Bitcoin Up $90,000 is a Buy Signal According to Banks

Bitcoin experienced a up to just above $90,000 on Thursday morning, following two consecutive days of outflows from U.S. spot Bitcoin ETFs. At the time of this report, Bitcoin’s price has recovered to around $61,000, remaining stable throughout the last week but up by 4.4% for the week, according to market data.

Standard Chartered emphasized that, despite the current geopolitical tensions, Bitcoin is not a safe-haven asset. However, they advised that any drop below $80,000 should be seen as a buying opportunity. Let’s look further into BTC price action and see how possible the increase in value really is.

The Dip and Rise of BTC

The global financial markets, including the crypto space, were shaken this week by the geopolitical events, notably Iran’s offensive against Israel. Global Head of Digital Assets Research at Standard Chartered, pointed out that Bitcoin shouldn’t be regarded as a hedge against such geopolitical risks. Instead, it acts as protection against traditional financial (TradFi) issues like banking collapses, de-dollarization, and concerns around the sustainability of U.S. Treasury bonds.

He predicted that “concerns related to the Middle East” could drive Bitcoin’s price below $60,000 before the weekend. However, he also identified potential factors that could support the price, such as increased activity in Bitcoin options markets and what he referred to as a “circularity” effect linked to U.S. presidential election odds.

There was a further observation of a significant increase in Bitcoin options positions, highlighting that open interest for Bitcoin’s $100,000 call options on Deribit, set to expire on December 27, surged by 1,300 BTC over the past two days. According to Kendrick, these positions and their potential connection to U.S. political developments suggest that the current price dip should be taken as a buying signal.

Additionally, on October 2, U.S. Bitcoin spot ETFs experienced net outflows amounting to $91.7 million. Grayscale’s Bitcoin Trust (GBTC) lost $27.3 million, while ARK’s (ARKB) saw outflows of $60.2 million. In contrast, Fidelity’s Bitcoin ETF (FBTC) recorded a net inflow of $21 million, according to data from SoSo Value. Ethereum spot ETFs showed positive momentum, with net inflows of $14.4 million. Notably, BlackRock’s ETHA ETF received $18 million in new investments.

A senior market analyst at a leading trading firm, attributed Bitcoin’s recent price stagnation to the broader risk-off sentiment in global markets. He explained that the ongoing strength of the U.S. dollar, combined with declines in risk assets due to the Middle Eastern conflict, along with profit-taking before the U.S. jobs report, are influencing the market.

The analyst also noted that Bitcoin found support as it approached its 50-day moving average near the $60,000 level. He cautioned that price fluctuations between $60,000 and $63,600 over the next couple of days may just be market noise as investors await new developments.

BTC as a Hedge

As of writing at the present, Bitcoin is trading at $61,000BTC/USDT. Bitcoin’s potential as a hedge against geopolitical risks remains a debated topic. On one hand, Bitcoin’s decentralized nature and its immunity to government control make it an attractive option during periods of political instability. Unlike fiat currencies, which are often vulnerable to government interventions or sanctions, Bitcoin operates on a global blockchain network, giving it resilience against country-specific risks. This has made it a refuge in regions with hyperinflation, such as Venezuela and Argentina, where citizens used Bitcoin to protect their savings from currency devaluation.

However, Bitcoin’s extreme volatility is a major limitation. While it has shown the ability to rise during uncertain times, its price can also fluctuate dramatically, making it a riskier option compared to traditional safe-haven assets like gold. For instance, during major geopolitical events such as the Russia-Ukraine war, Bitcoin saw increased demand, but its price swings left some investors with substantial losses​.

Moreover, research from major financial institutions like BlackRock highlights Bitcoin’s potential as a “unique diversifier” rather than a full-fledged hedge. Its low long-term correlation with traditional assets like equities and bonds could provide diversification benefits, but its short-term price movements are still highly unpredictable. BlackRock suggests that while Bitcoin may act as a hedge against systemic financial risks, it is not yet a reliable buffer against geopolitical crises in the same way as gold​. Bitcoin can serve as a hedge against certain risks, particularly related to financial systems and devaluation, but its role as a safe haven during geopolitical crises is still evolving and carries significant volatility-related risks.

Who is Buying?

Several major companies have invested heavily in Bitcoin, positioning it as a key asset in their portfolios. MicroStrategy leads the pack, holding over 214,000 BTC as of early 2024. The firm, under the leadership of Michael Saylor, has consistently expanded its Bitcoin holdings since 2020, viewing it as a long-term store of value.

Marathon Digital Holdings, a cryptocurrency mining company, is another major player, owning more than 16,900 BTC. Tesla, known for its high-profile Bitcoin purchase in 2021, holds approximately 9,720 BTC, although the company has sold portions of its holdings in the past to manage liquidity. Tesla’s CEO, Elon Musk, remains a vocal supporter of cryptocurrencies, including Bitcoin and Dogecoin.

Coinbase, a leading cryptocurrency exchange, also holds a significant amount of Bitcoin, with about 9,000 BTC on its balance sheet. Other prominent companies like Block Inc. (formerly Square) and Hut 8 Mining have substantial Bitcoin reserves as well, underscoring the growing trend of corporate adoption of digital assets.

These companies view Bitcoin as a hedge against inflation, currency devaluation, and a potential future asset class that can diversify their portfolios, although the volatility of the market poses risks​