Bitcoin price surge helped by growing institutional involvement

Bitcoin breaks out of its downtrend

Bitcoin has finally broken out of its downtrend amid a huge recovery that has seen the price ramp up in a parabolic manner over the course of the past week. With 30% of gains over the course of the first two days of this week, fear of missing out (FOMO) appears to be kicking in big time. However, the big question is whether this rally can be trusted.

Institutional investors aid Bitcoin surge

One element to note is that institutional investors seem to be playing an increasingly active part in this move; a shift which provides greater confidence given the doubts over the source of buying in the past. There are claims that some of the buying is coming from market manipulation, but the Grayscale Bitcoin Trust (GBTC) provides us with some idea of the kind of money that is moving into the crypto posterchild. The GBTC is a Bitcoin only closed-end fund worth over $1.5 billion, where only qualified accredited investors with a minimum investment of $50,000 can buy in. We can see below that the fund has exhibited a sharp increase in Bitcoins added as a result of rising institutional demand over recent weeks.

Converted into the relevant dollar value ($58 million), we can see that the April buying pressure is almost equivalent to December 2017. That month was the height of the Bitcoin rally, exhibiting both the greatest monthly rise and all-time high of $19,763. To see that same kind of inflows in April where we seemed to have been just getting started with this rally is certainly a sign of confidence.

Another way we can point towards real buying place is at the CME, with the Chicago exchange seeing a record high volume of trades taking place yesterday. Of course, this is one place that we would expect all transactions to hold credibility and so the CME is able to add credence to the notion that we are seeing a huge surge in volumes.

The weekly chart below highlights the recent ramp up in price, with the price moving through $7315 resistance this week. This is the first swing high to have been taken out since the uptrend came to a dramatic end back in late 2017. Certainly the $8481 swing high carries more value, and traders will be watching closely how the price reacts to that next hurdle.

The four-hour chart highlights the surge that we are currently within, following a retracement on Sunday. The $84.81 resistance level up ahead is worth noting as a potential point for another retracement to come into play. However, unless we see a break below $6771, such a pullback would be deemed as a short-term move and a precursor to further gains.