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Analysis

Bitcoin to $100K: Understanding the Market Flows Driving the Next Breakout

Head of Research

Nov 20, 2024

Bitcoin comes up in nearly every client conversation – so much so, that one considers if we are nearing peak sentiment and run the risk of a sell-on fact scenario playing out when we get confirmation of many of the Trump administration and regulatory roles that are soon to be announced.

Clearly, there is much more to the recent rally in Bitcoin than just those factors, but the crypto market has been blessed with so much positive news flow of late, that we may need new news emerge to fuel the beast – that said, the price is the price and while sentiment is as positive as it's been for years, I am guided by the aggregation of all market beliefs and views over my own, and that means respecting the price action that is put to me.

CoinMarketCap Crypto Fear and Greed at extreme levels

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Therefore, an upside closing break of $94k naturally opens a move to the illustrious $100k mark and one suspects it may act like a magnet, pulling in buyers into the big number. The break, in my opinion, is there for chasing. Conversely, a closing break below the rising trend support at $90k would suggest turning a touch more cautious, as it would signal a change in momentum that has essential fuelled the FOMO chase. A break of $86k – should it play out - would likely lead to more intense drawdown, where as the saying goes “If you’re going to dance in the disco, make sure you're closest to the exit when the fire breaks out”.

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For now, the prospect of a decent drawdown seems low as there has been such solid demand seen in recent bouts of weakness that won’t likely disappear until the news flow and sentiment shifts. Subsequently, the skew in directional risk remains titled towards an upside break.

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Flow-based dynamics support this more constructive view, with the 5-day average inflow into the various BTC ETFs at a record $484m. The IBIT ETF (iShares BTC ETF), which attracts the greatest share of attention in the ETF complex, is seeing reduced daily inflows, but with traders now able to trade options over the ETF, this offers an alternative expression to capture upside in Bitcoin and on the day, we saw the total number of call options outnumber puts by 4.4 to 1.

Buying calls in the IBIT ETF is expensive (given the high implied volatility), but it takes a brave soul to fade the vol and sell calls, knowing that the potential for a rip-your-face-off rally is ever-present – subsequently, if the underlying price in the IBIT ETFs increases it brings in a whole new world of options market maker hedging activity into the mix. A factor which would only perpetuate the rally in Bitcoin.

Just ask any Nvidia or GameStop investor about that….

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