Bitcoin price enters critical supply zone
Bitcoin recently hit as high as $87,000 before retracing to a key long-term holder supply area. Glassnode previously identified a key supply range for long-term holders of $81,000 – $86,000. The biggest long-term holder band has concentrated between $84,000 and $85,000 now, making this zone an important level for Bitcoin’s near-term price action, analysts noted Tuesday.
The $84,000–$85,000 area is also important as Capital.com analysts have highlighted $87,000 to $88,000 as immediate resistance and $84,000–$85,000 as the first area to watch in the event of a pullback. JPMorgan also has cited an estimated cost of Bitcoin production of around $85,000, which could be a further comfort to miners if the price holds above it.Bitcoin Leverage Slides to Multi-Month Low
The price has become more volatile, and there has been a huge reset in the derivatives market for bitcoin. Coin-denominated open interest has fallen to its lowest level since March and is almost 20% below its August level, according to Glassnode.
Even with the pullback, Bitcoin is still trading about 35% above its August low of $62,000. Much of the leverage accrued during Bitcoin’s ascent toward $87,000 has now been flushed out, Bitfinex analysts said. Perpetual futures positioning has also moved closer to neutrality.
The reduction in leverage may suggest that Bitcoin’s recent price behavior is less reliant on highly leveraged positions. Instead analysts are watching to see if fresh spot demand can support the market around the current supply cluster.
Bitcoin Could Finish Quarter in Consolidation
Bitfinex analysts expect Bitcoin to stay within a range ahead of the monthly and quarterly close on September 30. Their base case is that the trading range is between the $84,000 long-term holder cluster and the $87,722 yearly open.
Spot demand may matter more than wider financial conditions in determining how Bitcoin eventually breaks from this range, the analysts said. This puts the emphasis on actual buying rather than leverage-driven moves.
Institutional Bitcoin Use Goes Beyond Just Holding It
Bitcoin interest is changing at the institutional level too. TD Cowen analyst Lance Vitanza says that at the BitcoinTreasuries Conference in New York, discussions are more about **how institutions can use Bitcoin, not just whether they should own it.
Vitanza thinks the next phase for Bitcoin may hinge on seeing more spot demand coupled with the buildup of capital-markets infrastructure around the asset. It could be financial products and institutional systems that would make Bitcoin more integrated into traditional markets.
Macro Pressure from Rising Treasury Yields
Bitcoin also is feeling the pinch of changing macroeconomic conditions. Financial conditions tightened after the Federal Reserve raised interest rates earlier in September, Bitfinex analysts said.
The 10-year Treasury yield rose to 5.17% on Sept. 25, from 5.01% on Sept. 16. The 10-year inflation-adjusted yield also rose from 2.68% to 2.83%.
“Higher real returns on lower risk assets is a major constraint on bitcoin,” said Bitfinex analysts. Under these circumstances, they said they would need to see strong spot demand to support any further advance in Bitcoin.# Bitcoin Weighed Down by Crude Oil Prices
Another factor affecting Bitcoin’s short-term forecast is higher crude oil prices. “Non-yielding assets like Bitcoin are at a disadvantage with rising energy prices,” said Kyle Rodda, senior financial market analyst at Capital.com.
Rodda noted that lingering upside risks in energy markets could make it hard for Bitcoin to regain upward momentum. Meanwhile, he said Bitcoin’s technical setup was still constructive, citing mixed signals facing the market.Focus on August Core PCE Data
Traders are now turning their attention toward the August core PCE reading due September 30. The inflation report could provide more information on the course of monetary policy and broader financial conditions.
Despite macroeconomic headwinds, Bitcoin has been relatively strong against the historically weak September and third-quarter seasonal trends, Bitfinex analysts noted. Current price action suggests that Bitcoin has held above its August low and that leverage has been reduced significantly.
Bitcoin Market Outlook
The current price structure for Bitcoin is now focused around the $84,000-$85,000 long-term holder supply cluster with $87,000-$88,000 emerging as a notable resistance zone. Open interest is falling and perpetual positioning is around neutral indicating a large amount of the leverage built up during the move to $87,000 has been unwound.
The next phase could therefore be very dependent on spot buying. “Key macro factors as we end the quarter are the rise in Treasury yields, crude oil prices and the upcoming core PCE data while institutional adoption and emerging capital-markets infrastructure could impact Bitcoin’s longer-term demand.
