Newly minted ethereum futures ETFs, and rising interest rates have a sluggish volume. Still, some market observers are optimistic that bitcoin can build on recent, modest gains in October.
Should that prognostication prove accurate, it could mean upside for the Grayscale Bitcoin Trust (GBTC). GBTC, the index fund Grayscale is seeking to convert to a spot bitcoin ETF, benefits if the largest digital currency snaps out of the $26,000 to $30,000 range it’s been mired in for months. As of midday Tuesday, it was higher by 4.64% over the past seven days. This stirred hope that a more substantial rally could be in the near-term offing.
Interestingly, October – a month in which stocks often have a dubious reputation – has been kind. Additionally, the cryptocurrency could have fuel for more near-term gains as highlighted by data confirming that digital currency funds notched inflows during the final week of September – the first time in six weeks that’s happened.
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Short covering is one reason why the currency recently rallied.
“There were few immediate catalysts to explain the move higher in Bitcoin, though leverage building up in the Bitcoin perpetual futures market—the most liquid market in all of crypto—likely helped prime the pump. Some $270 million worth of short positions betting on a fall in prices have been wiped out since last week, according to Coinglass data, as Bitcoin prices began to surge higher from the low $26,000s, adding upside momentum to the existing rally,” reported Jack Denton for Barron’s.
Beleaguered bitcoin investors will take upside when they can get, but short covering isn’t a commentary on fundamentals. It simply means bearish traders are exiting positions, meaning bitcoin backers desire more fundamentally rooted rallies.
We will see if it meets that demand over the near-term. Still, GBTC could be the beneficiary of some favorable seasonality. When bitcoin notches September upside, as it did this year, it tends to conclude the year on a strong note. Antoni Trenchev, founder and managing partner at crypto lender Nexo, made this point to Barron’s.
“Bring on the final quarter of 2023 because the last couple of times Bitcoin rose in September (way back in 2015 and 2016), it posted gains in each of the next three months,” said Trenchev. “Bitcoin has clocked positive returns in eight out of the past 10 Octobers and each of the last four, so hopes are high among the faithful that the grandfather of cryptocurrencies can gain some impetus this month after a rare positive September.”
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