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Market Wrap: Bitcoin Sustains 'Musk Jump' as Crypto Sentiment Improves

Bitcoin tests $40K following positive comments from Tesla's CEO Elon Musk and hedge fund manager Paul Tudor Jones.

Jun 14, 2021 at 8:42 p.m. UTC
Updated Sep 14, 2021 at 1:11 p.m. UTC

A string of positive news kept bitcoin buyers active on Monday as analysts searched for signs of a short-term bottom. The world’s largest cryptocurrency by market capitalization is up about 20% over the past e seven days and is testing the $40,000 price level for the first time in two weeks. 

A number of signals “all firmly point to an undervalued bitcoin at current prices,” wrote Alexandra Clark, sales trader at the U.K.-based digital asset broker GlobalBlock, in an email to CoinDesk.

Buyers stepped in after Tesla CEO Elon Musk tweeted on Sunday the electric car maker would allow bitcoin transactions again "when there's confirmation of reasonable (50%) clean energy usage by miners with a positive future trend." 

“Although many analysts are still on the fence when it comes to determining whether the digital asset is ready to continue its uptrend," Clark wrote, "what we do know is that Musk is responsible.”

The tweet triggered a near-6% bounce in BTC, which had been trading in a tight trading range between $30,000 and $40,000 over the past month.

Latest prices

Buyers go 'all in' onbitcoin

Traders also reacted to hedge fund manager Paul Tudor Jones’ assertion he could “go all in on the inflation trades,” during an interview with CNBC on Monday. Jones said he “likes bitcoin” and wants a 5% allocation of it with the same percentage in gold, cash and commodities. 

MicroStrategy is also in the news again, preparing to buy up to $488 million in bitcoin with the proceeds of a $500 million bond sale that closed on Monday. MicroStrategy’s stock (Nasdaq: MSTR) jumped about 14% on Monday and is up about 30% year to date, roughly in line with bitcoin's price gains. 

Overall, sentiment appears to be shifting to the positive following a volatile May. In fact, 87% of investors surveyed by cryptocurrency brokerage firm Voyager plan to increase their bitcoin or other crypto holdings over the next quarter.

“It’s encouraging that investors remain bullish following the recent market correction as we continue to see some interesting trends in our user sentiment surveys,” wrote Steve Ehrlich, CEO of Voyager, in an email to CoinDesk.

However, uncertainty regarding bitcoin as an asset class still lingers, which could weigh on sentiment.

Goldman Sachs' consumer and wealth management division published a report on Monday stating crypto is "not a viable investment." The bank doesn't recommend it for client portfolios.

Bitcoin options market shows demand for downside hedges

Investors have shown lingering fears of further drop in bitcoin prices and continued demand for downside hedges, as seen in the cryptocurrency’s “options smile.”

Options smile, a U-shaped graph resembling a smiley emoticon, is created by plotting implied volatilities against options at various strike prices expiring on the same date.

The "smile" shows relatively higher implied volatility or demand for options at strikes below bitcoin’s current market price than the implied volatility for higher strikes options.

Bitcoin's "options smile" looks more like a smirk.

Bitcoin deviates from 11-year trend

Bitcoin is trading about 36% below its 11-year exponential trend, according to a report published on Monday by Pantera Capital.

The recent peak that preceded the May sell-off was just a touch over trend value. Bitcoin has only spent about 20% of its history far under trend valuation, according to Pantera. 

The deviation from trend could have further room to decline compared to prior lows seen in 2012 and 2020, although bitcoin does not appear overvalued relative to historical extremes.

Chart shows bitcoin deviation from 11-year trend.

Cycle check: Where to from here?

A research report published by Enigma Securities last week suggested bitcoin's price could head sideways for a while but may face further downside when compared with previous bear markets in 2013 and 2017. 

“Under no circumstances do we expect a quick recovery. It is, however, conceivable that we see a quicker recovery,” the report writes. 

The bear market for bitcoin in 2017 was no less severe than 2013, but was shorter, according to Enigma. 

Chart shows comparative bitcoin cycles which suggests flat to downward price action to come.

Bitcoin poised to outperform ether

Investors could be warming up to the world’s top cryptocurrency again as technicals show bitcoin is beginning to outperform ether. 

The BTC/ETH ratio is now above the 50-day moving average, which could point to improving relative strength of bitcoin versus ether, according to Katie Stockton, managing director of Fairlead Strategies. 

Daily chart shows recent stabilization in bitcoin relative to ether.

Goldman Sachs Plans to Offer Ether Options: Report

Goldman Sachs plans to offer investors options and futures trading in ether, according to a report on Monday.

  • The investment bank plans to offer ether trading in the months ahead, Mathew McDermott, head of digital assets at Goldman Sachs, told Bloomberg.
  • McDermott said clients see the recent rout as a good entry point and that the bank also plans to facilitate trades with exchange-traded notes that track ether.
  • In May, CoinDesk reported Goldman Sachs had started to offer investors access to non-deliverable forwards (NDFs), a derivative tied to bitcoin’s price that pays out in cash.

Technical analysis

Price charts for bitcoin and ether might be turning bullish after a month of market stagnation, potentially offering respite in the coming weeks, a new analysis shows.

  • Bitcoin's weekly stochastic oscillator has turned up from an oversold level or below 20, signaling the possibility of a near-term "relief rally," according to Katie Stockton, founder and managing partner of Fairlead Strategies.
  • Seasoned traders use the oscillator in conjunction with other indicators to gauge oversold and overbought conditions, which act as triggers for long and short trade entries. A reading below 20 implies oversold conditions, while an above-80 print indicates an overbought market.
  • Thus, bitcoin appears poised for a more substantial relief rally – a price bounce due to seller exhaustion. The cryptocurrency is currently trading at 2.5-week highs above $40,000, representing an 8% gain on a 24-hour basis.
  • According to Stockton, an initial resistance for bitcoin is near $47,000, which, if breached, would open the doors for further gains. However, Pankaj Balani, CEO of Delta Exchange, expects fresh sellers to step in above $45,000.

What else we're reading (and watching):

Other markets

Digital assets on the CoinDesk 20 are mostly higher on Tuesday.

Notable winners as of 21:00 UTC (4:00 p.m. ET): 

polkadot (DOT) +14.87%

chainlink (LINK) +8.47%

uniswap (UNI) +6.82%

Notable losers: 

 stellar (XLM) -0.05%

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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