Institutional “igniters” propel Bitcoin past $30,000. How much longer can the momentum last?

Can Bitcoin maintain its momentum after institutional investors have driven its value past $30,000?

Author: Mary Liu

Bitcoin continues to rebound, stimulated by positive news of TradFi’s entry into the cryptocurrency market, breaking through $30,000 in the early hours of June 22 Beijing time, with a 24-hour increase of more than 10%, and an 80% rebound in the year. The last time BTC reached over $30,000 was in April 2023. Tokens such as Ethereum, Cardano, and Solana also saw gains. The rebound triggered a wave of short liquidation in the entire market, with CoinGlass data showing that short liquidation totaled more than $173 million in 24 hours.

On the other hand, US stocks erased the mild gains of the past few trading days, with the Nasdaq Composite Index and the S&P 500 Index falling 0.7% and 0.5%, respectively.

Investors are increasingly optimistic about the prospects for BlackRock and other major institutions to layout their cryptocurrency business.

Earlier this week, BlackRock submitted an application for a spot Bitcoin ETF, which will track the underlying market price of Bitcoin. Coinbase is listed as the proposed Bitcoin custodian for the ETF. BlackRock has maintained a strategic partnership with Coinbase, even under the huge regulatory pressure from the US Securities and Exchange Commission (SEC).

Supporters of cryptocurrencies say that more investors will be able to invest in cryptocurrencies at much lower risk. Importantly, a small portion of traditional institutional clients interested in spot BTC ETFs is enough to further boost the market. Ruslan Lienkha, market director of Web3 cryptocurrency and fiat service provider YouHodler, commented, “In the near future, the joining of the largest investment company [BlackRock] seems to completely reshape the cryptocurrency market.”

Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, commented, “BlackRock’s application changes everything and reignites competition.” After BlackRock’s announcement, other asset management companies also submitted their own applications for spot Bitcoin ETFs, including WisdomTree and Invesco, which have been rejected by the SEC.

EDX, a cryptocurrency exchange supported by major TradFi participants, was also launched earlier this week. The exchange is supported by Fidelity Digital Assets, Charles Schwab, and Citadel Securities, and will offer trading of four tokens in the United States, including Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. After the news came out, Bitcoin Cash (BHC) also saw gains, rising 25% that day.

Actions by traditional financial companies have to some extent dispelled the gloom brought on by SEC enforcement actions against cryptocurrencies, including lawsuits against exchange operators Binance Holdings Ltd. and Coinbase Global Inc., in which the SEC designated a large number of digital tokens as unregistered securities.

Meanwhile, in Europe, Deutsche Bank has applied for regulatory permission to operate a digital asset custody service. “Unless its big clients express enough interest, it’s unlikely to do the business easily, because the costs are not low,” wrote Crypto Is Macro Now newsletter author Noelle Acheson.

Co-founder of social trading platform Alpha ImBlockingct, Hayden Hughes, tweeted: “This rebound has been supported by institutional demand, and BlackRock’s announcement on a bitcoin ETF and EDX Markets has given bitcoin a boost as people hope that traditional institutions can increase the liquidity depth of the crypto market.”

Investors are closely watching macroeconomic indicators to gauge the direction of the cryptocurrency market, including the prospect of further tightening of monetary policy by the Federal Reserve after pausing rate hikes this month.

Traders are also waiting for further clarity on the size of China’s economic stimulus expectations, as the People’s Bank of China recently cut borrowing costs. Tony Sycamore, market analyst at IG Australia Pty, said in his blog that China’s potential stimulus impact on bitcoin had not “been sufficiently released.”

Futures market shows bullish sentiment rising

BTC futures data shows traders are shifting from mostly bearish to bullish. According to Coinglass data, 54.24% of traders are long bitcoin. With reduced spot trading volumes and bitcoin net outflows from exchanges, prices may fluctuate further. Typically, when the net outflow of bitcoin from exchanges increases, selling pressure decreases, pushing short liquidation to have a greater impact on BTC price.

The Bitcoin Fear and Greed Index has reached a three-month high, highlighting investors’ greater appetite for risky assets.

Some analysts say the momentum for further gains remains as bitcoin has broken through a key resistance level that analysts have been watching.

In an interview with CNBC, Vijay Ayyar, Head of International Markets at India’s largest cryptocurrency exchange CoinDCX, said, “The series of spot Bitcoin ETF applications filed by large institutions undoubtedly has restored bullish sentiment to the cryptocurrency market. The main support level for BTC is $25,000, and we have seen this trend being driven more by pure spot purchases than by short covering.”

Bitcoin is still far below its 2021 historic high of $69,000. Ayyar believes that, from a market structure perspective, BTC has already broken the major downtrend that began in April and lasted for about two months, so the next step will be to test the level of $32,000, and if it successfully breaks through, it will have the potential to rise to $36,000, then to $45,000 to $48,000.