency.
"Although the actual amount isn't large comparatively, the signaling effect and market reflexivity of projecting other global market-leading companies to do the same will have a positive spiral effect on prices," Singapore-based QCP Capital said on its Telegram channel.
"Reflexivity" is a theory that a positive feedback loop between expectations and economic fundamentals can yield a substantial price rally. Tesla's bitcoin buys may have validated the long-held bullish narrative that the cryptocurrency acts as a reserve asset. More buyers, therefore, could join the market, putting upward pressure on prices.
The market is now pricing in the likelihood that other corporates will copy Tesla and Microstrategy's neo-treasury management strategy, according to John Kramer, trader at GSR. "Tides are continually shifting in crypto and what may be lurking close to port are sovereign funds becoming the next wave of institutions to adopt this corporate playbook," Kramer said in a Telegram chat.
Investor interest in call options (bullish bets) has now increased in a sign investors are positioning for a continued price rally.
"We are seeing high volume across the board in call options ranging from $56,000 to $72,000," Matthew Dibb, co-founder and COO of Stack Funds, told CoinDesk. "If the options market is any indication of the enthusiasm across investors, we will be going a lot higher," Dibb added.
Additionally, multiple 100-plus call option contracts have been bought at strikes of $44,000, $48,000, and $52,000, according to Swiss-based data analytics platform Laevitas.
The one-, three- and six-month put-call skews, which measure the cost of bearish puts relative to calls, are firmly entrenched in the negative territory, per data provider Skew. That shows call options are drawing higher demand than puts.
However, increased activity in call options ranging from $52,000 to $72,000 does not necessarily mean traders are anticipating a bull market peak around these levels. Besides, trying to predict a precise topside target is pointless, given that the cryptocurrency is in a multi-year bull market, according to Kruger.
At press time, bitcoin is trading mostly unchanged on the day near $46,500. The slight drop from highs looks to be a typical bull breather often seen following a strong rally.
The broader bias would remain bullish as long as the trendline rising from $10,000 is held intact.
The "Elon [Musk] rally" has established $42,500 as the new support, and prices could rise to $50,000 in coming weeks, according to Dibb, referring to Tesla's founder.
The cryptocurrency may face some selling pressure if regulators express concerns regarding Tesla's plans to adopt bitcoin as a payment means for its vehicles.
However, Kruger is not worried about a potential regulatory hurdle. "The real worry should be 'do I have enough crypto exposure' and not 'will regulators crash the market.' I'm not at all concerned at the moment," Kruger told CoinDesk.
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